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Solaris Oilfield Infrastructure, Inc. (SOI)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered resilient cash generation: revenue $73.886M, net income $9.824M, GAAP diluted EPS $0.20, adjusted pro forma EPS $0.13, and adjusted EBITDA $20.797M; free cash flow was $18.258M .
  • Significant estimate beats on public sources: revenue beat by $8.24M and adjusted EPS beat by $0.03; we were unable to retrieve S&P Global consensus locally, so these beats reflect Seeking Alpha’s reported consensus rather than S&P Global data .
  • Guidance and narrative: management guided Q3 adjusted EBITDA roughly flat at $20–$21M, SG&A ≈$8M, pro forma tax rate ≈26%, and pre-transaction pro forma diluted share count ≈44.3M; Q3 dividend maintained at $0.12 per share .
  • Strategic catalyst: definitive agreement to acquire Mobile Energy Rentals (MER) for ~$200M to diversify into distributed power; expected close in Q3 2024, with company renaming to Solaris Energy Infrastructure concurrent with closing .

What Went Well and What Went Wrong

What Went Well

  • Strong free cash flow and liquidity discipline: cash from operations $18.876M and free cash flow $18.258M; capex only ~$0.6–$1.0M in Q2, supporting shareholder returns and balance sheet flexibility .
  • Shareholder returns intact: $0.12/share dividend paid in Q2 (~$5M) and Q3 dividend of $0.12/share approved; cumulative returns since 2018 at ~$183M pro forma Q3 dividend .
  • Strategic expansion with MER: “The MER acquisition will provide Solaris an exciting opportunity to diversify into the growing distributed power market…with access to new end markets” — Chairman & CEO Bill Zartler ; transaction terms and strategic rationale reiterated in company press release and SEC Exhibit 99.1 .

What Went Wrong

  • Utilization headwinds: fully utilized systems fell to 92 in Q2 (down 10% QoQ and 15% YoY), and average frac crews followed declined to 56 vs. 64 in Q1, pressuring profitability .
  • Mix pressure: sequential revenue growth was driven by lower-margin ancillary last mile logistics services; EBITDA declined 8% QoQ despite higher revenue due to fewer fully utilized systems .
  • Non-recurring noise: reversal of a property tax contingency and accrued property tax (total ~$4.277M) affected reported operating costs and non-GAAP reconciliations, requiring careful interpretation of underlying run-rate margins .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
Total Revenue ($USD Millions)$63.347 $67.890 $73.886
Net Income ($USD Millions)$6.959 $7.300 $9.824
GAAP Diluted EPS ($USD)$0.14 $0.14 $0.20
EBITDA ($USD Millions)$18.759 $19.890 $21.419
Adjusted EBITDA ($USD Millions)$21.322 $22.687 $20.797
Cash from Operations ($USD Millions)$23.583 $16.875 $18.876
Capital Expenditure ($USD Millions)$7.271 $3.348 $0.663 (investments) / ~$1 capex noted
EBITDA Margin (%)29.6% 29.3% 29.0%
Adjusted EBITDA Margin (%)33.6% 33.4% 28.2%

Notes: EBITDA margins are derived from EBITDA divided by total revenue for each period using cited figures . Adjusted EBITDA margins use Adjusted EBITDA divided by total revenue.

Estimates vs Actuals (public source):

  • Q2 2024 Adjusted EPS: $0.13, beat by $0.03 .
  • Q2 2024 Revenue: $73.89M, beat by $8.24M .
    S&P Global consensus was unavailable via our local interface; where estimates comparisons are shown, they reflect Seeking Alpha’s reported consensus, not S&P Global.

KPIs

KPIQ4 2023Q1 2024Q2 2024
Fully Utilized Systems (units)103 102 92
Avg. Industry Frac Crews Followed (fully utilized basis)64 64 56

Segment breakdown: Not disclosed; Solaris primarily reports at the consolidated level (equipment rental/services) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDA ($USD Millions)Q3 2024N/A~$20–$21 New/maintained run-rate
SG&A ($USD Millions)Q3 2024N/A~8 Maintained vs Q2 run-rate
Pro Forma Tax Rate (%)Q3 2024N/A~26 Maintained
Pro Forma Diluted Shares (Millions)Q3 2024 (pre-transaction)N/A~44.3 Maintained
Dividend ($/share)Q3 2024$0.12 (Q2 paid)$0.12 approved for Q3 (to be paid Sep 6, 2024) Maintained
MER AcquisitionQ3 2024Announced Jul 9, 2024Expected to close Q3 2024; rename to Solaris Energy Infrastructure upon close On track

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Activity/UtilizationQ4: lower frac crew count into year-end; fully utilized systems down; focus on cash generation . Q1: utilization essentially flat QoQ, revenue up on lower-margin last mile mix .Choppiness linked to weak gas prices; stabilization in gas-exposed basins; strength in Permian; expect Q3 activity flat vs Q2 .Stabilizing sequentially; still below prior year levels
Profitability/MarginsQ4: adj. EBITDA $21.3M; mix headwinds . Q1: adj. EBITDA $22.7M; pricing improved but mix still lower margin .Adj. EBITDA $20.8M; revenue up QoQ but adj. EBITDA down on fewer fully utilized systems .Slight downtrend QoQ; careful on mix/utilization
Shareholder ReturnsQ4: $0.12 dividend raised prior quarter; buybacks initiated . Q1: $13M returned via buybacks/dividends; $0.12 dividend approved .Q2: $5M returned via dividend; Q3 dividend $0.12 approved; $183M cumulative (pro forma) .Maintained/consistent
MER DiversificationNot applicable in Q4; Q1 set up for future flexibility .MER deal announced (Jul 9); distributed power entry, data center/C&I exposure; close expected Q3 .Positive strategic pivot
Cost Discipline/CapexQ4: capex fell >50% QoQ; 2024 capex expected < $15M . Q1: capex ~$3M; 2024 capex still < $15M plan .Q2 capex ~$1M; opex discipline; SG&A guided ~ $8M in Q3 .Tight cost control sustained
Legal/Tax ItemsQ4: property tax contingency reserve disclosed . Q1: no new items .Q2: reversal of property tax contingency and accrued property tax following settlement .One-time tailwind; non-recurring

Management Commentary

  • “Solaris delivered another quarter of strong free cash flow as we continue to generate cash from our core sand handling equipment business and the organic additional fleet investments we made over the last few years.” — Chairman & CEO Bill Zartler (press release) .
  • “For the third quarter of 2024, we expect activity levels to be relatively flat with the second quarter…we expect SG&A…~$8 million…pro forma tax rate ~26%…pro forma dilutive share count ~44.3 million…adjusted EBITDA…$20–$21 million.” — Prepared remarks/Q&A (conference call) .
  • On MER: “The MER acquisition will provide Solaris an exciting opportunity to diversify into the growing distributed power market…with access to new end markets.” — Bill Zartler (press release, acquisition announcement) .

Q&A Highlights

  • Activity outlook: Management expects U.S. land completion activity to be “relatively flat” from Q2 to Q3; natural gas weakness has bottomed, Permian remains strong .
  • Cost and shares guidance: SG&A ~ $8M, pro forma tax ~26%, pre-transaction diluted share count ~44.3M; adjusted EBITDA ~$20–$21M for Q3 .
  • MER timing and integration: On track to close in Q3; MER complements Solaris’ all-electric offering and opens data center/C&I channels .
  • Shareholder returns: Dividend policy reiterated; buyback authorization remains with ~$15M capacity .

Estimates Context

  • S&P Global consensus data was unavailable via our local interface for SOI. Based on publicly reported consensus, Q2 adjusted EPS of $0.13 beat by $0.03 and revenue of $73.89M beat by $8.24M .
  • Company’s July 9 investor materials pre-guided Q2 ranges (revenue $70–$75M, adjusted EBITDA $20–$21M), which aligned closely with actuals, suggesting limited surprise vs internal frames .

Key Takeaways for Investors

  • Near-term: Expect a relatively flat Q3 activity backdrop with mix and utilization the key swing factors; trade the tape around utilization updates and MER closing headlines .
  • Cash returns intact: Dividend maintained at $0.12 and FCF strength continues; monitor buyback deployment ($15M remaining authorization) as a secondary catalyst .
  • Strategic re-rating potential: MER adds a contracted, high-demand distributed power platform with data center/C&I exposure; closing and early integration milestones could drive multiple expansion and narrative shift .
  • Watch non-GAAP adjustments: Property tax reversals boosted reported margins; normalize for one-offs when assessing trend lines .
  • Cost discipline supports downside protection: SG&A anchored around ~$8M and capex sharply reduced (<$15M FY plan; ~$1M in Q2), underpinning FCF resilience .
  • Macro sensitivity: Stabilizing gas basins and strong Permian are supportive, but utilization remains below prior-year levels; incremental rigs/crews and pricing will be key for EBITDA momentum .
  • Estimates set-up: With S&P Global consensus unavailable locally, public-source beats were material; expect modest upward estimate revisions if utilization stabilizes and MER closes on schedule .