Solaris Energy Infrastructure (SEI) 1 Nov 222022 Q3 Earnings call transcript

Good morning and welcome to the Solaris Oilfield Infrastructure Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] I would now like to turn the conference over to Yvonne Fletcher. Please go ahead.

Good morning and welcome to the Solaris third quarter 2022 earnings conference call. our CFO, CEO, Kyle by our Zartler; today and President Ramachandran. joined Chairman William and and I'm

to that Before we be useful which our of begin, Such financial our section. statements standard results I'd evaluating The we forward-looking like Please to remarks that in recent outline turn comparable a call comments additional should in of the release substitute remind CEO, the available performance. News will issued call and statements information with other GAAP public regarding of I'll also and with in point press may forward-looking Exchange regarding make are reflect risks. nature like this will discussion presentation known on yesterday, with Zartler. William some out prepared earnings include those results conference a be at and accordance or under financial as site our to Commission the contain and isolation I would that over can cautionary considered refer posted GAAP. of well measures, today. to for you future unknown the in not non-GAAP is Reconciliations our release Securities solarisoilfield.com today's of number filings believe of measures which release, risks. Chairman the to along and now we our earnings our our

you this The another quarter to strong you, results share proud Yvonne you delivered today. has Thank Solaris and team joining thank for with morning. and everyone I'm us the

fully adjusted $XX grew to system in paid support utilized and market our XXth that. million. We to our overall the outpaced our as in XX consecutive of over count in due both frac XX% incremental During last offering systems increased roughly well our no couple fully new to results continue solutions, nearly of this quarter, has quarter addressable customers XX% offering. the include fill Last and We count to utilized the broadening growth end and earnings dividend our our chemical We a last-mile to system how years offering. deployed sequentially unit, the water investing broader systems investments about our spent more technology EBITDA and service both we top debt. we $XX today believe that increased and XX% cycle and market in and the net cash opportunity existing site technology silos, quarter, to growth and sophisticated and spoke AutoBlend of our million with third the power

are we already operators to services, sand Through package, Our including these both new services delivery. goal last-mile efficiencies by addressable complement storage with market. technologies these that total storage a or core Through investments sand experiencing leads the provide that coming well have our offering. benefits solutions. companies that electric service existing our Each fill designs, all-electric or system, efficiency solutions, limitations customers new dropped solution boxes added a with our other the bottom we we of savings for as provide AutoBlend historically that reliable And for as to provided additional our is of and provide top used many frac expands for prefer through have our provide market. customers bundled vendor

was of of half units. additional third pulled in delivery by fill share, net approximately top our deployed quarter, the During growth driven through total systems

day. unload reduction per capacity drives also use truck both faster job. powerful truck fill with is significant high payload, efficiency fewer increased flexibility road a of system can per and and sand also people unloading top belly handling in reliable turns payload well drivers truck which our pneumatic our to industry customers. Trucking improved reduces Our fewer and and provides site; trucks, miles drives trucks overall and of on supply sites. combination combination trucking. times which to fewer By number by has still trips required we belly improved trucking Safety an having and dump sand leading on faster increase for risk using of drivers, by and the total The per in dump equipment overall well operational a costs, lower increase the times,

multiple in that the indicated in, operate as system like technology customers continue of deployed case Based customer our backlog call on today of to most continue current growing today. historically system demand us the to investment plans in result growth believe The these proposition higher smaller reduction presence. who our nearly the as areas our with to Whereas We the greater grow other and the XX% on came Several than where Rockies the bottom led of is in historically fill is Solaris to that areas continues total can of count. to top Some this technology these trials also allowances. and trucks attractive. The drop trucking improvement up to significant untapped even that efficiency XX%, be basins drive into both for customers XX%. demand using well up customers last by in miles for a of to value every truck as the units, a helping a additional be units has quarter top plans initial many has existing in and more of is to fill unit use Bakken, we mentioned reduce has payload backlog basins, can we fill from we the that stickiness had of Bakken on Rockies in regions the have Rockies. top third a following

of systems approximately top units fully quarter. During the the seven utilized top total added quarter, fill nine we utilized fill for over a fully

additional deploy to pace similar over coming expect a the at We units quarters.

units will three pull-through drive systems in currently fill near-term evolving, that always top use. one our of that as out are While, backlog indicates sand every not

to demand holidays, we be through can flat around pull down flat normal seasonality XXXX, in that For fully for a continued resulting is the systems be which systems, to by sand sand quarter-over-quarter. the fourth due expected offset utilized frac market a to quarter expect

some to use wet efforts, offering continue sand we ability our Turning our fluid new AutoBlend. silos, modified the near full of test for design full we in are including to future. fills, the silos, sand finalizing modifications to of We to of handle believe technology other top the and field close

be excited the unit. We with efficiencies we on can well also AutoBlend incremental to continue our sites provide about

continue same footprint, benefit the when During the traditional third blenders. enhanced quarter, and we our to and from all-electric redundancy, associated design to the days and were costs safety, roughly automation, the smaller downtime compared see blender built-in revenue with increased

XXXX, grow and in an continue their AutoBlend summary, front opportunity addition the the also market, of us through to to continued on to we're operations. coming that In our adoption for profit, the for addressable technologies believe opportunity We in deployment electric investments capital into customers return the frac in fleets, new our conventional new provide market improve in about excited help fleets.

strong financial that, for it organically continuing and Solaris is maintain a grow our turn to results With attractive our pay detailed of to uniquely Kyle positioned I'll to our returns, review while guidance. dividend liquidity. and over and

Thanks everyone. Bill and good morning,

averaged volume and from our testament XX% systems, of $XX mix innovation results adjusted partially our the are million. exceeded and growth the count, and offset growth driven new of We second lower our fully logistics increase We a third incremental that which over frac by XX in and nearly $XX quarter. execution. strong We team's EBITDA by generated represents to a traditional was industry sequential of strong for utilized quarter revenue Our believe This demand last-mile offering. our technologies. million

startup profit our margin top deployments incremental The sequentially flat was new fill was product deployments contribution by of costs associated ramping and system costs, with from support last-mile gross the for system third profitability, and utilized sand underrepresented Our quarter. margin activity offset combination a fully higher bases. lower strong in in system and

rolled we enhance of used we've margins. integrated top equipment, and the has last-mile our jobs As able out been in them to our fill many

to However, and off such of and third quarter. in be job frac other outside decrease second drove sand a as availability, difficult predict, coming our profitability last-mile quarter that record our a control of issues mix can

flow million We capital ended we cash will on continued our million prior form XXXX, $X in in our positive cash flow during negative cash was integrated $XX the capital million million credit approximately of last-mile in of a borrowing fund net momentum and with in execute dividends, facility offering on of repurchases. which million. $XXX team to to available cash our forward is quarter. the with credit million approximately $XX cash was of as the continues an late Net million in flat liquidity $XX in quarter third growth. cash the dividend a initiating in and for approximately quarter $X After activity $X under facility our million, mix we've shareholders of equipment. total $XX million share total to dividends in returned and in our balance of predict and net quarter. quarter from on job operations Although the flow intent with borrowings returned sheet, working to needs. our $XX of to facility, increase growth service to the free our million We our remain expenditures $X we shareholders $XX.X Since Operating total support going capital zero challenging position debt. fill excess credit of on with cash of see from the basis, a Together, is this near-term utilizing million top approximately working remain our net

of invest to growth to As our our be continue anticipate in we credit temporary. expanding we on the facility business, borrowings

fourth could last-mile some quarter the services, our year-end expect and seasonality normal trucking, impact logistics around pause holidays. which Turning our activity to we and will take Thanksgiving outlook,

pull-through profitability system for in result in activity quarter. can system fourth we last-mile seasonality Bill expect potential a this we flat new and margin seasonality, activity and flat costs, quarter. sequential the system the technology stated, expect thin basis, reduction to in potentially On a deployments continue As continued startup in to offset fourth from that counts

continued grow year, per expect we our earning crew third for frac we As was continue quarter $X the XXXX. to our throughout next potential expense in million. improvement SG&A approximately offering

SG&A the third quarter at For we XXXX, similar total to be $X expect approximately fourth the to of million. quarter

our capital to outlook. Turning

$XX towards million, which million and $XX Based demand, between and of million directed capabilities. expect XXXX of grow and For total the our our technology success fourth will be $XX we size million quarter be fleet incremental the we're XXXX, guidance to new on initiating of in for strong CapEx maintenance million. indicators to to capital CapEx $XX as $XX continues deployments of

weighted the increase or based capital of to flexibility year first demand XXXX program indicators. in the towards XXXX be decrease Our half with will the of half back on

continued maintenance year-to-date. growing a growing to us under employees our dividend are distributable all for seeing the times. capital outlook We and are cash shareholders should over basis remains measure improvement use profitability new capital, maintenance potential. summary, our of our dividend cash are from contribution as of dividend coverage defined in of into quarter, Our Solaris in In stock. the less earnings return result important as flow In through our to technology flow, as expenditures owners The combination four of XXXX. our end the by XXXX of third our revenue and and stable EBITDA adjusted investments was cash we distribution distributable we our a and encouraged coverage

technology-based service and team automating pressure for and standards through committed the business in of being to quality safety our the leaders and solutions remains operations. evolving gas oil low completion expands, As innovating industry, to our our challenges raising and customers, driving the streamlining highest

position. we'd efficiencies grow support our on focused drive maintain and delivering dividend, for balance take frac to be generate technology happy your that per returns solutions and crew, our that, our and remain new our liquidity sheet shareholders, will incremental strong customers can We for earnings questions. our both With

you. Thank

will will first Instructions] begin now come Piper ahead. [Operator Sandler. Luke the go We question-and-answer from from And our session. Please question Lemoine

Bill, to Kyle, morning Yvonne. good Hey,

Good morning Luke.

morning. Good

In be low about talk XXXX? on from point some and maybe how the seeing gross us incremental XXXX parameters for on as top per noted you've past, well. fill But on incremental On these given system. profit you've the can AutoBlend one deployments demand you're how at you accretive or how CapEx, XXXX, be the this XXX to investments our these could on maybe to comment additive the pretty even in are this estimates maybe a but basis, ROC more million so? about at simplistic van Or how increased

on into Ye, When just compelling sort top think a capital. idle capital, to the Luke, is the about on return call fill it that’s able the redeploy of period business, we're I'll back with we And units really put we to we take that capital really a target standalone on one. all three-year the piece two basis.

sand some the we're able have we silo of market through working, share aren't deployment of the to So, today that systems that fill. gain top

becomes $XX.X million. $X really million an deploying but it a incremental the we're of incremental that So, ROCE, capital, call from is compelling roughly only

Okay, XXXX you're top fill said, see ending got up -- it. at And you for I nine systems? fill you you XXXX now, on then how systems believe right CapEx with do the the do what top

the is system nine deployed Yes, fully count. a

average And way that's the so conservative entire to it. the again, That quarter. for a blended pretty about think was

roughly top adding way the we're top fills every capital per And million. we So, about cost fills day. think $X.X

be, descriptive will here imply but count So, on what as the is. back math the into won't ending what you too probably guidance, based to We you that. can some that be today can kind number of to do

thinking we've growth add to the the probably the you on additional fills so similar in see different top is three-year to both two XXXX. Kyle that it payback continued on a that at Luke, pace that systems, contribution should plus way referenced to a of of sand and pull-through about CapEx continue

think the that right low agree seems street little a you we with I So, now. would

a-- And Okay. just

-- third that's a every out about going And work. about of one three to

to an that incremental is one of sand one returns that's you return, on actually that not out portion. three increased actually through gets be would so set of will used that each half incremental a So, capital, actually get silo one idle capital pulling an out

it. Okay, helpful. bunch. Thanks Super a got

Thanks Luke.

The question Stephen Gengaro go be Please ahead. Yes. will from Stifel. next with

morning, Good everybody. Thanks.

be at So, follow-up of done third and market. frac we've traditionally expectations bit. When little just our Luke's guys a fleets Solaris model, to approach? on about looked for we you that the a assume sort question sort of Should our of we've changing had

when as you if that share at are look we It appears gaining market metric.

to traditionally I think So, a using hit top that fill the market yes, with incrementally has we're been unit, silos. able not

of it. current customers are Some our using

those not between we're on pulling actually adding share, third in work So, particular silos and market. capital changing are half, market through new pads. a for just actually somewhere new cases, But we're a going to many

positive the generation we then next sounds helpful. That's response It great. free your think prior when think Okay, your year. And might generation cash you're be little low, for CapEx low with lot the next that you like about be but comments, on in flow even year, a year, talking about? growth based might to a consensus cash free next question, should be

generated even markets with the go beyond now, to But top on now, well will it flow is needed. rapidly top units have additional we Right CapEx the work. expectations But feels that, those the And, will next we required. on absolutely. cash If significant manage demand Yes, down coupled going as plan things into if like be we and slow it. bring of we'll work, of existing as building that new fill year. into free change, new can silos right there year plenty to is our -- CapEx going that

of of because land What I maybe Great. have the you quarter. If perspective albeit plays XXXX more It Thank out in from just insight interactivity -- an on how U.S. your this generally a get fourth you, could think I at of continued your of, you'd is slower feels activity the equipment one a in there's next you. mean, like, early general. I in market. rate into guys and at activity year, kind commented slip point? growth completion availability view

Yes, that. predict you can't

year. bit. country, go things a things in where many falls in up our could politics going happen rebound to the If continuing change see We it to I to down. the steady around significantly, prices the sentiment the oil faster, If think to would as always we next but grow. look lens, up it probability or slow election it little it's on be view scenarios don't can. I significantly it

for you the Thank great. Okay, details.

Smith ahead. Advisors. question The Heikkinen next from Please from go Energy David comes

Hey, for you taking question. good Thank my morning.

David. Good morning

last if mean, this assets nothing spreads. rigs other the haven't you I seen pricing V frac the across I'm increases most increased like OFS comparable versus Correct certainly wrong, year of right, much that but to and

can about your going into XXXX? pricing if I'm you to So, you improve view curious how talk potential

Typically, year the we're basis. calendar setting a business, on for of pricing once rental a sort

we right, reset for you're hasn't first did So, pricing quarter. the And moved year. the pricing throughout part, the most

or point pricing rate As time. we I say, at the business. bring on be new to customers, have marginal incremental base really higher not they rate, reset that float at in in But general, for of we a our the tend

there expect will our those do increase, next a entering So, we're going customers. with year, into be discussions we into price

think money that business into heck investing of our our they're investment. a and getting customers I a recognize for we're lot benefit incremental of

not a it's you a our So, numbers, of some elevators. modifying of see are true growth using peer well we're the capital there a adding the or -- investments there existing as capital bases terms new price is increase, of by And into a making as bunch maintenance in that capacity in capacity, fleet.

that So, expectation into our more like. year is I going details what that and think to tuned as next stay looks for

just that XX year I'm being if or growth That XX points Appreciate might supports of completions It's at think whatever, that way or being activity XX% top growth more fill look kind an just capex CapEx it just If next just and right that deployed, out guessing the incremental support? added of XXXX. to system is top it. of growth that to If kind systems I probably end were systems. top quick for XX%. it the three beyond of to fill this new And more systems, pointing alone be top systems is and may. one QX might of follow-up implied more fill a I sale than

I spot think on you're David.

All right. Thank it. Appreciate you all.

David. Thanks

Samantha The be from Hoh will next ahead. Evercore Please go question from ISI.

technology? congrats system growth from and -- really discussion. fully licensed the that I staying are just guys, Hey the sort to -- on customer displacing with what just you're about to of, were able of in the wonder just could fully Maybe top impressive the mix pull-through this if of we gaining mix talk you the you same line on count. you're of systems? fill, about technology you, Can where where able kind displace or utilized traction type talk the pull-through legacy

equipment we Rockies the in discussion end payload especially dead other and is enhanced type we displaced Bakken, in but That a Those is truck. improvement, the using would system bit, the well, box as think payload you the around have that there, but top the market, incremental a truck hit over fill pull system in I per those higher rapid in compelling grown is the very put use the so others, capacities the the in seeing markets themselves have little in or markets pneumatic growth. markets. short Basin up relatively legacy on offering a a where being have than a road, more those put Delaware to the but of middle able we're increased in you but either and to through technologies hauls,

sorry. great. Okay,

ahead. go No,

have dual to how system? that like funneling, fill have, your that providing if a headcount if number support you need work on add when how I terms -- you of the have mean, customer does when blended of I you the have you Well, to you're this can silos, you incremental does it in already technology, But can don't how fill the that like only top take see do top work you taking people service.

silo fill system. used top is in conjunction system only our The with

trucks of and had fill run So, top a trucks customer. It's existing it's putting may new a independent incremental both system, system to have silo potentially set. silo silos unit switching pneumatic a a silo or silo top that it's system dump customer never package -- sand but an the that from a is with we're fill whole with new unit a out person belly either to there an with

it. got Okay,

that's Congratulations no, great. guys. Okay,

Thanks.

Daniel Instructions] The is from next go Please with Energy question Partners. Sean [Operator ahead. Mitchell

Thanks the one taking XXXX. just guys. question. for my another for morning, to Good Maybe CapEx increase on

a build there Just issues fill anything fill in on Is of calls systems chain? maybe about or of majority fill to mean, I to chain pace fill clarify, or that top blunders would for the top today? two, anything on the then versus of you're limit is systems most lot that that supply top the outside folks talking is today? number the And building maintenance the chain your there's supply number? supply current there in of the that ability system still --

our from fill, is two Yes, had eight them negotiating, call some for terms majority chain fill in internal continued vendors piece sand the supply out then month, working so a chain, top Sean, done building XXXX the and and silos I we've with think payment us in help the to silo And extent, augment going goes, to system demand far and years, we've got the it capacity, multiple some with internally, third-parties than right. And that to up and back got as finding we've you've And the inventory we've on we more we're past. growth XXXX. they sand are we've top stocking two building favorable of and then been in on specifically as to the supply systems components build manufacturing same capacity. a month thing went past that to our terms of

I good. So, in think us long dated. chain looks is general, pretty for the it supply But

hard It's address obviously predict But internally specific diligent have yes, possible. team for certainly year at that enhanced like been we've in to are best unforeseen this areas. next to it orders feel as very managing deliveries hiccups But components. we those we've our certain So, we're had to point, we some for put and can.

on for and congrats systems. the Thanks fill for color great. That's incremental the demand top the

great. Sounds

Thanks Sean.

Sean. Thanks

Mr. turn closing over end any to final the question-and-answer the Zartler reached I'd now call of have William we like remarks. gentlemen, to and the for Ladies back session.

our employees, for to company and joining us continue thank This and a to be morning customers, our Solaris. for your we off new all. to continued And dedication initiatives growth Chad. look our strong sharing day. We forward this the you offerings, and and continues improve time year. our and for next safe new exciting you, as deeper to updates you Stay thank and to shareholders finishing have our commercialize Thank everyone customer Thanks a historical technologies, form partnerships. year on very great

you, The now concluded. you presentation. attending for today's sir. Thank Thank conference has

You may disconnect. now