First Quarter 2023 Summary Results and Highlights
- Net income of $11.9 million, or $0.23 per diluted Class A
share; Adjusted pro forma net income of $11.0 million, or $0.24 per
fully diluted share
- Adjusted EBITDA of $25.1 million, reflecting a 9% sequential
and 60% year-over-year increase
- Increased deployments of Solaris’ new top fill technology and
AutoBlend™ units across multiple basins
- Raised regular quarterly dividend by 5% to $0.11 per share,
which was paid on March 24, 2023 and represented Solaris’ 18th
consecutive quarterly dividend
- Repurchased 1.6 million Class A common stock shares (3.5% of
total outstanding shares) during the quarter; approximately $36
million remains available under $50 million share repurchase
authorization announced in the first quarter
- $131 million cumulatively returned to shareholders through
dividends and share buybacks since 2018
Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) (“Solaris” or
the “Company”), today announced first quarter 2023 results, with
revenues of $82.7 million, net income of $11.9 million, adjusted
pro forma net income of $11.0 million, or $0.24 per fully diluted
share and Adjusted EBITDA of $25.1 million.
“Solaris continued to execute on our strategy in the first
quarter. We grew earnings sequentially and increased deployments of
our new product offerings, including top fill and AutoBlend™
systems,” Solaris’ Chairman and Chief Executive Officer Bill
Zartler commented.
“Our field execution and new technology deployments are lowering
our customers’ costs and driving well site efficiency. We expect
continued adoption of our new technology deployments to offset
potential natural gas driven activity softness in the second
quarter, which should result in Adjusted EBITDA and earnings that
are flat sequentially.
“We also recently outlined an enhanced shareholder capital
return program, where at least 50% of free cash flow will be
returned to shareholders. We took the first step in executing on
this framework through a 5% increase in our quarterly dividend and
the authorization of a $50 million share buyback program. During
the first quarter we retired 3.5% of our total outstanding shares
and we expect to continue executing on our buyback program in the
second quarter.”
First Quarter 2023 Financial Review
Solaris reported net income of $11.9 million, or $0.23 per
diluted Class A share, for first quarter 2023, compared to fourth
quarter 2022 net income of $8.0 million, or $0.15 per diluted Class
A share, and first quarter 2022 net income of $5.7 million, or
$0.11 per diluted Class A share. Adjusted pro forma net income for
first quarter 2023 was $11.0 million, or $0.24 per fully diluted
share, compared to fourth quarter 2022 adjusted pro forma net
income of $10.2 million, or $0.22 per fully diluted share, and
first quarter 2022 adjusted pro forma net income of $4.8 million,
or $0.11 per fully diluted share.
Revenues were $82.7 million for first quarter 2023, which were
down 2% sequentially and up 45% year over year. First quarter
revenue was positively impacted by pricing improvements over fourth
quarter, as well as the addition of top fill systems, and offset by
a decline in lower margin ancillary trucking services. Adjusted
EBITDA for first quarter 2023 was $25.1 million, which was up 9%
from fourth quarter 2022 and up 60% from first quarter 2022. The
sequential increase in Adjusted EBITDA was driven by pricing
improvement and additional top fill systems as noted above, as well
as a 23% increase in fully utilized mobile proppant management
systems when compared to Adjusted EBITDA for first quarter
2022.
During the first quarter of 2023, an average of 92 mobile
proppant management systems were fully utilized, which was in line
with average fourth quarter 2022 levels. During the first quarter,
25% of our systems utilized a Solaris top fill system compared to
16% in the fourth quarter of 2022 and 1% in the first quarter of
2022.
Capital Expenditures, Free Cash Flow and Liquidity
Capital expenditures in the first quarter 2023 were
approximately $19 million, which is primarily related to
manufacturing of top fill systems. Solaris is maintaining its
capital expenditure guidance for full year 2023 of $65 million to
$75 million, which includes $15 million for maintenance capital. We
continue to expect capital expenditures to be weighted towards the
first half of 2023.
Free cash flow (defined as net cash provided by operating
activities less investment in property, plant and equipment) during
first quarter 2023 was negative $2 million, including a
seasonally-higher working capital use of $8 million and capital
expenditures of $19 million. Distributable cash flow (defined as
Adjusted EBITDA less maintenance capital expenditures) was
approximately $22 million for the first quarter 2023, which was up
approximately 15% sequentially and nearly 60% year over year, and
covered quarterly dividend distributions of approximately $5
million.
As of March 31, 2023, the Company had approximately $2 million
of cash on the balance sheet. The Company had $26 million in
borrowings outstanding on the credit facility. In April 2023,
Solaris amended and expanded its credit facility by $25 million,
which results in pro forma liquidity of $51 million as of the end
of first quarter 2023.
Shareholder Returns
On March 2, 2023, the Company’s Board of Directors approved an
enhanced shareholder return program, which included a $50 million
share repurchase authorization and a 5% increase in the Company’s
cash dividend to $0.11 per share of Class A common stock, which was
paid on March 24, 2023 to holders of record as of March 14, 2023. A
distribution of $0.11 per unit was also approved for holders of
units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC”).
During the first quarter of 2023, the Company repurchased 1.6
million Class A common stock shares, or 3.5% of the Company’s total
outstanding shares, for approximately $14 million at an average
price of $8.80 per share, leaving approximately $36 million in the
Company’s stock repurchase authorization.
Since initiating the dividend in December 2018, the Company has
paid 18 consecutive quarterly dividends and repurchased
approximately 9% of total outstanding shares. Cumulatively, the
Company has returned approximately $131 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 first
quarter 2023 results on Tuesday, May 2, 2023 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 1247631.
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 adjusted net income, adjusted diluted
earnings per share and Adjusted EBITDA, 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
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
March 31,
December 31
2023
2022
2022
Revenue
77,828
51,836
77,658
Revenue - related parties
4,894
5,079
6,396
Total revenue
82,722
56,915
84,054
Operating costs and expenses:
Cost of services (excluding depreciation
and amortization)
53,223
37,671
56,696
Depreciation and amortization
8,417
6,929
8,657
Selling, general and administrative
6,538
5,211
5,873
Other operating (income) expense (1)
(338
)
(309
)
2,746
Total operating costs and expenses
67,840
49,502
73,972
Operating income
14,882
7,413
10,082
Interest expense, net
(459
)
(79
)
(181
)
Total other expense
(459
)
(79
)
(181
)
Income before income tax expense
14,423
7,334
9,901
Provision for income taxes
2,486
1,612
1,913
Net income
11,937
5,722
7,988
Less: net income related to
non-controlling interests
(4,368
)
(2,220
)
(3,192
)
Net income attributable to Solaris
$
7,569
$
3,502
$
4,796
Earnings per share of Class A common stock
- basic
$
0.23
$
0.11
$
0.15
Earnings per share of Class A common stock
- diluted
$
0.23
$
0.11
$
0.15
Basic weighted average shares of Class A
common stock outstanding
31,214
31,239
31,640
Diluted weighted average shares of Class A
common stock outstanding
31,214
31,239
31,640
1)
Other (income) expense includes accrued
excise tax on share repurchases, the sale or disposal of assets,
insurance gains, credit losses or recoveries, severance costs, and
other settlements.
SOLARIS OILFIELD
INFRASTRUCTURE, INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts) (Unaudited)
March 31,
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
2,175
$
8,835
Accounts receivable, net of allowances for
credit losses of $355 and $385, respectively
68,124
64,543
Accounts receivable - related party
3,840
4,925
Prepaid expenses and other current
assets
4,245
5,151
Inventories
7,621
5,289
Total current assets
86,005
88,743
Property, plant and equipment, net
313,299
298,160
Non-current inventories
1,730
1,569
Operating lease right-of-use assets
3,850
4,033
Goodwill
13,004
13,004
Intangible assets, net
1,247
1,429
Deferred tax assets
53,624
55,370
Other assets
239
268
Total assets
$
472,998
$
462,576
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable
$
29,817
$
25,934
Accrued liabilities
22,370
25,252
Current portion of payables related to Tax
Receivable Agreement
—
1,092
Current portion of operating lease
liabilities
923
917
Current portion of finance lease
liabilities
2,191
1,924
Other current liabilities
—
790
Total current liabilities
55,301
55,909
Operating lease liabilities, net of
current
6,034
6,212
Borrowings under the credit agreement
26,000
8,000
Finance lease liabilities, net of
current
3,359
3,429
Payables related to Tax Receivable
Agreement
71,530
71,530
Other long-term liabilities
364
367
Total liabilities
162,588
145,447
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, 30,399 shares issued and outstanding as
of March 31, 2023 and 31,641 shares issued and outstanding as of
December 31, 2022
304
317
Class B common stock, $0.00 par value,
180,000 shares authorized, 13,674 shares issued and outstanding as
of March 31, 2023 and 13,674 issued and outstanding as of December
31, 2022
—
—
Additional paid-in capital
194,463
202,551
Retained earnings
13,081
12,847
Total stockholders' equity attributable to
Solaris and members' equity
207,848
215,715
Non-controlling interest
102,562
101,414
Total stockholders' equity
310,410
317,129
Total liabilities and stockholders'
equity
$
472,998
$
462,576
SOLARIS OILFIELD
INFRASTRUCTURE, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
CASH FLOWS (In thousands) (Unaudited)
Three Months Ended
March 31,
2023
2022
Cash flows from operating activities:
Net income
$
11,937
$
5,722
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
8,417
6,929
(Gain) loss on disposal of asset
(22
)
107
Stock-based compensation
1,980
1,593
Amortization of debt issuance costs
31
40
Deferred income tax expense
2,329
1,455
Other
10
(1
)
Changes in assets and liabilities:
Accounts receivable
(3,581
)
(11,321
)
Accounts receivable - related party
1,086
(1,216
)
Prepaid expenses and other assets
905
1,717
Inventories
(4,071
)
(1,152
)
Accounts payable
2,042
5,040
Accrued liabilities
(3,122
)
(2,644
)
Payments pursuant to tax receivable
agreement
(1,092
)
—
Net cash provided by operating
activities
16,849
6,269
Cash flows from investing activities:
Investment in property, plant and
equipment
(18,949
)
(11,776
)
Cash received from insurance proceeds
—
231
Proceeds from disposal of assets
123
38
Net cash used in investing activities
(18,826
)
(11,507
)
Cash flows from financing activities:
Share repurchases
(14,427
)
—
Distribution to unitholders (includes
distribution of $1.5 million at $0.11/unit and $1.4 million at
$0.105/unit, respectively)
(1,985
)
(1,446
)
Dividend paid to Class A common stock
shareholders
(3,656
)
(3,441
)
Borrowings under the credit agreement
18,000
—
Payments under finance leases
(738
)
(8
)
Payments under insurance premium
financing
(541
)
(246
)
Payments for shares withheld for taxes
from RSU vesting and cancelled
(1,336
)
(990
)
Net cash used in financing activities
(4,683
)
(6,131
)
Net decrease in cash and cash
equivalents
(6,660
)
(11,369
)
Cash and cash equivalents at beginning of
period
8,835
36,497
Cash and cash equivalents at end of
period
$
2,175
$
25,128
Non-cash activities
Investing:
Capitalized depreciation in property,
plant and equipment
129
146
Capitalized stock based compensation
174
115
Property and equipment additions incurred
but not paid at period-end
5,015
2,827
Property, plant and equipment additions
transferred from inventory
1,578
575
Additions to fixed assets through finance
leases
933
—
Cash paid for:
Interest
335
37
Income taxes
1
22
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
March 31,
December 31,
2023
2022
2022
Net income
$
11,937
$
5,722
$
7,988
Depreciation and amortization
8,417
6,929
8,657
Interest expense, net
459
79
181
Income taxes (1)
2,486
1,612
1,913
EBITDA
$
23,299
$
14,342
$
18,739
Stock-based compensation expense (2)
1,980
1,593
1,427
(Gain) loss on disposal of assets
(361
)
5
2,739
Other (3)
200
(200
)
139
Adjusted EBITDA
$
25,118
$
15,740
$
23,044
________________________
1)
Federal and state income taxes.
2)
Represents stock-based compensation
expense related to restricted stock awards.
3)
Other includes accrued excise tax on share
repurchases, gains on insurance claims, credit losses or recoveries
and other settlements.
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
March 31,
December 31,
2023
2022
2022
Numerator:
Net income attributable to Solaris
$
7,569
$
3,502
$
4,796
Adjustments:
Reallocation of net income attributable to
non-controlling interests from the assumed exchange of LLC
Interests (1)
4,368
2,220
3,192
(Gain) loss on disposal of assets
(361
)
5
2,739
Other (2)
200
(200
)
139
Incremental income tax expense
(779
)
(703
)
(671
)
Adjusted pro forma net income
$
10,997
$
4,824
$
10,195
Denominator:
Weighted average shares of Class A common
stock outstanding
31,214
31,239
31,640
Adjustments:
Assumed exchange of Solaris LLC units for
shares of Class A common stock (1)
15,224
14,769
14,968
Adjusted pro forma fully weighted average
shares of Class A common stock outstanding - diluted
46,438
46,008
46,608
Adjusted pro forma earnings per share -
diluted
$
0.24
$
0.11
$
0.22
(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)
Other includes accrued excise tax on share
repurchases, gains on insurance claims, credit losses or recoveries
and other settlements.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230501005642/en/
Yvonne Fletcher Senior Vice President, Finance and Investor
Relations (281) 501-3070 IR@solarisoilfield.com
Solaris Oilfield Infrast... (NYSE:SOI)
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