Solaris Oilfield Infrastructure, Inc. (NYSE:SOI, Financial) (“Solaris” or the “Company”), today announced second quarter 2023 results, with revenues of $77.2 million, net income of $12.2 million, adjusted pro forma net income of $11.3 million, or $0.25 per fully diluted share and Adjusted EBITDA of $26.8 million.
“Our strong second quarter results are a testament to the Solaris team’s continued execution on our strategy of growing earnings per frac crew followed. We grew profitability by deploying more top fill and AutoBlend™ systems and improving ancillary trucking services margin despite the softening in drilling and completion activity,” Solaris’ Chairman and Chief Executive Officer Bill Zartler commented.
“Since we began returning cash to shareholders in 2018, we have cumulatively returned $148 million through dividends and share repurchases. We expect to generate meaningful cash flow as our budgeted growth capital spending slows, allowing us to continue executing on our enhanced shareholder return framework.”
Second Quarter 2023 Financial Review
Solaris reported net income of $12.2 million, or $0.24 per diluted Class A share, for second quarter 2023, compared to first quarter 2023 net income of $11.9 million, or $0.23 per diluted Class A share, and second quarter 2022 net income of $8.3 million, or $0.16 per diluted Class A share. Adjusted pro forma net income for second quarter 2023 was $11.3 million, or $0.25 per fully diluted share, compared to first quarter 2023 adjusted pro forma net income of $11.0 million, or $0.24 per fully diluted share, and second quarter 2022 adjusted pro forma net income of $9.4 million, or $0.20 per fully diluted share.
Revenues were $77.2 million for second quarter 2023, which were down 7% sequentially and down 11% year over year. Adjusted EBITDA for second quarter 2023 was $26.8 million, which was up 7% from first quarter 2023 and up 27% from second quarter 2022. The sequential decrease in revenue was driven by decreases in industry frac activity and ancillary trucking services revenues, which was offset by additional top fill and AutoBlend™ systems. The sequential increase in Adjusted EBITDA was driven by increases in new technology deployments and ancillary trucking services margin.
During the second quarter of 2023, Solaris earned revenue on 108 fully utilized systems, which includes sand systems, top fill systems and AutoBlend™ systems. Total fully utilized systems were down 8% sequentially from 118 in the first quarter of 2023.
Capital Expenditures, Free Cash Flow and Liquidity
Capital expenditures in the second quarter 2023 were approximately $21 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. The Company expects capital expenditures in the third quarter of 2023 to be approximately $15 million, including maintenance capital expenditures.
Free cash flow (defined as net cash provided by operating activities less investment in property, plant and equipment) during second quarter 2023 was positive $7 million, including a working capital source of $3 million and capital expenditures of $21 million. Distributable cash flow (defined as Adjusted EBITDA less maintenance capital expenditures) was approximately $22 million for the second quarter 2023, which was approximately flat sequentially and up 10% year over year, and covered quarterly dividend distributions of approximately $5 million by approximately four times.
As of June 30, 2023, the Company had approximately $9 million of cash on the balance sheet. The Company had $43 million in borrowings outstanding on the credit facility and $41 million of liquidity as of the end of second quarter 2023.
Shareholder Returns
On May 16, 2023, the Company’s Board of Directors approved a cash dividend to $0.11 per share of Class A common stock, which was paid on June 16, 2023 to holders of record as of June 6, 2023. A distribution of $0.11 per unit was also approved for holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC”).
During the second quarter of 2023, the Company repurchased 1.4 million Class A common stock shares, or 3.0% of the Company’s total outstanding shares, for approximately $11 million, leaving approximately $24 million in the Company’s stock repurchase authorization. Since initiating the repurchase authorization in the first quarter of 2023, Solaris has repurchased a total of 3.1 million Class A common shares, or 6.5% of the Company’s total outstanding shares.
Since initiating the dividend in December 2018, the Company has paid 19 consecutive quarterly dividends and repurchased approximately 12% of total outstanding shares, representing approximately $148 million in cash cumulatively returned to shareholders through dividends and share repurchases since December 2018.
Conference Call
The Company will host a conference call to discuss its second quarter 2023 results on Friday, July 28, 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 6293931. 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, Financial) 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 | Six Months Ended | |||||||||||||||||||
June 30, | March 31, | June 30, | ||||||||||||||||||
2023 | 2022 | 2023 | 2023 | 2022 | ||||||||||||||||
Revenue | 69,925 | 81,130 | 77,828 | 147,753 | 132,966 | |||||||||||||||
Revenue - related parties | 7,277 | 5,581 | 4,894 | 12,171 | 10,660 | |||||||||||||||
Total revenue | 77,202 | 86,711 | 82,722 | 159,924 | 143,626 | |||||||||||||||
Operating costs and expenses: | ||||||||||||||||||||
Cost of services (excluding depreciation and amortization) | 45,652 | 61,237 | 53,223 | 98,875 | 98,908 | |||||||||||||||
Depreciation and amortization | 9,071 | 7,132 | 8,417 | 17,488 | 14,061 | |||||||||||||||
Property tax contingency (1) | — | 3,072 | — | — | 3,072 | |||||||||||||||
Selling, general and administrative | 6,825 | 6,062 | 6,538 | 13,363 | 11,273 | |||||||||||||||
Other operating income (2) | (125 | ) | (1,114 | ) | (338 | ) | (463 | ) | (1,423 | ) | ||||||||||
Total operating costs and expenses | 61,423 | 76,389 | 67,840 | 129,263 | 125,891 | |||||||||||||||
Operating income | 15,779 | 10,322 | 14,882 | 30,661 | 17,735 | |||||||||||||||
Interest expense, net | (879 | ) | (88 | ) | (459 | ) | (1,338 | ) | (167 | ) | ||||||||||
Total other expense | (879 | ) | (88 | ) | (459 | ) | (1,338 | ) | (167 | ) | ||||||||||
Income before income tax expense | 14,900 | 10,234 | 14,423 | 29,323 | 17,568 | |||||||||||||||
Provision for income taxes | 2,659 | 1,945 | 2,486 | 5,145 | 3,557 | |||||||||||||||
Net income | 12,241 | 8,289 | 11,937 | 24,178 | 14,011 | |||||||||||||||
Less: net income related to non-controlling interests | (4,709 | ) | (2,836 | ) | (4,368 | ) | (9,077 | ) | (5,056 | ) | ||||||||||
Net income attributable to Solaris | $ | 7,532 | $ | 5,453 | $ | 7,569 | $ | 15,101 | $ | 8,955 | ||||||||||
Earnings per share of Class A common stock - basic | $ | 0.24 | $ | 0.16 | $ | 0.23 | $ | 0.47 | $ | 0.27 | ||||||||||
Earnings per share of Class A common stock - diluted | $ | 0.24 | $ | 0.16 | $ | 0.23 | $ | 0.47 | $ | 0.27 | ||||||||||
Basic weighted average shares of Class A common stock outstanding | 29,542 | 31,432 | 31,214 | 30,373 | 31,337 | |||||||||||||||
Diluted weighted average shares of Class A common stock outstanding | 29,542 | 31,432 | 31,214 | 30,373 | 31,337 | |||||||||||||||
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 and we anticipate a ruling to be delivered sometime in the second half of 2023. |
2) | Other income 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) | ||||||
June 30, | December 31, | |||||
2023 | 2022 | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 9,371 | $ | 8,835 | ||
Accounts receivable, net of allowances for credit losses of $355 and $385, respectively | 56,103 | |||||
