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SOI Solaris Oilfield Infrastructure

Participants
Yvonne Fletcher Senior Vice President of Finance & Investor Relations
Bill Zartler Chairman & Chief Executive Officer
Kyle Ramachandran President & Chief Financial Officer
George O'Leary Tudor, Pickering, Holt & Company
Jon Hunter Cowen & Company
Call transcript
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Operator

Good day, and welcome to the Solaris Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Yvonne Fletcher, Senior Vice President of Finance and Investor Relations. ahead. go Please

Yvonne Fletcher

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

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

Bill Zartler

everyone, for Yvonne, joining you, us Thank you, and thank today.

with revenue increased and consecutive million on sequentially paid of sheet. a and We debt the strong another million. to $X.X quarter balance We Adjusted of cash XXth $XX XX% EBITDA The quarter X% XXXX was $XX second sequential our dividend. the in increase over Solaris. ended no generated to quarterly we million, for quarter

have improved supply disciplined as over over quarter from During range conditions natural demand continued we in commodity quick over however, climbed from which to also seeing remained operators industry the of market. sustained price oil second oil measured operators $XX and to recovery to U.S. bodes reaction, with cycle, the gas the for XXXX, U.S. $XX a well been U.S. global we prices ramp Historically, to believe $X improve. prices reaction are completions oil $X. increases. similar in to This and gas activity

not we have rig programs jump. oil XX% $XX second currently operators the frac completions significant operators maintained and to response by from the During that over that an budgets initial give a activity. Solaris look new XXXX customers completions more technology, sustained the of U.S. incentive which detail in activity and at with year, Combined provides are operators the is which drilling increased will to remains ramp capital a activity public is allocating portion for believe prices relatively second-quarter higher shortly. slower. $XX an increased in rest production Taking Private gearing prices, through existing activity completions this range remaining commodity while to XXXX, run-up had the The for count, average, quarter, horizontal with the the I and XXXX up U.S. however, and the discipline add on significant steady. holding up of later in

which than industry has trends. over closely Turning XX% our followed count overall the of grown to activity; course more Solaris has system XXXX,

February, Storm Uri than start quarter. our first impacted in the in stronger with a and quarter relatively which growth less basin impacted of peers by the drove our exposure second in exposures, winter model Permian both relative was Our business different rates

operators maintain and the for industry expect drilling as flat relatively shift budgets activity the activity. we Looking into the third discipline towards capital quarter, frac

quarter they third customer where manage Solaris' a their on decisions. to market an to are sand today. those expect existing throughout some than agreement we to will X-year non-Solaris-provided we exit where share system finalizing higher gains Solaris that equipment lead supply we should jobs to who chain count switch with However, This the see are increasing week, storage

not activity ramp, quarter the systems are we this we we the than today this third pace While expect control of end with alone. do customer where higher few to a

partners as recognition Strategic example our growth an are and next customer's for with our levels provider such with these leveraging are the and confident solve in customers activity where last of last and Additionally, in our expect by example for will think partnering them. great trust completion software. we another of see us of alignments, These this to position supply operations. business, developments of We type the stronger be development to trusted with from we and continued stronger chain this year how their further a help gaining our are customers and year. grow, finish grow customers issues we of even new as customer as Lens in existing drive efficiencies how us mile value the we a Solaris even through our strong dedicated what mile alignments

quarter, technology open On where the equipment our of spoke demonstrated about as topic full part technology house offering. we of electric blending our we efficiencies, our last new

full-scale successfully we all-new our During the electric trials. on second multi-well quarter, ran blender

XX,XXX represent the throughput. trials, pounds per initial over which gallon we at XXX multiple of and our minute, rates they believe minute up achieved per performance barrels course the in We blender over to of translates X.X of stages, these these sand pounds leading-edge to reached industry. During per sand

on or XX areas location, of was work from day. people the remotely safety hazardous potentially a All this three hours data from operated more the of removing van

developing customers from initial incorporating commercial technology, trials multiple the dialogue learnings right for this for our with new While working as model on are active are around well commitments initial driving units. long-term we results potential as our

incremental the additional the pull-through will blender opportunities We've building As a into we for and and compelling returns. full the will additional Solaris bring confidence that are more for generate to generate blenders that in revenue service expect units quarter new two offering. result, the we increased equipment late fourth believe services demand

our final blender, are also dump our trucking the stages, storage is sand believe will expect in market of generating system to and in we we to trucking. addition quarter. using advantages to vertical In for the trucks our the belly our extend over delivery systems momentum testing with the reliable This the bring second-generation operators and sand it system belly third the of to markets to bolt-on we equipment electric benefits filling addition where our pneumatic dump seeing are

our We for fully purpose, that that equipment design, for in which, today's automated designing high fit all-electric, need the Solaris reduce throughput automate and will of Kyle more goal oil economics, is financial for even some instance, review. push over current for limits introducing value, developing and performance, detailed continue levels, customers will resources along site operations solutions gas with safety. well and maximize development. beyond and completion a and it With to believe that, the the helping turn I

Kyle Ramachandran

good to XX and the systems everyone. second of Total modest sequential revenue XX% increase services Bill, over the increase the and fully which levels. fourth $XX represents some growth recap during quarter, and XXXX We in an quarter million higher-than-average system $X.X a EBITDA generated by driven first activity. modest last-mile mainly morning, in increased quarter deployed numbers, utilized of customers, revenue million. averaged we To of adjusted Thanks, about and XX% sequentially, from

Over total degrees XX worked with systems, the of of deployed course of a utilization. we proppant quarter, which the varying

recent for the private for systems we've now in highest million, impacted been which quarter deployed Operating To at flow for operator mix the making calculation in our mile services purposes. to the U.S. $X.X by cash activity for primarily we these highlight systems has Our The accelerated two-third in fully will the the was operators capital history, is approximately is and activity consistent XX was utilized revenue conscious equivalent was levels programs. highest in history. been believe drilling cash decision by reflects pay ensure the modeling percentage ever systems more number trucking completion space in by Solaris' with which requirements, Nearly an the created measure availability last every which it several trucking best who a is wide the of utilized services, less of between higher pace. that working driven, seen private day fully current we've gap our I detail. generated quarter, driven

roughly buildup accounts that had $X merger-related delayed had slightly positive. experienced on second in free cash These driven collections was approximately from Absent adjusting payments has of receivable in collections total and a up. In flow. $X.X flow flow quarter, late customer a addition, single customer-specific negative impact delay cash cash capital After collection our for million trucking mainly the now million, and caught by been transition million. expenditures we $X.X that a operating have free would the accelerated delays the our was

our a $X in returns; We shareholders available approximately $XX approximately to second dividends, undrawn have and for flat ended quarter million facility shareholder in we Since total million we in returned with repurchases. of with total to the the our under XXXX, $XX Turning liquidity. credit shareholders to of share is cash dividends returned the of $XX of cash the quarter which form quarter. million of second million prior form in initiating the $XX and in approximately million dividend a in

XX% up higher experienced slightly February. second from Solaris fourth from fully quarter with system's as and outlook; began XXXX from weather systems Turning over minimal on first inclement quarter quarter we to our impact the the and momentum strong deployments year utilized levels levels in were in

customers using customer price for than anticipate our quarter introduction cost our many realizing recently higher exiting committed to quarter commodity as inflation agreement. be though by operators quarter public of have levels, that second driven our the new pricing. remain and discipline, peers As we in in even the cases, of Many rising the higher discussed activity a three-year and environment, rationale sequentially, in stronger to capital third flattish

have historically find While lean to we based the more and we same internally driven on of pricing ourselves seeing inflation pressures, become our costs to have strategic. some even are not ways and challenged our

our value pricing receive to We have our to are enhancements upgrades strategy instead in delivery included core that systems our year, our focused customers software Every offerings. customers. and our on

temporary our customers. During and strategically partnership offered with in proactively XXXX the discounts we downturn,

the value approaching to downturn. throughout begun continued to those recapture of our have We temporary the increase customers has discounts as offering some

pressures us don't path realize could inflationary they pricing. and on year, impact pushing of While the are our recent sole incentives the pricing the we not know through the have will an to take rest ability ultimate higher for net

the to inclusive expectations of our quarter approximately non-cash second expenses for compensation. were stock-based for costs; Turning SG&A $X SG&A million,

SG&A we stock For roughly to the levels, inclusive quarter second of the normal compensation. be third with of XXXX, the expect line quarter non-cash of expensing total in quarterly

$X CapEx between to the runs Turning our to CapEx typical $X spent maintenance created we to due This to Last million CapEx; end $XX the closer year, is upgrades pandemic. annual our for million. maintenance million low the to upgrade by higher closer the end. and year, and maintenance global uncertainty

year our in million fourth growth million for for and total blenders to to the previous additional to next budget million. two we to in Our slightly $X expect initiatives, for from add was automation be the belly full for to million CapEx $XX expect quarter. the in XXXX million. CapEx range another $X decision addition expectation spend million growth continued before to remaining million CapEx Of develop $X the of a we for XXXX, decreasing solution, CapEx $X the $XX But to given range $XX dump quarter to

team focused well in returns both that, shareholders and happy our With now completion site investing committed economic returns gives ways industry, our performance be U.S. organically increased take product incremental by questions. confidence on ongoing dividend to helping continues us remain your an leader recovery be We efficiencies and inorganically. for oil can our conservative our in that Solaris the and coming drive balance gas to shareholders, and rebound sheet, finding developments in and for our point to to which years. preserving innovation, continues a new safety. energized for maximize and and we'd to in sustained a customers incremental our add to discipline optimize Operator be the

Operator

[Operator Our question Company. come from first will George with Instructions] O'Leary TPH &

George O'Leary

field some that. with hosting and in successful It blender. had for cool a Thanks in spend it guys. you the March to see like was with event go time person Sounds you trials

to the And build decision to Just curious with those build? for then blender? you decision one? the how And -- customers form are you are going of respect And the term they customers? what drives drives build to giving or do you they some with what blenders discussions sort to can contracts how for

Kyle Ramachandran

gone George, trials well. Yes, very the have

operational As Bill alluded to expectations. exceeding the is performance

excited it. we're about So really

in it. field really customers have We obviously excited today. about the are one Our working

technology just We're of days two point, starting it, were little 'XX, contract. momentum deliver get productive built will -- we've to of discussions that expect today. long were way Not but to this are very X-packs, end approaching there those through not -- there grow not specifically of the the We what is And customers out building from beyond three and been feel were date. the under in because at this But and this we definitely we order people a to At we really to of differentiated more like all in on year. 'XX, isn't it with have ahead communicated that is commitments the very we order. customers. had queue need those point. waiting by we're But bit those that early represents point, a is, to

conversation so stream system sand I for And my to efficient high-pressure what storage site. to has most from well the picking am going hydrated the changed deliver a to who's

but long leads to early ordering blenders. the days, the on really two which, drove start decision additional really conversations. excited, we're constructive So some Still again,

Bill Zartler

That's -- it. Kyle's got

George O'Leary

the What's folks helpful. are very there take was was And work one kind go from customer and difference adding gain and gain the strategy systems? share huge customers market Great, encouraging end of that's just encouraging then, and pitch by to share computing the who using well. a market as quarter the to your of commentary and

Kyle Ramachandran

a it's mix. Well,

terms offering on do folks really value using. with to that whether recognized provided and And You do able still sheet people now that time, we've evolution system manner, higher in balance comprehensive monitoring or I the this out of recent have it's assets there the they've have in the software, way remote a that been has been over think have a works, whether more most it's blender. automation what

it think to ability of the team's evolution is the of are site what I our innovate And in new So focus there. excited company's on what implications laser of well side the our growth. this really about demonstrates low-pressure we're the sort and

Bill Zartler

and systems add been one service provide. I'd we we've It's been has George, think, out slowdown. I We've And able good system that to the really The more. as the actual ultra-low, the put come back reliability up a and people time ramp basis, the of actually on we a to there's reliability it work track side track we regular and to and correspondingly if the systems repair problem. of

as to laser-focused we're customers on fast keep So completing as they want complete. ensuring that our

George O'Leary

I could much well I'll Great. deploying of big topic what clients. doing keep where your in are we interest a more, on Any in simul-fracs color work investors, simul-fracs been sneak on talk how given percentage all with there's just investor good are on-site? as one has ongoing. large and sand if systems could. they I how Simul-fracs systems imagine

Kyle Ramachandran

as only a sort it's of Not customers of not the of to every the larger Typically, little just mix but our And be of some may location driver are so it's in than range. XX% to probably the going be any know But well. given to a I it then day, that. And don't if within higher changes to footprint. pad going is plans. conducive number every on on simul-frac. wells it's require depending -- days, certainly It bit day their and XX% that

Bill Zartler

it increasing. is anecdotally, slowly But

Operator

Jon [Operator Instructions] Hunter will come with question Our from next Cowen.

Jon Hunter

But quarter. we've activity I relates a activity ask the you're thinking of So, And have modest heard in the curious outlook I as about then some year. it clearly, exit the increase activity a just on next as indications fourth potential you wanted uplift to fourth XXXX, encouraging some signs how to in into the mean, frac you quarter. third.

you're So, thinking curious improvement perhaps in how XXXX? quarter about fourth then and the in the

Bill Zartler

rig -- indicator. We see a a ramp All leading is coming. count

have seen increase the We in frac corresponding not count. a recently fleet

of the this building down inventory first DUC over that half that's So back may worked have been year. a

So is price to wells oil they're good certainly, economics today as complete all with -- a and incentive pretty go signs and soon drilled. as the in the of are those

and a predict beginning can't is issue, I really November. timing starts, week when it's that it ramp or next whether So

But budgets, are driven increase next we've into had they into going on it's in looking by It's individual from coming. talk fourth that year. next year, And certainly, need think they're I just quarter an cycle. timing we to capital where our see issue. their increased more coming equipment customers the a really

Jon Hunter

you would activity, system flat third look question Or puts other I per per my an bit then, curious, as follow-up margin and as helpful. of any there the takes system, your need are considering I flat on dollars a of increase to XQ. be quarter? margin you That's XQ And on from to to expect forward had well? into I'm is be

Yvonne Fletcher

Yes.

I now, Jonathan, think be we're relatively for to flat. think, expecting I it

QX $XX,XXX system. did look If to you at the from probably profit That to close pickup we $XX,XXX. was of QX, gross per there

so of latter some then in though a was were last better mile the doing it, part help getting really storm systems and recovery increment of that our was -- business. And that part even lot flat,

so continue flat system. translate And that QX assuming margin performance -- that QX, we should mean a can then per into I contribution that into

Operator

closing reached question-and-answer like would remarks. Zartler have to back the I the to turn end call over We for session. Mr. now the Bill any of final

Bill Zartler

the connect the dots continuing low on make of frac side plan products as offering to pressure All you, side. services development, successfully into Thank the employees, thank I the as our better look business and the the another for that gone thank manage to efforts we And for core our well continuing of those to Matt. to stakeholders and quarter. all and executing product our new listening all to you customers, adding have And forward really to really call. good

great And a you day. thank have all. So,

Operator

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

You now disconnect. may