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Solaris Oilfield Infrastructure, Inc. (SOI)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 revenue declined sequentially to $63.35M and net income was $6.96M ($0.14 diluted EPS), with Adjusted EBITDA at $21.32M as industry frac crew counts softened into year-end .
  • Operations generated $23.58M cash from operations and $16M free cash flow; capex dropped over 50% q/q to ~$7M, and borrowings were reduced by $7M, ending at $30M with $47M liquidity .
  • Management guided FY2024 capex to be less than $15M, citing an inflection to “significantly higher free cash flow” and continued shareholder returns, including a Q1 2024 dividend of $0.12 per share and early-2024 buybacks of 1.1M shares for ~$8.1M .
  • S&P Global consensus data was unavailable; external sources indicate modest misses on EPS and revenue versus consensus (context only) .

What Went Well and What Went Wrong

What Went Well

  • Free cash flow inflected positively with $16M in Q4, supported by $23.58M in cash from operations and capex discipline (~$7M, down >50% q/q) .
  • Shareholder returns continued: Q4 2023 dividend of $0.12 (+9% q/q), Q1 2024 dividend of $0.12 approved, and additional repurchases in early 2024 (1.1M shares, ~$8.1M); cumulative returns since 2018 reached ~$172M pro forma .
  • Strategy reinforced by new technology deployments across systems; management emphasized a strong 2023 and 2024 free cash flow outlook: “We expect to generate significantly higher free cash flow… support continued shareholder returns…” — Bill Zartler .

What Went Wrong

  • Top-line and profitability compressed: Q4 revenue down 9% q/q and 25% y/y; Adjusted EBITDA down 9% q/q and 7% y/y as ancillary last mile logistics activity fell and frac crew counts softened .
  • Operational activity moderated: fully utilized systems fell to 103 (−5% q/q, −6% y/y); frac crews followed averaged 64 (−4% q/q) .
  • EPS declined to $0.14 diluted (vs. $0.16 in Q3); S&P estimates unavailable; external sources indicated small misses (context only) .

Financial Results

MetricQ2 2023Q3 2023Q4 2023
Total Revenue ($USD Millions)$77.20 $69.68 $63.35
Net Income ($USD Millions)$12.24 $7.64 $6.96
Diluted EPS ($USD)$0.24 $0.16 $0.14
Adjusted EBITDA ($USD Millions)$26.83 $23.43 $21.32

KPIs and balance sheet/cash flow

KPI / MetricQ2 2023Q3 2023Q4 2023
Fully Utilized Systems (#)108 108 103
Frac Crews Followed (avg, fully utilized)N/A67 64
Capital Expenditures ($USD Millions)~$21 ~$15 (after asset sales) ~$7
Free Cash Flow ($USD Millions)+$7 +$6 +$16
Cash from Operations ($USD Millions)$28.61 $20.88 $23.58
Borrowings Outstanding ($USD Millions)$43 $37 $30
Liquidity ($USD Millions)$41 $41 $47
Net Debt ($USD Millions)N/AN/A$24

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital ExpenditureQ4 2023“~$10M” (from Q3 release) Actual: ~$7M Better than guided
Capital ExpenditureFY 2024N/A“Less than $15M” Established
Dividend per ShareQ4 2023$0.12 approved Paid $0.12 on Dec 11, 2023 Implemented
Dividend per ShareQ1 2024N/A$0.12 approved (to be paid Mar 21, 2024) Maintained vs Q4
Free Cash FlowFY 2024N/A“Significantly higher free cash flow” (directional) New directional outlook

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023)Previous Mentions (Q3 2023)Current Period (Q4 2023)Trend
Technology deployment (Top Fill, AutoBlend)Profitability growth via more top fill and AutoBlend; improved ancillary trucking margin Adoption rising; ~55% of frac crews deployed top fill or AutoBlend; maintenance to improve reliability Continued deployments; fully utilized systems at 103 Adoption rising; systems deployed remain high
Industry activity/frac crewsNot disclosedIndustry activity bottomed; frac crews followed −8% q/q Average frac crews followed fell to 64 (−4% q/q) Softened into year-end
Capital intensity/capexCapex ~$21M; FY2023 guide $65–$75M Q4 capex guide ~ $10M Capex ~$7M; FY2024 < $15M Sharp reduction ahead
Free cash flow & returnsExpect meaningful cash flow as growth capex slows; ongoing returns Expect FCF to grow in Q4 and into 2024; continue returns “Significantly higher free cash flow” expected in 2024; dividend and buybacks continuing FCF inflection supports capital returns
Balance sheet/liquidity$43M borrowings; $41M liquidity $37M borrowings; $41M liquidity $30M borrowings; $47M liquidity Strengthening liquidity; lower net debt

Management Commentary

  • “2023 was a strong year for Solaris… generated positive free cash flow, raised our dividend per share twice, returned $47 million to shareholders… and grew Adjusted EBITDA by 15% from the prior year…” — Chairman & CEO Bill Zartler .
  • “Looking to 2024, we expect to generate significantly higher free cash flow… support continued shareholder returns and maintain our healthy balance sheet, while creating optionality… including organic and inorganic investments.” — Bill Zartler .
  • “Despite [industry activity bottoming], we continued to see adoption of our new technology offerings… nearly 55% of industry frac crews we followed in the quarter deployed either a top fill or AutoBlend system…” — Bill Zartler (Q3 context) .

Q&A Highlights

  • Full Q4 2023 earnings call transcript could not be retrieved via the document tools due to a database inconsistency; refer to the company’s webcast archive and external transcript sources for Q&A details .
  • External sources indicate headline framing of modest misses vs consensus (context only); detailed Q&A themes should be referenced directly from the transcript/webcast .

Estimates Context

  • S&P Global/Capital IQ consensus estimates were unavailable due to a CIQ company mapping issue for SOI; as a result, comparisons to Wall Street consensus from S&P Global cannot be provided at this time.
  • External sources reported Q4 diluted EPS of ~$0.15 missing by ~$0.01 and revenue of ~$63.35M missing by ~$3.36M (context only; S&P Global not available) .

Key Takeaways for Investors

  • 2024 is set up as a free cash flow year: FY2024 capex guided to < $15M, following Q4 capex of ~$7M and cash from operations of $23.58M .
  • Liquidity strengthened to $47M with borrowings reduced to $30M; net debt at $24M supports ongoing shareholder return programs .
  • Customer adoption of top fill/AutoBlend supports contribution margins, even as industry activity softened; system deployments remained high (103 fully utilized systems in Q4) .
  • Shareholder return framework intact: dividend maintained at $0.12 for Q1 2024 and continued buybacks (~1.1M shares in early 2024); cumulative returns ~$172M pro forma since 2018 .
  • Near-term trading: watch frac crew counts and ancillary last mile logistics activity—both were primary drivers of Q4 sequential declines in revenue and EBITDA .
  • Medium-term thesis: capital-light mode with reduced capex should translate to higher FCF and balance sheet flexibility for organic/inorganic investments, per management commentary .
  • Estimate benchmarking: S&P Global consensus unavailable; rely on company-reported trends and external transcript sources for interim context until mapping resolves .

Appendix: Additional Data Points

  • Q4 2023 total revenue composition: $60.07M revenue + $3.28M related party revenue (total $63.35M) .
  • Q4 2023 working capital activity: working capital source of ~$4M within free cash flow calculation .
  • FY2023 results: revenue $292.95M; adjusted EBITDA $96.69M; net income $38.78M; adjusted pro forma net income $37.46M .