HOUSTON--(BUSINESS WIRE)--Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) (“Solaris” or the “Company”), today announced third quarter 2023 financial and operational results.
“The Solaris team executed strongly and safely as industry activity bottomed during the third quarter. Despite this, we continued to see adoption of our new technology offerings. As a result, nearly 55% of industry frac crews we followed in the quarter deployed either a top fill or AutoBlend™ system, up from over 40% in the prior quarter,” Solaris’ Chairman and Chief Executive Officer Bill Zartler commented.
“We generated another quarter of positive free cash flow and used excess cash to reduce our revolver borrowings. We expect free cash flow to grow in the fourth quarter and into 2024 as we generate returns from the growth capital we have invested in the business over the last couple of years. We will use this additional cash flow to continue to return capital to shareholders and strengthen the balance sheet.”
“We are pleased to announce today that the Board has approved a $0.12 per share dividend, the second increase to our ordinary dividend in 2023. Our current per share dividend is a 9% increase over the third quarter dividend and a 14% increase over the fourth quarter 2022 dividend. Since we began returning cash to shareholders in 2018, we will have cumulatively returned approximately $158 million through dividends and share repurchases.”
Third Quarter 2023 Financial Review
Solaris reported net income of $7.6 million, or $0.16 per diluted Class A share, for third quarter 2023, compared to second quarter 2023 net income of $12.2 million, or $0.24 per diluted Class A share, and third quarter 2022 net income of $11.5 million, or $0.22 per diluted Class A share. Adjusted pro forma net income for third quarter 2023 was $8.5 million, or $0.19 per fully diluted share, compared to second quarter 2023 adjusted pro forma net income of $11.3 million, or $0.25 per fully diluted share, and third quarter 2022 adjusted pro forma net income of $11.1 million, or $0.24 per fully diluted share.
Revenues were $69.7 million for third quarter 2023, which were down 10% sequentially and down 25% year over year. Adjusted EBITDA for third quarter 2023 was $23.4 million, which was down 13% from second quarter 2023 and down 2% from third quarter 2022. The sequential decrease in revenue was primarily driven by decreases in ancillary trucking services activity. Total system revenue was approximately flat sequentially, as the decline in industry frac activity was offset by revenue growth from the addition of top fill systems. The sequential decrease in Adjusted EBITDA was impacted by the decline in ancillary services as well as higher maintenance costs that were incurred to improve system reliability as operators continue to drive frac efficiency through increased service intensity. These system improvements are also expected to enhance Solaris’ ability to respond more quickly to anticipated future activity improvements.
During the third 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 flat sequentially and up 2% year over year. The Company followed an average of 67 industry frac crews on a fully utilized basis in the third quarter of 2023, which was down 8% from 73 frac crews followed in the second quarter of 2023.
Capital Expenditures, Free Cash Flow and Liquidity
Capital expenditures after the sale of assets in the third quarter 2023 were approximately $15 million, which is primarily related to manufacturing of top fill systems. The Company expects capital expenditures in the fourth quarter of 2023 to be approximately $10 million, including maintenance capital expenditures. Based on this estimate, full year 2023 capital expenditures are expected to be at the low end of the previously guided range of $65 million to $75 million.
Free cash flow (defined as net cash provided by operating activities less investment in property, plant and equipment) after asset sales was positive $6 million in the third quarter of 2023, including a working capital use of $1 million and capital expenditures of $17 million, which was offset by the sale of $2 million of assets no longer used. Distributable cash flow (defined as Adjusted EBITDA less maintenance capital expenditures) was approximately $20 million for the third quarter 2023 and covered quarterly dividend distributions of $5 million by approximately four times.
As of September 30, 2023, the Company had approximately $3 million of cash on the balance sheet. The Company reduced net borrowings on the credit facility by $6 million and ended the third quarter of 2023 with $37 million in borrowings outstanding and $41 million of liquidity.
Shareholder Returns
On August 15, 2023, the Company’s Board of Directors approved a cash dividend of $0.11 per share of Class A common stock, which was paid on September 15, 2023 to holders of record as of September 5, 2023. A distribution of $0.11 per unit was also approved for holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC”).
On October 25, 2023, the Company’s Board of Directors approved a cash dividend of $0.12 per share of Class A common stock, to be paid on December 11, 2023 to holders of record as of December 1, 2023. A distribution of $0.12 per unit has also been approved for holders of units in Solaris LLC, which is subject to the same payment and record dates.
The Company did not repurchase shares during the third quarter of 2023 and approximately $24 million remains 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.
Pro forma for the announced dividend to be paid in December 2023, the Company has paid 21 consecutive quarterly dividends and repurchased approximately 12% of total outstanding shares.
Conference Call
The Company will host a conference call to discuss its third quarter 2023 results on Friday, October 27, 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 2373251. 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) |
||||||||||||||||||||
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|
|
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|
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|
|
|
|
|
|
|
|||||
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||||||||||
|
|
September 30, |
|
June 30, |
|
September 30, |
||||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2023 |
|
2022 |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenue |
|
|
64,427 |
|
|
|
89,376 |
|
|
|
69,925 |
|
|
|
212,180 |
|
|
|
222,342 |
|
Revenue - related parties |
|
|
5,249 |
|
|
|
2,949 |
|
|
|
7,277 |
|
|
|
17,420 |
|
|
|
13,609 |
|
Total revenue |
|
|
69,676 |
|
|
|
92,325 |
|
|
|
77,202 |
|
|
|
229,600 |
|
|
|
235,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cost of services (excluding depreciation and amortization) |
|
|
42,102 |
|
|
|
64,171 |
|
|
|
45,652 |
|
|
|
140,977 |
|
|
|
163,079 |
|
Depreciation and amortization |
|
|
9,179 |
|
|
|
7,716 |
|
|
|
9,071 |
|
|
|
26,667 |
|
|
|
21,777 |
|
Property tax contingency (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,072 |
|
Selling, general and administrative |
|
|
6,359 |
|
|
|
5,929 |
|
|
|
6,825 |
|
|
|
19,722 |
|
|
|
17,202 |
|
Impairment of fixed assets |
|
|
1,423 |
|
|
|
— |
|
|
|
— |
|
|
|
1,423 |
|
|
|
— |
|
Other operating (income)/expense (2) |
|
|
613 |
|
|
|
524 |
|
|
|
(125 |
) |
|
|
150 |
|
|
|
(899 |
) |
Total operating costs and expenses |
|
|
59,676 |
|
|
|
78,340 |
|
|
|
61,423 |
|
|
|
188,939 |
|
|
|
204,231 |
|
Operating income |
|
|
10,000 |
|
|
|
13,985 |
|
|
|
15,779 |
|
|
|
40,661 |
|
|
|
31,720 |
|
Interest expense, net |
|
|
(1,057 |
) |
|
|
(141 |
) |
|
|
(879 |
) |
|
|
(2,395 |
) |
|
|
(308 |
) |
Total other expense |
|
|
(1,057 |
) |
|
|
(141 |
) |
|
|
(879 |
) |
|
|
(2,395 |
) |
|
|
(308 |
) |
Income before income tax expense |
|
|
8,943 |
|
|
|
13,844 |
|
|
|
14,900 |
|
|
|
38,266 |
|
|
|
31,412 |
|
Provision for income taxes |
|
|
1,305 |
|
|
|
2,332 |
|
|
|
2,659 |
|
|
|
6,450 |
|
|
|
5,889 |
|
Net income |
|
|
7,638 |
|
|
|
11,512 |
|
|
|
12,241 |
|
|
|
31,816 |
|
|
|
25,523 |
|
Less: net income related to non-controlling interests |
|
|
(2,704 |
) |
|
|
(4,106 |
) |
|
|
(4,709 |
) |
|
|
(11,781 |
) |
|
|
(9,162 |
) |
Net income attributable to Solaris |
|
$ |
4,934 |
|
|
$ |
7,406 |
|
|
$ |
7,532 |
|
|
$ |
20,035 |
|
|
$ |
16,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Earnings per share of Class A common stock - basic |
|
$ |
0.16 |
|
|
$ |
0.22 |
|
|
$ |
0.24 |
|
|
$ |
0.64 |
|
|
$ |
0.49 |
|
Earnings per share of Class A common stock - diluted |
|
$ |
0.16 |
|
|
$ |
0.22 |
|
|
$ |
0.24 |
|
|
$ |
0.64 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Basic weighted average shares of Class A common stock outstanding |
|
|
29,025 |
|
|
|
31,599 |
|
|
|
29,542 |
|
|
|
29,919 |
|
|
|
31,425 |
|
Diluted weighted average shares of Class A common stock outstanding |
|
|
29,025 |
|
|
|
31,599 |
|
|
|
29,542 |
|
|
|
29,919 |
|
|
|
31,425 |
|
| 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 fourth quarter 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) |
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|
|
|
September 30, |
|
December 31, |
||
|
|
2023 |
|
2022 |
||
Assets |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,451 |
|
$ |
8,835 |
Accounts receivable, net of allowances for credit losses of $316 and $385, respectively |
|
|
48,295 |
|
|
64,543 |
Accounts receivable - related party |
|
|
7,065 |
|
|
4,925 |
Prepaid expenses and other current assets |
|
|
5,633 |
|
|
5,151 |
Inventories |
|
|
7,447 |
|
|
5,289 |
Assets held for sale |
|
|
3,000 |
|
|
— |
Total current assets |
|
|
74,891 |
|
|
88,743 |
Property, plant and equipment, net |
|
|
327,427 |
|
|
298,160 |
Non-current inventories |
|
|
1,856 |
|
|
1,569 |
Operating lease right-of-use assets |
|
|
12,773 |
|
|
4,033 |
Goodwill |
|
|
13,004 |
|
|
13,004 |
Intangible assets, net |
|
|
884 |
|
|
1,429 |
Deferred tax assets |
|
|
49,398 |
|
|
55,370 |
Other assets |
|
|
275 |
|
|
268 |
Total assets |
|
$ |
480,508 |
|
$ |
462,576 |
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
20,053 |
|
$ |
25,934 |
Accrued liabilities |
|
|
18,002 |
|
|
25,252 |
Current portion of payables related to Tax Receivable Agreement |
|
|
— |
|
|
1,092 |
Current portion of operating lease liabilities |
|
|
1,599 |
|
|
917 |
Current portion of finance lease liabilities |
|
|
2,429 |
|
|
1,924 |
Other current liabilities |
|
|
822 |
|
|
790 |
Total current liabilities |
|
|
42,905 |
|
|
55,909 |
Operating lease liabilities, net of current |
|
|
13,197 |
|
|
6,212 |
Borrowings under the credit agreement |
|
|
37,000 |
|
|
8,000 |
Finance lease liabilities, net of current |
|
|
3,029 |
|
|
3,429 |
Payables related to Tax Receivable Agreement |
|
|
71,530 |
|
|
71,530 |
Other long-term liabilities |
|
|
120 |
|
|
367 |
Total liabilities |
|
|
167,781 |
|
|
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, 29,052 shares issued and outstanding as of September 30, 2023 and 31,641 shares issued and outstanding as of December 31, 2022 |
|
|
291 |
|
|
317 |
Class B common stock, $0.00 par value, 180,000 shares authorized, 13,674 shares issued and outstanding as of September 30, 2023 and December 31, 2022 |
|
|
— |
|
|
— |
Additional paid-in capital |
|
|
187,700 |
|
|
202,551 |
Retained earnings |
|
|
16,811 |
|
|
12,847 |
Total stockholders' equity attributable to Solaris and members' equity |
|
|
204,802 |
|
|
215,715 |
Non-controlling interest |
|
|
107,925 |
|
|
101,414 |
Total stockholders' equity |
|
|
312,727 |
|
|
317,129 |
Total liabilities and stockholders' equity |
|
$ |
480,508 |
|
$ |
462,576 |
SOLARIS OILFIELD INFRASTRUCTURE, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
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|
|
|
|
|
|
|
|
|
|
|||
|
|
Nine Months Ended
|
|
Three Months
|
||||||||
|
|
2023 |
|
2022 |
|
2023 |
||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net income |
|
$ |
31,816 |
|
|
$ |
25,523 |
|
|
$ |
7,638 |
|
Adjustment to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization |
|
|
26,667 |
|
|
|
21,777 |
|
|
|
9,179 |
|
Impairment of fixed assets |
|
|
1,423 |
|
|
|
— |
|
|
|
1,423 |
|
Loss on disposal of asset |
|
|
604 |
|
|
|
1,307 |
|
|
|
622 |
|
Stock-based compensation |
|
|
5,830 |
|
|
|
4,665 |
|
|
|
1,926 |
|
Amortization of debt issuance costs |
|
|
114 |
|
|
|
127 |
|
|
|
43 |
|
Allowance for credit losses |
|
|
160 |
|
|
|
(420 |
) |
|
|
162 |
|
Change in payables related to Tax Receivable Agreement |
|
|
— |
|
|
|
(654 |
) |
|
|
— |
|
Deferred income tax expense |
|
|
6,019 |
|
|
|
5,143 |
|
|
|
1,166 |
|
Other |
|
|
(178 |
) |
|
|
(178 |
) |
|
|
(16 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|||
Accounts receivable |
|
|
16,088 |
|
|
|
(38,563 |
) |
|
|
7,646 |
|
Accounts receivable - related party |
|
|
(2,140 |
) |
|
|
1,011 |
|
|
|
(277 |
) |
Prepaid expenses and other assets |
|
|
263 |
|
|
|
2,972 |
|
|
|
(880 |
) |
Inventories |
|
|
(5,020 |
) |
|
|
(4,744 |
) |
|
|
781 |
|
Accounts payable |
|
|
(6,469 |
) |
|
|
12,569 |
|
|
|
(9,516 |
) |
Accrued liabilities |
|
|
(7,744 |
) |
|
|
10,305 |
|
|
|
984 |
|
Payments pursuant to tax receivable agreement |
|
|
(1,092 |
) |
|
|
— |
|
|
|
— |
|
Property tax contingency (1) |
|
|
— |
|
|
|
3,072 |
|
|
|
— |
|
Net cash provided by operating activities |
|
|
66,341 |
|
|
|
43,912 |
|
|
|
20,881 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|||
Investment in property, plant and equipment |
|
|
(57,117 |
) |
|
|
(59,527 |
) |
|
|
(16,987 |
) |
Cash received from insurance proceeds |
|
|
122 |
|
|
|
1,308 |
|
|
|
53 |
|
Proceeds from disposal of assets |
|
|
2,165 |
|
|
|
422 |
|
|
|
2,000 |
|
Net cash used in investing activities |
|
|
(54,830 |
) |
|
|
(57,797 |
) |
|
|
(14,934 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
Share repurchases |
|
|
(25,757 |
) |
|
|
— |
|
|
|
— |
|
Distribution to unitholders (includes distribution of $4.5 million at $0.11/unit, $4.3 million at $0.105/unit, and $1.5 million at $0.11/unit, respectively) |
|
|
(4,993 |
) |
|
|
(4,327 |
) |
|
|
(1,504 |
) |
Dividend paid to Class A common stock shareholders |
|
|
(10,402 |
) |
|
|
(10,348 |
) |
|
|
(3,358 |
) |
Borrowings under the credit agreement |
|
|
35,000 |
|
|
|
9,000 |
|
|
|
— |
|
Repayment of the credit agreement |
|
|
(6,000 |
) |
|
|
(3,000 |
) |
|
|
(6,000 |
) |
Payments under finance leases |
|
|
(1,908 |
) |
|
|
(1,100 |
) |
|
|
(582 |
) |
Payments under insurance premium financing |
|
|
(1,380 |
) |
|
|
(946 |
) |
|
|
(414 |
) |
Payments related to debt issuance costs |
|
|
(91 |
) |
|
|
(358 |
) |
|
|
— |
|
Payments for shares withheld for taxes from RSU vesting and cancelled |
|
|
(1,364 |
) |
|
|
(1,100 |
) |
|
|
(9 |
) |
Net cash used in financing activities |
|
|
(16,895 |
) |
|
|
(12,179 |
) |
|
|
(11,867 |
) |
Net decrease in cash and cash equivalents |
|
|
(5,384 |
) |
|
|
(26,064 |
) |
|
|
(5,920 |
) |
Cash and cash equivalents at beginning of period |
|
|
8,835 |
|
|
|
36,497 |
|
|
|
9,371 |
|
Cash and cash equivalents at end of period |
|
$ |
3,451 |
|
|
$ |
10,433 |
|
|
$ |
3,451 |
|
Non-cash activities |
|
|
|
|
|
|
|
|
|
|||
Investing: |
|
|
|
|
|
|
|
|
|
|||
Capitalized depreciation in property, plant and equipment |
|
|
202 |
|
|
|
424 |
|
|
|
95 |
|
Capitalized stock based compensation |
|
|
410 |
|
|
|
296 |
|
|
|
114 |
|
Property and equipment additions incurred but not paid at period-end |
|
|
588 |
|
|
|
3,436 |
|
|
|
360 |
|
Property, plant and equipment additions transferred from inventory |
|
|
2,575 |
|
|
|
1,210 |
|
|
|
533 |
|
Additions to fixed assets through finance leases |
|
|
2,012 |
|
|
|
4,554 |
|
|
|
86 |
|
Financing: |
|
|
|
|
|
|
|
|
|
|||
Insurance premium financing |
|
|
283 |
|
|
|
806 |
|
|
|
414 |
|
Cash paid for: |
|
|
|
|
|
|
|
|
|
|||
Interest |
|
|
2,079 |
|
|
|
102 |
|
|
|
1,051 |
|
Income taxes |
|
|
198 |
|
|
|
370 |
|
|
|
— |
|
| (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, |
|||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2023 |
|
2022 |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Net income |
|
$ |
7,638 |
|
$ |
11,512 |
|
|
$ |
12,241 |
|
$ |
31,816 |
|
$ |
25,523 |
|
Depreciation and amortization |
|
|
9,179 |
|
|
7,716 |
|
|
|
9,071 |
|
|
26,667 |
|
|
21,777 |
|
Interest expense, net |
|
|
1,057 |
|
|
141 |
|
|
|
879 |
|
|
2,395 |
|
|
308 |
|
Income taxes (1) |
|
|
1,305 |
|
|
2,332 |
|
|
|
2,659 |
|
|
6,450 |
|
|
5,889 |
|
EBITDA |
|
$ |
19,179 |
|
$ |
21,701 |
|
|
$ |
24,850 |
|
$ |
67,328 |
|
$ |
53,497 |
|
Property tax contingency (2) |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
3,072 |
|
Stock-based compensation expense (3) |
|
|
1,917 |
|
|
1,553 |
|
|
|
1,924 |
|
|
5,821 |
|
|
4,665 |
|
Loss on disposal of assets |
|
|
746 |
|
|
989 |
|
|
|
4 |
|
|
390 |
|
|
1,025 |
|
Impairment on fixed assets (4) |
|
|
1,423 |
|
|
— |
|
|
|
— |
|
|
1,423 |
|
|
— |
|
Change in payables related to Tax Receivable Agreement (5) |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
(654 |
) |
Other (6) |
|
|
163 |
|
|
(309 |
) |
|
|
47 |
|
|
409 |
|
|
(867 |
) |
Adjusted EBITDA |
|
$ |
23,428 |
|
$ |
23,934 |
|
|
$ |
26,825 |
|
$ |
75,371 |
|
$ |
60,738 |
|
_______________________
| 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 and we anticipate a ruling to be delivered sometime in the fourth quarter of 2023. |
|
| 3) | Represents stock-based compensation expense related to restricted stock awards, including performance-based restricted stock. |
|
| 4) | Impairment recorded on certain fixed assets classified as assets held for sale during the three months ended September 30, 2023. |
|
| 5) | Reduction in liability due to state tax rate change. |
|
| 6) | 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 |
|
Nine Months Ended |
||||||||||||||||
|
|
September 30, |
|
June 30, |
|
September 30, |
||||||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2023 |
|
2022 |
||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income attributable to Solaris |
|
$ |
4,934 |
|
|
$ |
7,406 |
|
|
$ |
7,532 |
|
|
$ |
20,035 |
|
|
$ |
16,361 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Reallocation of net income attributable to non-controlling interests from the assumed exchange of LLC Interests (1) |
|
|
2,704 |
|
|
|
4,106 |
|
|
|
4,709 |
|
|
|
11,781 |
|
|
|
9,162 |
|
Loss on disposal of assets |
|
|
746 |
|
|
|
989 |
|
|
|
4 |
|
|
|
390 |
|
|
|
1,025 |
|
Impairment on fixed assets (2) |
|
|
1,423 |
|
|
|
— |
|
|
|
— |
|
|
|
1,423 |
|
|
|
— |
|
Property tax contingency (3) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,072 |
|
Change in payables related to Tax Receivable Agreement (4) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(654 |
) |
Other (5) |
|
|
163 |
|
|
|
(309 |
) |
|
|
47 |
|
|
|
409 |
|
|
|
(867 |
) |
Incremental income tax expense |
|
|
(1,453 |
) |
|
|
(1,071 |
) |
|
|
(983 |
) |
|
|
(2,688 |
) |
|
|
(2,780 |
) |
Adjusted pro forma net income |
|
$ |
8,517 |
|
|
$ |
11,121 |
|
|
$ |
11,309 |
|
|
$ |
31,350 |
|
|
$ |
25,319 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Weighted average shares of Class A common stock outstanding |
|
|
29,025 |
|
|
|
31,599 |
|
|
|
29,542 |
|
|
|
29,919 |
|
|
|
31,425 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Potentially dilutive shares (6) |
|
|
15,448 |
|
|
|
15,021 |
|
|
|
15,365 |
|
|
|
15,273 |
|
|
|
14,983 |
|
Adjusted pro forma fully weighted average shares of Class A common stock outstanding - diluted |
|
|
44,473 |
|
|
|
46,620 |
|
|
|
44,907 |
|
|
|
45,192 |
|
|
|
46,408 |
|
Adjusted pro forma earnings per share - diluted |
|
$ |
0.19 |
|
|
$ |
0.24 |
|
|
$ |
0.25 |
|
|
$ |
0.69 |
|
|
$ |
0.55 |
|
| (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) | Impairment recorded on certain fixed assets classified as assets held for sale during the three months ended September 30, 2023. |
|
| (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 and we anticipate a ruling to be delivered sometime in the fourth quarter of 2023. |
|
| (4) | Reduction in liability due to state tax rate change. |
|
| (5) | Other includes accrued excise tax on share repurchases, gains on insurance claims, credit losses or recoveries and other settlements. |
|
| (6) | Assumes the exchange of all outstanding Solaris LLC Units for shares of Class A common stock and vesting of Restricted stock awards and Performance-based restricted stock awards at the beginning of the relevant reporting periods. |