Third Quarter 2022 Highlights
- Net income of $11.5 million, or $0.22 per diluted Class A
share, for the quarter ended September 30, 2022; Adjusted pro forma
net income of $11.1 million, or $0.24 per fully diluted share for
the quarter ended September 30, 2022
- Adjusted EBITDA of $23.9 million for the quarter ended
September 30, 2022
- Paid a regular quarterly dividend of $0.105 per share on
September 14, 2022, Solaris’ 16th consecutive quarterly dividend;
$107 million cumulatively returned to shareholders through
dividends and share buybacks since 2018
- Increased deployments of Solaris’ new top fill technology
across multiple basins
Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) (“Solaris” or
the “Company”), a leading provider of supply chain management and
logistics solutions designed to drive efficiencies and reduce costs
for the oil and natural gas industry, today reported financial
results for the third quarter 2022.
Operational Update and Outlook
During the third quarter of 2022, an average of 94 mobile
proppant management systems were fully utilized, which was up 12%
from average second quarter 2022 levels.
“The Solaris team executed on another strong quarter of growth,
while maintaining a healthy balance sheet and continuing to return
cash to shareholders,” Solaris’ Chairman and Chief Executive
Officer Bill Zartler commented. “Throughout 2022, the success of
our new top fill solutions has helped us grow with both new and
existing customers. The new technology has also helped us expand in
historically untapped markets for Solaris, including the Rockies.
We are excited to partner with our customers as we help to provide
solutions that can increase logistics and well site efficiency and
ultimately lower well costs.”
Third Quarter 2022 Financial Review
Solaris reported net income of $11.5 million, or $0.22 per
diluted Class A share, for third quarter 2022, compared to second
quarter 2022 net income of $8.3 million, or $0.16 per diluted Class
A share. Adjusted pro forma net income for third quarter 2022 was
$11.1 million, or $0.24 per fully diluted share, compared to second
quarter 2022 adjusted pro forma net income of $9.4 million, or
$0.20 per fully diluted share. A description of adjusted pro forma
net income and a reconciliation to net income attributable to
Solaris, its most directly comparable generally accepted accounting
principles (“GAAP”) measure, and the computation of adjusted pro
forma earnings per fully diluted share are provided below.
Revenues were $92.3 million for third quarter 2022, which were
up 6% from second quarter 2022, driven by an increase in systems
deployed and contribution from new technologies, partially offset
by a reduction in last mile trucking logistics activity.
Adjusted EBITDA for third quarter 2022 was $23.9 million, which
was up 14% from second quarter 2022. The increase in Adjusted
EBITDA was driven by an increase in the number of fully utilized
systems and contribution from new technologies, partially offset by
lower last mile logistics activity and profitability mix, and start
up costs associated with the ramp in new technologies and expansion
into growth basins. A description of Adjusted EBITDA and a
reconciliation to net income, its most directly comparable GAAP
measure, is provided below.
Capital Expenditures, Free Cash Flow and Liquidity
Capital expenditures in the third quarter 2022 were $27.2
million. The Company expects total capital expenditures in the
fourth quarter 2022 to be between $15 million and $20 million,
including investments in new technology deployments. Based on the
success of the Solaris top fill deployments and strong indicators
for incremental demand, the Company is providing initial guidance
for total 2023 capital expenditures to be approximately $75
million, inclusive of $10 million to $15 million for maintenance
capital expenditures.
Free cash flow (defined as net cash provided by operating
activities less investment in property, plant and equipment) during
third quarter 2022 was $(5.7) million and reflects increased
capital expenditures and working capital use of $(2.6) million to
support growth. Distributable cash flow (defined as Adjusted EBITDA
less maintenance capital expenditures) was approximately $22
million for the third quarter 2022 and covered quarterly dividend
distributions of approximately $4.9 million.
As of September 30, 2022, the Company had approximately $10.4
million of cash on the balance sheet. The Company has $6.0 million
in borrowings outstanding on the credit facility, and total
liquidity, including availability under the credit facility, was
$54.4 million as of the end of the third quarter 2022.
Shareholder Returns
On August 22, 2022, the Company’s Board of Directors declared a
cash dividend of $0.105 per share of Class A common stock, which
was paid on September 16, 2022 to holders of record as of September
6, 2022. A distribution of $0.105 per unit was also approved for
holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris
LLC”). Since initiating the dividend in December 2018, the Company
has paid 16 consecutive quarterly dividends. Cumulatively, the
Company has returned approximately $107 million in cash to
shareholders through dividends and share repurchases since December
2018.
Conference Call
The Company will host a conference call to discuss its third
quarter 2022 results on Tuesday, November 1, 2022 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. To join the conference call from outside of the United
States, participants may dial (412) 317-6594. 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 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 2240232.
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) provides mobile
equipment that drives supply chain and execution efficiencies in
the completion of oil and natural gas wells. Solaris’ patented
equipment and systems are deployed across oil and natural gas
basins in the United States. Additional information is available on
our 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
the U.S. Securities and Exchange Commission’s (the “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 press release or will be incorporated by reference
into any 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, 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 various risks and uncertainties associated with
the extraordinary market environment and impacts resulting from the
volatility in global oil markets and the COVID-19 pandemic,
expected capital expenditures and the impact of such expenditures
on performance, management changes, 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, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
June 30,
September 30,
2022
2021
2022
2022
2021
Revenue
89,376
46,390
81,130
222,342
104,139
Revenue - related parties
2,949
2,987
5,581
13,609
9,101
Total revenue
92,325
49,377
86,711
235,951
113,240
Operating costs and expenses:
Cost of services (excluding depreciation
and amortization)
64,171
38,460
61,237
163,079
82,816
Depreciation and amortization
7,716
6,842
7,132
21,777
20,288
Property tax contingency (1)
—
—
3,072
3,072
—
Selling, general and administrative
5,929
4,760
6,062
17,202
14,326
Other operating (income) expenses (2)
524
(2,690
)
(1,114
)
(899
)
(2,074
)
Total operating costs and expenses
78,340
47,372
76,389
204,231
115,356
Operating income (loss)
13,985
2,005
10,322
31,720
(2,116
)
Interest expense, net
(141
)
(66
)
(88
)
(308
)
(170
)
Total other expense
(141
)
(66
)
(88
)
(308
)
(170
)
Income (loss) before income tax
expense
13,844
1,939
10,234
31,412
(2,286
)
Provision for income taxes
2,332
507
1,945
5,889
77
Net income (loss)
11,512
1,432
8,289
25,523
(2,363
)
Less: net (income) loss related to
non-controlling interests
(4,106
)
(558
)
(2,836
)
(9,162
)
857
Net income (loss) attributable to
Solaris
$
7,406
$
874
$
5,453
$
16,361
$
(1,506
)
Earnings per share of Class A common stock
- basic
$
0.22
$
0.03
$
0.16
$
0.49
$
(0.06
)
Earnings per share of Class A common stock
- diluted
$
0.22
$
0.03
$
0.16
$
0.49
$
(0.06
)
Basic weighted average shares of Class A
common stock outstanding
31,599
31,058
31,432
31,425
30,671
Diluted weighted average shares of Class A
common stock outstanding
31,599
31,058
31,432
31,425
30,671
1)
Property tax contingency represents a
reserve related to an unfavorable Texas District Court ruling
related to prior period property taxes. The ruling is currently
under appeal.
2)
Other (income) expense include the sale or
disposal of assets, settlements of insurance claims, change in
payable related to Tax Receivable Agreement, credit losses or
recoveries, and transaction costs.
SOLARIS OILFIELD
INFRASTRUCTURE, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(In thousands, except per
share amounts)
(Unaudited)
September 30,
December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
$
10,433
$
36,497
Accounts receivable, net of allowances for
credit losses of $385 and $746, respectively
68,496
29,513
Accounts receivable - related party
2,596
3,607
Prepaid expenses and other current
assets
8,548
9,797
Inventories
5,615
1,654
Total current assets
95,688
81,068
Property, plant and equipment, net
284,913
240,091
Non-current inventories
2,249
2,676
Operating lease right-of-use assets
4,213
4,182
Goodwill
13,004
13,004
Intangible assets, net
1,619
2,203
Deferred tax assets
58,148
62,942
Other assets
295
57
Total assets
$
460,129
$
406,223
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
26,079
$
9,927
Accrued liabilities
30,147
16,918
Current portion of payables related to Tax
Receivable Agreement
1,210
1,210
Current portion of operating lease
liabilities
886
717
Current portion of finance lease
liabilities
1,222
31
Other current liabilities
1,301
496
Total current liabilities
60,845
29,299
Operating lease liabilities, net of
current
6,410
6,702
Credit agreement
6,000
—
Finance lease liabilities, net of
current
2,331
70
Payables related to Tax Receivable
Agreement
71,422
71,892
Other long-term liabilities
372
384
Total liabilities
147,380
108,347
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, 31,638 shares issued and outstanding as
of September 30, 2022 and 31,146 shares issued and outstanding as
of December 31, 2021
316
312
Class B common stock, $0.00 par value,
180,000 shares authorized, 13,674 shares issued and outstanding as
of September 30, 2022 and 13,770 issued and outstanding as of
December 31, 2021
—
—
Additional paid-in capital
201,720
196,912
Retained earnings
11,509
5,925
Total stockholders' equity attributable to
Solaris and members' equity
213,545
203,149
Non-controlling interest
99,204
94,727
Total stockholders' equity
312,749
297,876
Total liabilities and stockholders'
equity
$
460,129
$
406,223
SOLARIS OILFIELD
INFRASTRUCTURE, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September
30,
Three Months Ended September
30,
2022
2021
2022
Cash flows from operating activities:
Net (loss) income
$
25,523
$
(2,363
)
$
11,512
Adjustment to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization
21,777
20,288
7,716
Loss on disposal of asset
1,307
113
1,346
Stock-based compensation
4,665
3,907
1,553
Amortization of debt issuance costs
127
132
29
Allowance for credit losses
(420
)
630
(32
)
Change in payables related to Tax
Receivable Agreement
(654
)
—
—
Deferred income tax expense (benefit)
5,143
(273
)
2,042
Other
(178
)
(153
)
—
Changes in assets and liabilities:
Accounts receivable
(38,563
)
(17,995
)
(5,555
)
Accounts receivable - related party
1,011
(1,852
)
1,349
Prepaid expenses and other assets
2,972
(3,266
)
(2,126
)
Inventories
(4,744
)
(714
)
(1,287
)
Accounts payable
12,569
7,076
4,667
Accrued liabilities
10,305
6,167
304
Property tax contingency (1)
3,072
—
—
Net cash provided by operating
activities
43,912
11,697
21,518
Cash flows from investing activities:
Investment in property, plant and
equipment
(59,527
)
(13,702
)
(27,201
)
Cash received from insurance proceeds
1,308
35
448
Proceeds from disposal of assets
422
42
365
Net cash used in investing activities
(57,797
)
(13,625
)
(26,388
)
Cash flows from financing activities:
Distribution and dividend paid to Solaris
LLC unitholders and Class A common shareholders
(14,675
)
(14,400
)
(4,898
)
Borrowings under the credit agreement
9,000
—
9,000
Repayment of the credit agreement
(3,000
)
—
(3,000
)
Payments under finance leases
(1,100
)
(23
)
(533
)
Payments under insurance premium
financing
(946
)
(410
)
(524
)
Proceeds from stock option exercises
—
12
—
Payments related to debt issuance
costs
(358
)
—
—
Payments for shares withheld for taxes
from RSU vesting and cancelled
(1,100
)
(786
)
(93
)
Net cash used in financing activities
(12,179
)
(15,607
)
(48
)
Net decrease in cash and cash
equivalents
(26,064
)
(17,535
)
(4,918
)
Cash and cash equivalents at beginning of
period
36,497
60,366
15,351
Cash and cash equivalents at end of
period
$
10,433
$
42,831
$
10,433
Non-cash activities
Operating:
Employee retention credit
$
—
$
1,900
$
—
Investing:
Capitalized depreciation in property,
plant and equipment
424
2,260
135
Capitalized stock based compensation
296
228
89
Property and equipment additions incurred
but not paid at period-end
3,436
323
3,436
Property, plant and equipment additions
transferred from inventory
1,210
958
152
Additions to fixed assets through finance
leases
4,554
—
2,287
Financing:
Insurance premium financing
806
410
806
Cash paid for:
Interest
102
99
65
Income taxes
370
325
—
1)
Property tax contingency represents a
reserve related to an unfavorable Texas District Court ruling
related to prior period property taxes. The ruling is currently
under appeal.
SOLARIS OILFIELD
INFRASTRUCTURE, INC AND SUBSIDIARIES
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 define EBITDA as
net income, 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) stock-based
compensation expense and (ii) certain non-cash items and
extraordinary, unusual or non-recurring gains, losses or expenses.
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 to EBITDA
and Adjusted EBITDA for each of the periods indicated.
Three Months Ended
Nine months ended
September 30,
June 30
September 30,
2022
2021
2022
2022
2021
Net income (loss)
$
11,512
$
1,432
$
8,289
$
25,523
$
(2,363
)
Depreciation and amortization
7,716
6,842
7,132
21,777
20,288
Interest expense, net
141
66
88
308
170
Income taxes (1)
2,332
507
1,945
5,889
77
EBITDA
$
21,701
$
8,847
$
17,454
$
53,497
$
18,172
Property tax contingency (2)
—
—
3,072
3,072
—
Stock-based compensation expense (3)
1,553
1,355
1,519
4,665
3,907
Employee retention credit (4)
—
(2,992
)
—
—
(2,992
)
Change in payables related to Tax
Receivable Agreement (5)
—
—
(654
)
(654
)
—
Credit losses and adjustments to credit
losses
(32
)
30
(361
)
(420
)
630
Other (6)
712
422
34
578
563
Adjusted EBITDA
$
23,934
$
7,662
$
21,064
$
60,738
$
20,280
___________________
1)
Federal and state income taxes.
2)
Property tax contingency represents a
reserve related to an unfavorable Texas District Court ruling
related to prior period property taxes. The ruling is currently
under appeal.
3)
Represents stock-based compensation
expense related to restricted stock awards.
4)
Employee retention credit as part of
Consolidated Appropriations Act of 2021, net of administrative
fees.
5)
Reduction in liability due to state tax
rate change.
6)
Other includes loss on disposal of assets,
gain on insurance claims and other settlements, and costs related
to the evaluation of potential acquisitions.
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
Nine months ended
September 30,
June 30
September 30,
2022
2021
2022
2022
2021
Numerator:
Net income (loss) attributable to
Solaris
$
7,406
$
874
$
5,453
$
16,361
$
(1,506
)
Adjustments:
Reallocation of net income (loss)
attributable to non-controlling interests from the assumed exchange
of LLC Interests (1)
4,106
558
2,836
9,162
(857
)
Employee retention credit (2)
—
(2,992
)
—
—
(2,992
)
Property tax contingency (3)
—
—
3,072
3,072
—
Change in payables related to Tax
Receivable Agreement (4)
—
—
(654
)
(654
)
—
Credit losses and adjustments to credit
losses
(32
)
30
(361
)
(420
)
630
Other (5)
712
422
34
578
563
Incremental income tax benefit
(expense)
(1,071
)
515
(1,006
)
(2,780
)
573
Adjusted pro forma net income (loss)
$
11,121
$
(593
)
$
9,374
$
25,319
$
(3,589
)
Denominator:
Weighted average shares of Class A common
stock outstanding
31,599
31,058
31,432
31,425
30,671
Adjustments:
Assumed exchange of Solaris LLC Units for
shares of Class A common stock (1)
15,021
14,686
15,132
14,983
14,957
Adjusted pro forma fully weighted average
shares of Class A common stock outstanding - diluted
46,620
45,744
46,564
46,408
45,628
Adjusted pro forma earnings per share -
diluted
$
0.24
$
(0.01
)
$
0.20
$
0.55
$
(0.08
)
(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)
Employee retention credit as part of
Consolidated Appropriations Act of 2021, net of administrative
fees.
(3)
Property tax contingency represents a
reserve related to an unfavorable Texas District Court ruling
related to prior period property taxes. The ruling is currently
under appeal.
(4)
Reduction in liability due to state tax
rate change.
(5)
Other includes loss on disposal of assets,
gain on insurance claims and other settlements, and costs related
to the evaluation of potential acquisitions.
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version on businesswire.com: https://www.businesswire.com/news/home/20221031005798/en/
Yvonne Fletcher Senior Vice President, Finance and Investor
Relations (281) 501-3070 IR@solarisoilfield.com
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