UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38090

SOLARIS OILFIELD INFRASTRUCTURE, INC.

(Exact name of registrant as specified in its charter)


Delaware	81-5223109
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9651 Katy Freeway, Suite 300 Houston, Texas	77024
(Address of principal executive offices)	(Zip code)

(281) 501-3070

(Registrant’s telephone number, including area code)

~~9811 Katy Freeway, Suite 700, Houston, Texas 77024~~Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value	“SOI”	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐☒
		Emerging growth company	☐

If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 25, 2023,~~April 15, 2024, the registrant had ~~30,581,265~~30,350,534 shares of Class A common stock, $0.01 par value per share, and 13,671,971 shares of Class B common stock, $0.00 par value per share, outstanding.

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SOLARIS OILFIELD INFRASTRUCTURE, INC.

TABLE OF CONTENTS

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Our forward-looking statements include statements about our business strategy, our industry, our future profitability, our expected capital expenditures and the impact of such expenditures on our performance, management changes, current and potential future long-term contracts, the costs of being a publicly traded corporation, our capital programs and our future business and financial performance. In addition, our forward-looking statements address the various risks and uncertainties associated with extraordinary market environments and the expected impact on our businesses, results of operations, and earnings.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

●

the level of domestic capital spending and access to capital markets by the oil and natural gas industry and uncertainty regarding the future actions of oil producers, including the members of the Organization of the Petroleum Exporting Countries (OPEC) and ~~Russia;~~Russia and the actions taken to set, maintain or cut production levels;

●

developments and uncertainty in the global economy and the resulting impacts to the demand and supply for crude oil and natural gas or volatility of oil and natural gas prices, and therefore the demand for the services we provide and the commercial opportunities available to us;

●

geopolitical risks, including the war inbetween Russia and Ukraine, the Israel and ~~the~~Hamas conflict ~~in Israel-Gaza region~~ and continued hostilities in the Middle East which could each affect the stability and continued recovery of oil and gas markets;

●

consolidation amongst current or potential customers that could affect demand for our products and services;

●

inflationary risks, ~~rising~~increased interest rates, central bank policy, bank failures and associated liquidity risks and supply chain constraints, including changes in market price and availability of materials and labor;

●

significant changes in the transportation industries or fluctuations in transportation costs or the availability or reliability of transportation that service our business;

●

large or multiple customer defaults, including defaults resulting from actual or potential insolvencies;

●

epidemics or pandemics, including the effects of related public health concerns and the impact of continued actions taken by governmental authorities and other third parties in response to pandemics and their impact on commodity prices, supply and demand considerations and storage capacity;

●

technological advancements in well completion technologies and our ability to expand our product and service offerings;

●

competitive conditions in our industry;

●

inability to fully protect our intellectual property rights;

●

~~actions taken by our customers, competitors and third-party operators;~~

●

~~changes in the availability and cost of capital;~~

●

~~our ability to successfully implement our business strategy;~~

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●

actions taken by our customers, competitors and third-party operators;

●

changes in the availability and cost of capital;

●

our ability to successfully implement our business strategy;

●

increases in tax rates or the enactment of taxes that specifically impact exploration and production related operations resulting in an increase in the amount of taxes owed by us;

●

the effects of existing and future laws, rulings, governmental regulations and accounting standards and statements (or the interpretation thereof) on us and our customers;

●

cyber-attacks targeting systems and infrastructure used by the oil and natural gas industry;

●

the effects of future litigation;

●

credit markets;

●

business acquisitions;

●

natural or man-made disasters and other external events that may disrupt our manufacturing operations;

●

uncertainty regarding our future operating results; and

●

plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.

All forward-looking statements speak only as of the date of this Quarterly Report. You should not place undue reliance on our forward-looking statements. Although forward-looking statements reflect our good faith beliefs at the time they are made, forward-looking statements involve known and unknown risks, uncertainties and other factors, including the factors described under Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, this Quarterly Report and in our other filings with the United States Securities and Exchange Commission (the “SEC”), which may cause our actual results, performance or achievements to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

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PART 1: FINANCIAL INFORMATION

Item 1: Financial Statements

SOLARIS OILFIELD INFRASTRUCTURE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

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
Commitments and contingencies (Note 9)




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

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


	March 31,		December 31,
	2024		2023
Assets
Current assets:
Cash and cash equivalents	$	3,424	$	5,833
Accounts receivable, net of allowances for credit losses of $404 and $104, respectively		46,411		44,916
Accounts receivable - related party		2,721		2,378
Prepaid expenses and other current assets		3,405		4,342
Inventories		6,924		6,672
Assets held for sale		—		3,000
Total current assets		62,885		67,141
Property, plant and equipment, net		320,885		325,121
Non-current inventories		1,566		1,593
Non-current receivables, net of allowances of $862 and $862, respectively		1,663		1,663
Operating lease right-of-use assets		10,394		10,721
Goodwill		13,004		13,004
Intangible assets, net		521		702
Deferred tax assets		45,861		48,010
Other assets		291		342
Total assets	$	457,070	$	468,297
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	12,266	$	12,654
Accrued liabilities		16,489		20,292
Current portion of payables related to Tax Receivable Agreement		2,684		—
Current portion of operating lease liabilities		1,381		1,385
Current portion of finance lease liabilities		2,495		2,462
Other current liabilities		—		408
Total current liabilities		35,315		37,201
Operating lease liabilities, net of current		11,251		11,541
Credit agreement		30,000		30,000
Finance lease liabilities, net of current		1,766		2,401
Payables related to Tax Receivable Agreement		68,846		71,530
Other long-term liabilities		44		44
Total liabilities		147,222		152,717
Commitments and contingencies (Note 9)
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, 28,330 shares and 28,967 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		283		290
Class B common stock, $0.00 par value, 180,000 shares authorized, 13,674 shares issued and outstanding as of March 31, 2024 and December 31, 2023		—		—
Additional paid-in capital		182,723		188,379
Retained earnings		17,125		17,314
Total stockholders' equity attributable to Solaris Oilfield Infrastructure, Inc.		200,131		205,983
Non-controlling interest		109,717		109,597
Total stockholders' equity		309,848		315,580
Total liabilities and stockholders' equity	$	457,070	$	468,297

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SOLARIS OILFIELD INFRASTRUCTURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2023		2022		2023		2022		2024		2023

Revenue		64,427		89,376		212,180		222,342	$	64,635	$	77,828
Revenue - related parties		5,249		2,949		17,420		13,609		3,255		4,894
Total revenue		69,676		92,325		229,600		235,951		67,890		82,722

Operating costs and expenses:
Cost of services (excluding depreciation)		42,102		64,171		140,977		163,079
Cost of services (exclusive of depreciation and amortization)										39,887		53,223
Depreciation and amortization		9,179		7,716		26,667		21,777		9,934		8,417
Property tax contingency		—		—		—		3,072
Selling, general and administrative		6,359		5,929		19,722		17,202		7,990		6,538
Impairment of fixed assets		1,423		—		1,423		—
Other operating (income)/expense, net		613		524		150		(899)
Other operating (income) expense, net										123		(338)
Total operating costs and expenses		59,676		78,340		188,939		204,231		57,934		67,840
Operating income		10,000		13,985		40,661		31,720		9,956		14,882
Interest expense, net		(1,057)		(141)		(2,395)		(308)		(799)		(459)
Total other expense		(1,057)		(141)		(2,395)		(308)
Income before income tax expense		8,943		13,844		38,266		31,412		9,157		14,423
Income tax expense		(1,305)		(2,332)		(6,450)		(5,889)
Provision for income taxes										(1,857)		(2,486)
Net income		7,638		11,512		31,816		25,523		7,300		11,937
Less: net income related to non-controlling interests		(2,704)		(4,106)		(11,781)		(9,162)		(2,983)		(4,368)
Net income attributable to Solaris	$	4,934	$	7,406	$	20,035	$	16,361
Net income attributable to Solaris Oilfield Infrastructure, Inc.										4,317		7,569
Less: income attributable to participating securities										(277)		(350)
Net income attributable to common shareholders									$	4,040	$	7,219

Income per share of Class A common stock – basic	$	0.16	$	0.22	$	0.64	$	0.49
Income per share of Class A common stock – diluted	$	0.16	$	0.22	$	0.64	$	0.49
Earnings per share of Class A common stock – basic									$	0.14	$	0.23
Earnings per share of Class A common stock – diluted									$	0.14	$	0.23

Basic weighted-average shares of Class A common stock outstanding		29,025		31,599		29,919		31,425		28,587		31,214
Diluted weighted-average shares of Class A common stock outstanding		29,025		31,599		29,919		31,425		28,587		31,214

]

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SOLARIS OILFIELD INFRASTRUCTURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In ~~thousands)~~thousands, except per share amounts)

(Unaudited)

Nine Months Ended September 30, 2023

Class A

Class B

Additional

Non-

Total

Common Stock

Common Stock

Paid-in

Retained

Treasury Stock

controlling

Stockholders'


Shares

Amount

Shares

Amount

Capital

Earnings

Shares

Amount

Interest

Equity
Balance at January 1, 2023

31,641

317

13,674

—

202,551

12,847

—

—

101,414

317,129
Net effect of deferred tax asset and payables related to the stock repurchase and the vesting of restricted stock

—

—

—

—

594

—

—

—

—

594
Share and unit repurchases and retirements

(1,641)

(17)

—

—

(10,543)

(3,295)

—

—

(572)

(14,427)
Stock-based compensation

—

—

—

—

1,494

—

—

—

660

2,154
Vesting of restricted stock

547

5

—

—

903

—

—

—

(908)

—
Cancelled shares withheld for taxes from RSU vesting

(148)

(1)

—

—

(536)

(384)

—

—

(415)

(1,336)
Unitholder Distributions

—

—

—

—

—

—

—

—

(1,985)

(1,985)
Dividends paid ($0.11 per share of Class A common stock)

—

—

—

—

—

(3,656)

—

—

—

(3,656)
Net income

—

—

—

—

—

7,569

—

—

4,368

11,937
Balance at March 31, 2023

30,399

$
304

13,674

$
—

$
194,463

$
13,081

—

$
—

$
102,562

$
310,410
Share and unit repurchases and retirements

(1,438)

(14)

—

—

(9,222)

(1,990)

—

—

(104)

(11,330)
Stock-based compensation

—

—

—

—

1,399

—

—

—

647

2,046
Vesting of restricted stock

10

1

—

—

16

—

—

—

(17)

—
Cancelled shares withheld for taxes from RSU vesting

(3)

(1)

—

—

(9)

(2)

—

—

(7)

(19)
Unitholder Distributions

—

—

—

—

—

—

—

—

(1,504)

(1,504)
Dividends paid ($0.11 per share of Class A common stock)

—

—

—

—

—

(3,388)

—

—

—

(3,388)
Net income

—

—

—

—

—

7,532

—

—

4,709

12,241
Balance at June 30, 2023

28,968

$
290

13,674

$
—

$
186,647

$
15,233

—

$
—

$
106,286

$
308,456
Net effect of deferred tax asset and payables related to the stock repurchase and the vesting of restricted stock

—

—

—

—

(536)

—

—

—

—

(536)
Stock-based compensation

—

—

—

—

1,387

—

—

—

653

2,040
Vesting of restricted stock

85

1

—

—

209

—

—

—

(210)

—
Cancelled shares withheld for taxes from RSU vesting

(1)

—

—

—

(7)

2

—

—

(4)

(9)
Unitholder Distributions

—

—

—

—

—

—

—

—

(1,504)

(1,504)
Dividends paid ($0.11 per share of Class A common stock)

—

—

—

—

—

(3,358)

—

—

—

(3,358)
Net income

—

—

—

—

—

4,934

—

—

2,704

7,638
Balance at September 30, 2023

29,052

$
291

13,674

$
—

$
187,700

$
16,811

—

$
—

$
107,925

$
312,727



	Class A			Class B			Additional				Non-		Total
	Common Stock			Common Stock			Paid-in		Retained		controlling		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Earnings		Interest		Equity
Balance at December 31, 2023	28,967	$	290	13,674	$	—	$	188,379	$	17,314	$	109,597	$	315,580
Share repurchases and retirements	(1,108)		(11)	—		—		(7,031)		(858)		(233)		(8,133)
Net effect of deferred tax asset and payables related to the vesting of restricted stock	—		—	—		—		(422)		—		—		(422)
Stock-based compensation	—		—	—		—		1,581		—		770		2,351
Vesting of restricted stock	653		6	—		—		1,731		—		(1,737)		—
Cancelled shares withheld for taxes from vesting of restricted stock	(182)		(2)	—		—		(1,515)		—		(22)		(1,539)
Distributions to non-controlling interest unitholders	—		—	—		—		—		—		(1,641)		(1,641)
Dividends paid ($0.12 per share of Class A common stock)	—		—	—		—		—		(3,648)		—		(3,648)
Net income	—		—	—		—		—		4,317		2,983		7,300
Balance at March 31, 2024	28,330	$	283	13,674	$	—	$	182,723	$	17,125	$	109,717	$	309,848

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SOLARIS OILFIELD INFRASTRUCTURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In ~~thousands)~~thousands, except per share amounts)

(Unaudited)

Nine Months Ended September 30, 2022

Class A

Class B

Additional

Non-

Total

Common Stock

Common Stock

Paid-in

Retained

Treasury Stock

controlling

Stockholders'


Shares

Amount

Shares

Amount

Capital

Earnings

Shares

Amount

Interest

Equity
Balance at January 1, 2022

31,146

$
312

13,770

$
—

$
196,912

$
5,925

—

$
—

$
94,727

$
297,876
Net effect of deferred tax asset and payables related to the vesting of restricted stock

—

—

—

—

610

—

—

—

—

610
Stock-based compensation

—

—

—

—

1,188

—

—

—

520

1,708
Vesting of restricted stock

366

3

—

—

574

—

—

—

(577)

—
Cancelled shares withheld for taxes from RSU vesting

(96)

(1)

—

—

(302)

(388)

—

—

(299)

(990)
Unitholder Distributions

—

—

—

—

—

—

—

—

(1,446)

(1,446)
Dividends paid ($0.105 per share of Class A common stock)

—

—

—

—

—

(3,441)

—

—

—

(3,441)
Net income

—

—

—

—

—

3,502

—

—

2,220

5,722
Balance at March 31, 2022

31,416

314

13,770

—

198,982

5,598

—

—

95,145

300,039
Exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock

96

1

(96)

—

683

—

—

—

(684)

—
Net effect of deferred tax asset and payables related to Tax Receivable Agreement from the exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock and the vesting of restricted stock

—

—

—

—

(437)

—

—

—

—

(437)
Stock-based compensation

—

—

—

—

1,121

—

—

—

490

1,611
Vesting of restricted stock

7

—

—

—

9

—

—

—

(9)

—
Cancelled shares withheld for taxes from RSU vesting

(2)

—

—

—

(4)

(6)

—

—

(7)

(17)
Solaris LLC distribution paid to Solaris LLC unitholders (other than Solaris Inc.) at $0.105 per Solaris LLC Unit

—

—

—

—

—

—

—

—

(1,446)

(1,446)
Dividends paid ($0.105 per share of Class A common stock)

—

—

—

—

—

(3,444)

—

—

—

(3,444)
Net income

—

—

—

—

—

5,453

—

—

2,836

8,289
Balance at June 30, 2022

31,517

$
315

13,674

$
—

$
200,354

$
7,601

—

$
—

$
96,325

$
304,595
Net effect of deferred tax asset and payables related to Tax Receivable Agreement from the exchange of Solaris LLC Units and shares of Class B common stock for shares of Class A common stock and the vesting of restricted stock

—

—

—

—

(9)

—

—

—

—

(9)
Stock-based compensation

—

—

—

—

1,146

—

—

—

496

1,642
Vesting of restricted stock

130

1

—

—

258

—

—

—

(259)

—
Cancelled shares withheld for taxes from RSU vesting

(9)

—

—

—

(29)

(36)

—

—

(28)

(93)
Solaris LLC distribution paid to Solaris LLC unitholders (other than Solaris Inc.) at $0.105 per Solaris LLC Unit

—

—

—

—

—

—

—

—

(1,436)

(1,436)
Dividends paid ($0.105 per share of Class A common stock)

—

—

—

—

—

(3,462)

—

—

—

(3,462)
Net income

—

—

—

—

—

7,406

—

—

4,106

11,512
Balance at September 30, 2022

31,638

$
316

13,674

$
—

$
201,720

$
11,509

—

$
—

$
99,204

$
312,749



	Class A			Class B			Additional				Non-		Total
	Common Stock			Common Stock			Paid-in		Retained		controlling		Stockholders'
	Shares	Amount		Shares	Amount		Capital		Earnings		Interest		Equity
Balance at December 31, 2022	31,641		317	13,674		—		202,551		12,847		101,414		317,129
Share repurchases and retirements	(1,641)		(17)	—		—		(10,543)		(3,295)		(572)		(14,427)
Net effect of deferred tax asset and payables related to the vesting of restricted stock	—		—	—		—		594		—		—		594
Stock-based compensation	—		—	—		—		1,494		—		660		2,154
Vesting of restricted stock	547		5	—		—		903		—		(908)		—
Cancelled shares withheld for taxes from vesting of restricted stock	(148)		(1)	—		—		(536)		(384)		(415)		(1,336)
Distributions to non-controlling interest unitholders	—		—	—		—		—		—		(1,985)		(1,985)
Dividends paid ($0.11 per share of Class A common stock)	—		—	—		—		—		(3,656)		—		(3,656)
Net income	—		—	—		—		—		7,569		4,368		11,937
Balance at March 31, 2023	30,399	$	304	13,674	$	—	$	194,463	$	13,081	$	102,562	$	310,410

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SOLARIS OILFIELD INFRASTRUCTURE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	For the Nine Months Ended				Three Months Ended
	September 30,				March 31,
	2023		2022		2024		2023
Cash flows from operating activities:
Net income	$	31,816	$	25,523	$	7,300	$	11,937
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		26,667		21,777		9,934		8,417
Impairment of fixed assets		1,423		—
Loss on disposal of assets		604		1,307
Allowance for credit losses		160		(420)
(Gain) loss on disposal of assets						12		(22)
Stock-based compensation		5,830		4,665		2,217		1,980
Amortization of debt issuance costs		114		127		43		31
Allowance for credit losses						300		—
Inventory write-off						223		—
Deferred income tax expense		6,019		5,143		1,727		2,329
Change in payables related to parties pursuant to Tax Receivable Agreement		—		(654)
Other		(178)		(178)		31		10
Changes in operating assets and liabilities:
Accounts receivable		16,088		(38,563)		(1,795)		(3,581)
Accounts receivable - related party		(2,140)		1,011		(343)		1,086
Prepaid expenses and other current assets		263		2,972		951		905
Inventories		(5,020)		(4,744)		(448)		(4,071)
Accounts payable		(6,469)		12,569		(131)		2,042
Accrued liabilities		(7,744)		10,305		(3,146)		(3,122)
Property tax contingency		—		3,072
Payments pursuant to tax receivable agreement		(1,092)		—		—		(1,092)
Net cash provided by operating activities		66,341		43,912		16,875		16,849
Cash flows from investing activities:
Investment in property, plant and equipment		(57,117)		(59,527)		(3,358)		(18,949)
Cash received from insurance proceeds		122		1,308
Proceeds from disposal of assets		2,165		422
Proceeds from disposal of property, plant and equipment						10		123
Net cash used in investing activities		(54,830)		(57,797)		(3,348)		(18,826)
Cash flows from financing activities:
Share repurchases		(25,757)		—
Distribution to unitholders (includes distribution of $4.5 million at $0.11/unit and $4.3 million at $0.105/unit, respectively)		(4,993)		(4,327)
Dividend paid to Class A common stock shareholders		(10,402)		(10,348)
Share repurchases and retirements						(8,092)		(14,427)
Distributions to non-controlling interest unitholders						(1,641)		(1,985)
Dividends paid to Class A common stock shareholders						(3,648)		(3,656)
Payments under finance leases						(602)		(738)
Payments under insurance premium financing						(414)		(541)
Cancelled shares withheld for taxes from vesting of restricted stock						(1,539)		(1,336)
Borrowings under the credit agreement		35,000		9,000		4,000		18,000
Repayment of credit agreement		(6,000)		(3,000)		(4,000)		—
Payments under finance leases		(1,908)		(1,100)
Payments under insurance premium financing		(1,380)		(946)
Payments related to debt issuance cost		(91)		(358)
Payments for shares withheld for taxes from RSU vesting and cancelled		(1,364)		(1,100)
Net cash used in financing activities		(16,895)		(12,179)		(15,936)		(4,683)

Net decrease in cash and cash equivalents		(5,384)		(26,064)		(2,409)		(6,660)
Cash and cash equivalents at beginning of period		8,835		36,497		5,833		8,835
Cash and cash equivalents at end of period	$	3,451	$	10,433	$	3,424	$	2,175

Non-cash activities
Investing:
Capitalized depreciation in property, plant and equipment		202		424	$	120	$	129
Capitalized stock based compensation		410		296
Capitalized stock-based compensation						134		174
Property and equipment additions incurred but not paid at period-end		588		3,436		331		5,015
Property, plant and equipment additions transferred from inventory		2,575		1,210
Reclassification of assets held for sale to property, plant and equipment						3,000		—
Additions to fixed assets through finance leases		2,012		4,554		—		933
Financing:
Insurance premium financing		283		806
Cash paid for:
Interest		2,079		102	$	758	$	335
Income Taxes		478		370
Income taxes						76		1

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

SOLARIS OILFIELD INFRASTRUCTURE, INC.
Notes to the Condensed Consolidated Financial Statements
(Dollars in millions, except share ~~data)~~and per share amounts)

1. Organization and Background of Business

Description of Business

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Solaris Oilfield Infrastructure, Inc. (either individually or together with its subsidiaries, as the context requires, “Solaris Inc.” or the “Company”) is the managing member of Solaris Oilfield Infrastructure, LLC (“Solaris LLC”) and is responsible for all operational, management and administrative decisions relating to Solaris LLC’s business. Solaris Inc. consolidates the financial results of Solaris LLC and its subsidiaries and reports a non-controlling interest related to the portion of the units in Solaris LLC (the “Solaris LLC Units”) not owned by Solaris Inc., which will reduce net income attributable to the holders of Solaris Inc.’s Class A common stock.

The accompanying interim unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). These financial statements reflect all normal recurring adjustments that are necessary for fair presentation. Operating results for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ are not necessarily indicative of the results that may be expected for the full year or for any interim period.

The unaudited interim condensed consolidated financial statements do not include all information or notes required by GAAP for annual financial statements and should be read together with Solaris Inc.’s Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and notes thereto.

All material intercompany transactions and balances have been eliminated upon consolidation.

~~Global Economic, Geopolitical~~Allowance for Credit Losses

In our determination of the allowance for credit losses, we pool receivables with similar risk characteristics and ~~Market Conditions~~

~~The recent conflict in~~consider a number of current conditions, past events and other factors, including the ~~Israel-Gaza region~~length of time trade accounts receivable are past due, previous loss history, and the ~~ongoing war in Ukraine each have~~condition of the potential to disrupt the supply and demand for oil and natural gas across the globe. The degree to which these and other events outside of our control adversely impacts our results will depend on future developments, which are highly uncertain, cannot be predicted and are outside of our control. The timing, extent, trajectory and duration of their impacts upon our businessgeneral economy and the industry as a whole, and apply an expected loss percentage. The expected credit loss percentage is determined using historical loss data adjusted for current conditions and forecasts of future economic conditions. Along with the expected credit loss percentage approach, the Company applies a case-by-case review on individual trade receivables when deemed appropriate. The related expense associated with the recognition of the allowance for credit losses was included in ~~which we,~~Other operating expense on our condensed consolidated statements of operations. Adjustments to the allowance may be required depending on how potential issues are resolved and when receivables are collected. Accounts deemed uncollectible are reflected as a write-off applied against the allowance for credit losses and occur when the financial condition of our customers deteriorate and ~~vendors operate could impact any subsequent recovery of normal economic and operating conditions.~~

~~Use of Estimates~~

~~The preparation of consolidated financial statements~~result in ~~accordance with GAAP requires management~~an impairment on their ability to make ~~estimates and assumptions that affect~~payments, including the ~~reported amounts~~impact of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.customer bankruptcies.

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The ~~most significant estimates are~~following activity related to stock-based compensation, useful lives and salvage values of long-lived assets, future cash flows associated with goodwill and long-lived asset impairment evaluations, net realizable value of inventory, income taxes, Tax Receivable Agreement liability, collectability of accounts receivable and estimates ofour allowance for credit losses ~~and determination~~on customer receivables for the quarter ended March 31, 2024 reflects the estimated impact of the ~~present value~~current economic environment on our receivable balance:


Balance, December 31, 2023	$	1.0
Provision for credit losses, net of recoveries		0.3
Write-offs		—
Balance, March 31, 2024	$	1.3

Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenues from Contracts with Customers (“ASC Topic 606”). Under ASC Topic 606, revenue recognition is based on the transfer of ~~lease payments~~control, or the customer’s ability to benefit from our services and ~~right-of-use assets.~~products, in an amount that reflects the consideration expected to be received in exchange for those services and products. We assess our customers’ ability and intention to pay, which is based on a variety of factors, including historical payment experience and financial condition, and we typically charge our customers on a weekly or monthly basis. Contracts with customers are normally on thirty- to sixty-day payment terms.

Our contracts may contain bundled pricing covering multiple performance obligations, such as contracts containing a combination of systems, mobilization services and / or sand transportation coordination services. In these instances, we allocate the transaction price to each performance obligation identified in the contract based on relative stand-alone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product or service is transferred to the customer, in satisfaction of the corresponding performance obligations.

Variable consideration typically may relate to discounts, price concessions and incentives. The Company estimates variable consideration based on the amount of consideration we expect to receive. The Company accrues revenue on an ongoing basis to reflect updated information for variable consideration as performance obligations are met.

Disaggregation of Revenue

The following table summarizes revenues from our contracts disaggregated by revenue generating activity contained therein for the three months ended March 31, 2024 and 2023:


	Three Months Ended
	March 31,
	2024		2023
Wellsite services	$	67.7	$	82.5
Transloading and Other		0.2		0.2
Total revenue	$	67.9	$	82.7

Fair Value Measurements

The Company’s financial assets and liabilities, as well as other recurring and nonrecurring fair value measurements such as goodwill impairment and long lived assets impairment, are to be measured using inputs from the three levels of the fair value hierarchy, of which the first two are considered observable and the last unobservable, which are as follows:

●

Level 1—1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;

●

Level 2—2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs corroborated by observable market data for substantially the full term of ~~the~~ assets or liabilities; and

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●

Level 3—3 – Unobservable inputs that reflect the Company’s assumptions that the market participants would use in pricing assets or liabilities based on the best information available.

~~Nonrecurring measurements~~

~~Certain~~The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts receivable, prepaids and other current assets, ~~are measured at~~accounts payable and accruals, and other current liabilities approximate their fair value ~~on a nonrecurring basis. These items are not measured at fair value on an ongoing basis but may be subject~~due to ~~fair value adjustments in certain circumstances. As~~their short-term nature. The carrying amounts of ~~September 30, 2023, these assets include certain systems and related equipment that met~~ the ~~held for sale criteria upon entering into a non-binding sale~~Company’s borrowings under the credit agreement ~~with a third party. These assets were recorded to assets held for sale at a total fair value of $3.0 million in the unaudited condensed consolidated balance sheet. The Company determined the~~approximate fair value based on ~~the sale price included in the non-binding sale agreement, which is a Level 3 input. As the carrying value of the fixed assets classified as held for sale exceeded~~ their ~~fair value less estimated costs to sell, we recorded an impairment of $1.4 million in the condensed consolidated statement of operations.~~

~~Revenue Recognition~~

The majority of our contracts contain multiple performance obligations, such as work orders containing a combination of equipment, last mile logistics services, and labor services. We allocate the transaction price to each performance obligation identified in the contract based on relative stand-alone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product or service is transferred to the customer, in satisfaction of the corresponding performance obligations. We measure progress using an input method based on resources consumed or expended relative to the total resources expected to be consumed or expended. We assess our customers’ ability and intention to pay, which is based on a variety of factors including historical payment experience and financial condition and we typically charge our customers on a weekly or monthly basis. Contracts with customers are typically on thirty- to sixty-day payment terms.

~~Table of Contents~~

~~Disaggregation of Revenue~~

~~The following table summarizes revenues from our contracts disaggregated by revenue generating activity contained therein for the three and nine months ended September 30, 2023 and 2022:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2023

2022

2023

2022

Wellsite services

$
69.5

$
92.1

$
229.1

$
235.2
Transloading and Other

0.2

0.2

0.5

0.8
Total revenue

$
69.7

$
92.3

$
229.6

$
236.0

~~Recently Issued Accounting Standards~~

In March 2020, the Financial Accounting Standards Board issued ASU No. 2020-04, Reference Rate Reform, which provided temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provided certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. The original guidance expired on December 31, 2022, and ASU No. 2022-06 extended the effective date of the guidance to December 31, 2024. As described more fully in Note 7. “Income Taxes,” the Tax Receivable Agreement was amended on June 27, 2023, to replace the references to LIBOR.variable interest rates.

3. Property, Plant and Equipment

Property, plant and equipment are stated at cost. We manufacture or construct most of our systems. During the manufacturing of these assets, they are reflected as systems in process until complete. Modifications to existing systems, including the expenditures for upgrades and enhancements that result in additional functionality, increased efficiency, or the extension of the estimated useful life, are capitalized.

As of September 30, 2023, we classified $4.4 million of certain systems and related equipment, net of accumulated depreciation, to assets held for sale upon entering into a non-binding sale agreement with a third party. As the carrying value of the fixed assets classified as held for sale exceeded their fair value less estimated costs to sell, we recorded an impairment of $1.4 million in the condensed consolidated statement of operations.

~~Property, plant and equipment~~ consists of the following:


	September 30,		December 31,		March 31,		December 31,
	2023		2022		2024		2023
Systems and related equipment	$	404.4	$	369.3	$	440.5	$	434.4
Systems in process		44.0		30.1		20.6		21.1
Vehicles						13.5		13.5
Machinery and equipment						5.8		5.8
Buildings						4.9		4.9
Computer hardware and software		3.9		1.7		3.9		3.9
Machinery and equipment		5.7		5.4
Vehicles		14.2		13.2
Buildings		4.8		4.6
Land		0.6		0.6		0.6		0.6
Furniture and fixtures		1.3		0.4		1.3		1.3
Property, plant and equipment, gross	$	478.9	$	425.3	$	491.1	$	485.5
Less: accumulated depreciation		(151.5)		(127.1)		(170.2)		(160.4)
Property, plant and equipment, net	$	327.4	$	298.2	$	320.9	$	325.1

During the three months ended March 31, 2024 and 2023, we recorded depreciation expense of $9.8 million and $8.2 million, respectively.

As of March 31, 2024, we have reclassified certain systems and related equipment amounting to $3.0 million that were previously classified as assets held for sale back to property, plant and equipment due to a change in plan of sale.

104

~~Table of Contents~~

4. Accrued Liabilities

Accrued liabilities were comprised of the following at March 31, 2024 and December 31, 2023:


	March 31,		December 31,
	2024		2023
Property, plant and equipment	$	0.1	$	0.8
Employee related expenses		3.6		7.6
Selling, general and administrative		0.9		1.3
Cost of services		4.7		3.5
Excise, franchise and sales taxes		1.6		1.5
Ad valorem taxes		5.6		5.6
Accrued liabilities	$	16.5	$	20.3

5. Senior Secured Credit Facility

We had $30.0 million borrowings outstanding under our senior secured credit facility as of March 31, 2024 and December 31, 2023, presented as “Credit agreement” in our condensed consolidated balance sheets.

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As of March 31, 2024, we were in compliance with all covenants under our senior secured credit facility and have the ability to draw up to an additional $37.5 million.

~~4. Leases~~

The Company leases offices and storage from third-parties for our corporate and field locations under operating leases, which include commitments related to the guarantee of lease agreement with Solaris Energy Management, LLC, a related party of the Company, related to the rental of office space. Refer to Note 10. “Related Party Transactions” for additional information regarding related party transactions recognized. Upon completion of the primary term, both parties have substantive rights to terminate the leases. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term.

As of September 30, 2023 and December 31, 2022, the Company had property, plant and equipment under finance leases with a cost of $9.2 and $7.2, respectively, and accumulated depreciation of $2.7 and $0.9, respectively.

~~The components of lease expense were as follows:~~

Three Months Ended

Three Months Ended


Nine Months Ended

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023

September 30, 2022
Operating lease cost (1)

$
0.5

$
0.4

$
1.5

$
1.0

Finance lease cost

Amortization of ROU assets

0.6

0.2

1.8

1.1
Interest on lease liabilities

0.1

0.1

0.3

0.1
Total finance lease cost

$
0.7

$
0.3

$
2.1

$
1.2

~~(1)Includes short term leases.~~

~~Future minimum lease payments under non-cancellable operating leases as of September 30, 2023 were as follows:~~

Year Ending December 31,

Operating Leases

Finance Leases
2023 (remainder of)

$
0.6

0.7
2024

2.6

2.7
2025

2.4

2.0
2026

2.3

0.5
2027

2.3

—
2028

2.0

—
Thereafter

9.5

—
Total future minimum lease payments

21.7

5.9
Less: effects of discounting

(6.9)

(0.4)
Total lease liabilities

$
14.8

$
5.5

~~Supplemental cash flow information related to leases were as follows:~~

Nine Months Ended

Nine Months Ended

September 30, 2023

September 30, 2022
Supplemental Cash Flows Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$
1.1

$
0.9
Financing cash flows from finance leases

1.9

1.1

~~Table of Contents~~

~~Other information related to leases was as follows:~~

September 30,

December 31,

2023

2022
Weighted Average Remaining Lease Term

Operating leases

10.3 years

11.9 years
Finance leases

2.7 years

2.9 years
Weighted Average Discount Rate

Operating leases

6.9%

6.3%
Finance leases

5.7%

5.7%

~~5. Senior Secured Credit Facility~~

On April 28, 2023, Solaris LLC executed Amendment No. 2 to the Amended and Restated Credit Agreement, by and among Solaris LLC, as borrower, each of the guarantors party thereto, each of the lenders party thereto, and Wells Fargo Bank, National Association, as administrative agent (the “2023 Amendment”) to the Amended and Restated Credit Agreement (the “Credit Agreement”), which was entered into on April 26, 2019, by and among Solaris LLC, as borrower, each of the guarantors party thereto, each of the lenders party thereto and Wells Fargo Bank, National Association, as administrative agent, and contained an initial $50.0 ~~borrowing facility. The 2023 Amendment introduced an additional~~ $25.0 facility (the “Additional Facility”) to increase available borrowings under the Credit Agreement from $50.0 to $75.0 (the “Loan”) while preserving the original accordion feature, to provide for a maximum of $100.0 of total available capacity under the Credit Agreement. As more fully described in the 2023 Amendment, certain covenant requirements were also modified. The 2023 Amendment contains a reducing revolver feature whereby the Additional Facility will reduce 15% beginning in the first quarter of 2024 through the fourth quarter of 2024 and 20% thereafter with the balance due at maturity. The Credit Agreement continues to have a maturity date of April 26, 2025.

~~As of September 30, 2023, we had $37.0 borrowings outstanding under the Credit Agreement and have the ability to draw up to an additional $38.0.~~

Our obligations under the Loan are generally secured by a pledge of substantially all the assets of Solaris LLC and its subsidiaries, and such obligations are guaranteed by Solaris LLC’s domestic subsidiaries other than Immaterial Subsidiaries (as defined in the Credit Agreement). We have the option to prepay the loans at any time without penalty.

Borrowings under the Credit Agreement bear interest at either Term Secured Overnight Financing Rate (“SOFR”) or an alternate base rate plus an applicable margin, and interest is payable quarterly for alternate base rate loans or the last business day of the interest period applicable to SOFR loans. The applicable margin ranges from 2.75% to 3.75% for SOFR loans and 1.75% to 2.75% for alternate base rate loans, in each case depending on our total leverage ratio and loan tranche. The Credit Agreement requires that we pay a quarterly commitment fee on undrawn amounts of the Loan, ranging from 0.375% to 0.5% depending upon the total leverage ratio. The weighted average interest rate on the borrowings outstanding as of September 30, 2023 was approximately 8.34%.

The Credit Agreement requires that we maintain ratios of (i) consolidated EBITDA to interest expense of not less than 2.75 to 1.00, (ii) senior indebtedness to consolidated EBITDA of not more than 2.50 to 1.00 and (iii) the sum of 100% of eligible accounts, inventory and fixed assets to the total revolving exposure of not less than 1.00 to 1.00 when the total leverage ratio is greater than 2.00 to 1.00 and total revolving exposure under the Loan exceeds $3.0. For the purpose of these tests, certain items are subtracted from indebtedness and senior indebtedness. EBITDA, as defined in the Credit Agreement, excludes certain noncash items and any extraordinary, unusual or nonrecurring gains, losses or expenses.

The Credit Agreement also requires that we prepay any outstanding borrowings in the event our total consolidated cash balance exceeds $20.0 on the last business day of every other calendar week, taking into account certain adjustments. Capital expenditures are not restricted unless borrowings under the Loan exceed $5.0 for any 180 consecutive day period, in which case capital expenditures will be permitted up to $100.0 plus any unused availability for capital expenditures from the immediately preceding fiscal year.

~~Table of Contents~~

~~As of September 30, 2023, we were in compliance with all covenants under the Credit Agreement.~~

6. Equity

Dividends

Solaris LLC paid dividend distributions totaling ~~$4.9~~$5.3 million and ~~$4.9~~$5.2 million to all Solaris LLC unitholders in the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively, of which ~~$3.4~~$3.6 million and $3.5 was paid to Solaris Inc. Solaris LLC paid dividend distributions totaling $14.9 and $14.7 to all Solaris LLC unitholders in the nine months ended September 30, 2023 and 2022, respectively, of which $10.4 and $10.3$3.7 million was paid to Solaris Inc. Solaris Inc. used the proceeds from the distributions to pay quarterly cash dividends to all holders of shares of Class A common stock.

Share Repurchase Program

On March 1, 2023, the Company’s board of directors authorized a share repurchase plan to repurchase up to $50.0 million of the Company’s Class A common stock until the plan terminates pursuant to its provisions. ~~No shares were purchased and retired during~~During the three months ended ~~September 30, 2023. During the nine months ended September 30, 2023,~~March 31, 2024, Solaris Inc. purchased and retired ~~3,078,500~~1,108,349 shares of the Company’s Class A common stock at an aggregate cost of ~~$25.8,~~$8.1 million, or ~~$8.38~~$7.30 per share, under the share repurchase program. As of ~~September 30, 2023, $24.2 remains~~March 31, 2024, we had purchased and retired 4,272,127 shares of Class A common stock for $34.6 million, or $8.09 per share, resulting in $15.4 million remaining available for future repurchases authorized under the share repurchase plan. The ~~Company has accrued stock repurchase~~1% U.S. federal excise tax on certain repurchases of ~~$0.3 for the nine months ended September 30, 2023.~~

~~Stock-Based Compensation~~

~~The Company’s long-term incentive plan for employees, directors and consultants (the “LTIP”) provides for the grant of all or any~~stock by publicly traded U.S. corporations enacted as part of the ~~following types~~Inflation Reduction Act of equity-based awards: (i) incentive stock options qualified as such under United States federal income tax laws; (ii) stock options that do not qualify as incentive stock options; (iii) stock appreciation rights; (iv) restricted stock awards; (v) restricted stock units; (vi) bonus stock; (vii) performance awards; (viii) dividend equivalents; (ix) other stock-based awards; (x) cash awards; and (xi) substitute awards.

~~Subject~~2022 applies to adjustment in accordance with the terms of the LTIP, 5,118,080 shares of Solaris Inc.’s Class A common stock were originally reserved for issuance pursuant to awards under the LTIP and, pursuant to the First Amendment to the LTIP that was approved by the Company’s stockholders and became effective as of May 17, 2023, an additional 4,700,000 shares of Solaris Inc.’s Class A common stock were reserved for issuance pursuant to awards under the LTIP. As of September 30, 2023, 5,417,457 ~~shares of Solaris Inc.’s Class A common stock were available for grant under the LTIP.~~

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~~The following table summarizes activity related to restricted stock for the three and nine months ended September 30, 2023:~~

Restricted Stock Awards

Number of Shares

Weighted Average
Grant Date Fair
Value ($)
Unvested at January 1, 2023

1,295,728

$
10.33
Awarded

790,201

9.19
Vested

(548,992)

9.74
Forfeited

(9,648)

9.82
Unvested at March 31, 2023

1,527,289

$
9.71
Awarded

16,038

7.48
Vested

(7,606)

10.70
Forfeited

(26,924)

9.66
Unvested at June 30, 2023

1,508,797

$
9.68
Awarded

128,355

10.53
Vested

(85,160)

10.58
Forfeited

(26,078)

9.51
Unvested at September 30, 2023

1,525,914

$
9.69

Of the 1,525,914 shares of restricted stock that remained unvested as of September 30, 2023, it is expected that 739,918 shares, 528,420 shares, and 257,576 shares will vest in 2024, 2025 and 2026, respectively, in each case, subject to the applicable vesting terms governing such shares of restricted stock. There was approximately $11.0 of unrecognized compensation expense related to unvested restricted stock as of September 30, 2023. The unrecognized compensation expense will be recognized over the weighted average remaining vesting period of ~~1.1 years.~~

~~The following table summarizes activity related to PSUs for the three and nine months ended September 30, 2023:~~

Weighted-Average

Grant Date Fair

Number of Units

Value ($)
Outstanding at January 1, 2023

—

$
—
Granted

176,898

11.92
Forfeited

—

—
Outstanding at March 31, 2023

176,898

$
11.92
Granted

—

—
Forfeited

(4,686)

11.92
Outstanding at June 30, 2023

172,212

$
11.92
Granted

—

—
Forfeited

—

—
Outstanding at September 30, 2023

172,212

$
11.92

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Of the 172,212 performance-based restricted stock units (“PSUs”) that remained outstanding as of September 30, 2023, such PSUs had a weighted average grant date fair value of $11.92 per share. The performance criteria for the PSUs are split as follows:

●

Relative PSUs: 50% of the PSUs are based on total shareholder return relative to the total shareholder return of a predetermined group of peer companies. This relative total shareholder return is calculated at the end of the performance periods stipulated in the PSU agreement.

●

~~Absolute PSUs: 50% of the PSUs have a performance criteria of absolute total shareholder return calculated at the end of the performance period stipulated in the PSU agreement.~~

~~The vesting and payout of the PSUs occur when the related service condition is completed, which is approximately~~ ~~one~~ ~~to three years after the grant date depending on the stipulated performance period. The PSUs can be paid out in either Class A common stock or cash, at~~ our election. Dividends accrue on PSUs and are paid upon vesting. As of September 30, 2023, $1.5 of compensation cost related to unvested PSUs remained to be recognized. The cost is expected to be recognized over a weighted-average period of 2.3 years.

The grant date fair value was determined using the Monte Carlo simulation method and is expensed ratably over the service period. Expected volatilities used in the fair value simulation were estimated using historical periods consistent with the remaining performance periods. The risk-free rate was based on the U.S. Treasury rate for a term commensurate with the expected life of the grant. We used the following assumptions to estimate the fair value of such PSUs (which, for purposes of clarity, were granted during the three months ended March 31, 2023):


		~~Assumptions~~
~~Risk-free interest rate~~		~~4.6%~~
~~Volatility~~		~~58.93%~~

share repurchase program.

~~Income~~Earnings Per Share

Basic ~~income~~earnings per share of Class A common stock is computed by dividing net income attributable to Solaris Inc. by the weighted-average number of shares of Class A common stock outstanding during the same period. Diluted ~~income~~earnings per share is computed giving effect to all potentially dilutive shares.

The following table sets forth the calculation of ~~income (loss)~~earnings per share for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022:~~2023:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
Basic net income (loss) per share:	2023		2022		2023		2022
Basic earnings per share:									2024		2023

Numerator
Net income attributable to Solaris	$	4.9	$	7.4	$	20.0	$	16.4
Numerator (in millions)
Net income attributable to Solaris Oilfield Infrastructure, Inc.									$	4.3	$	7.6
Less: income attributable to participating securities (1)		(0.2)		(0.3)		(0.9)		(0.7)		(0.3)		(0.4)
Net income attributable to common stockholders	$	4.7	$	7.1	$	19.1	$	15.7	$	4.0	$	7.2

Denominator
Weighted average number of unrestricted outstanding common shares used to calculate basic net income per share		29,025,293		31,598,612		29,919,094		31,424,530
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share		29,025,293		31,598,612		29,919,094		31,424,530
Weighted average number of unrestricted outstanding common shares used to calculate basic earnings per share										28,586,853		31,214,271
Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted earnings per share										28,586,853		31,214,271

Income per share of Class A common stock - basic	$	0.16	$	0.22	$	0.64	$	0.49
Income per share of Class A common stock - diluted	$	0.16	$	0.22	$	0.64	$	0.49
Earnings per share of Class A common stock - basic									$	0.14	$	0.23
Earnings per share of Class A common stock - diluted									$	0.14	$	0.23

(1)

The Company’s restricted shares of common stock are participating securities.

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The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted ~~income (loss)~~earnings per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2023		2022		2023		2022		2024		2023
Class B common stock		13,671,971		13,671,971		13,671,971		13,731,975		13,671,971		13,671,971
Restricted stock awards		1,505,675		1,349,260		1,466,069		1,251,329		1,654,925		1,374,760
Performance-based restricted stock awards		270,373		—		134,488		—		209,890		176,898
Stock Options		6,605		7,013		6,605		7,063
Stock options										6,605		5,440
Total		15,454,624		15,028,244		15,279,133		14,990,367		15,543,391		15,229,069

7. Income Taxes

Income Taxes

Solaris Inc. is a corporation and, as a result, is subject to United States federal, state and local income taxes. Solaris LLC is treated as a partnership for United States federal income tax purposes and therefore does not pay United States federal income tax on its taxable income. Instead, the Solaris LLC unitholders, including Solaris Inc., are liable for United States federal income tax on their respective shares of Solaris LLC’s taxable income reported on the unitholders’ United States federal income tax returns. Solaris LLC is liable for income taxes in those states not recognizing its status as a partnership for United States federal income tax purposes.

For the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ we recognized a combined United States federal and state expense for income taxes of ~~$1.3~~$1.9 million and ~~$2.3, respectively. For the nine months ended September 30, 2023 and 2022, we recognized a combined United States federal and state expense for income taxes of $6.5 and $5.9,~~$2.5 million, respectively. The effective combined United States federal and state income tax rates were ~~14.6%~~20.3% and ~~16.8%~~17.2% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively. The effective combined United States federal and state income tax rates were 16.9% and 18.7% for the nine months ended September 30, 2023 and 2022,~~ respectively. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ our effective tax rate differed from the statutory rate primarily due to Solaris LLC’s treatment as a partnership for United States federal income tax purposes.

The Company’s deferred tax position reflects the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. The largest components of the Company’s deferred tax position relate to the Company’s investment in Solaris LLC and net operating loss carryovers. The Company recorded a deferred tax asset and additional paid-in capital for the difference between the book value and the tax basis of the Company’s investment in Solaris LLC. This difference originates from the equity offerings of Class A common stock, exchanges of Solaris LLC Units (together with a corresponding number of shares of Class B common stock) for shares of Class A common stock, and issuances of Class A common stock, and corresponding Solaris LLC Units, in connection with stock-based compensation.

Based on our cumulative earnings history and forecasted future sources of taxable income, we believe that we will be able to realize our deferred tax assets in the future. As the Company reassesses this position in the future, changes in cumulative earnings history, excluding non-recurring charges, or changes to forecasted taxable income may alter this expectation and may result in an increase in the valuation allowance and an increase in the effective tax rate.

Section 382 of the Internal Revenue Code of 1986, contains rules that limit the ability of a company that undergoes an “ownership change” to utilize its net operating loss and tax credit carryovers and certain built-in losses recognized in years after the “ownership change.” An “ownership change” is generally defined as any change in ownership of more than 50% of a corporation’s stock over a rolling three-year period by stockholders that own (directly or indirectly) 5% or more of the stock of a corporation, or arising from a new issuance of stock by a corporation. If an ownership change occurs, Section 382 generally imposes an annual limitation on the use of pre-ownership change net operating loss carryovers to offset taxable income earned after the ownership change. We do not believe the Section 382 annual

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limitation related to historical ownership changes impacts our ability to utilize our net operating losses; however, if we were to experience a future ownership change our ability to use net operating losses may be impacted.

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Payables Related to the Tax Receivable Agreement

~~We made payments of $1.1 in January 2023 under the~~On May 17, 2017, Solaris Inc. entered into a Tax Receivable ~~Agreement. Solaris LLC made a tax distribution to Solaris Inc. of $1.1 in order to satisfy these obligations and concurrently made a cash distribution on a pro rata basis to each of~~Agreement (the “Tax Receivable Agreement”) with the ~~other~~ members of Solaris ~~LLC of $0.4. Future amounts payable under the~~LLC. The Tax Receivable Agreement ~~are dependent upon future events.~~

was later amended on June 27, 2023. As of ~~September 30, 2023,~~March 31, 2024, our liability under the Tax Receivable Agreement was $71.5 million, representing 85% of the net cash savings in United States federal, state and local income tax or franchise tax that Solaris Inc. anticipates realizing in future years from certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of Solaris LLC Units in connection with our initial public offering or pursuant to ~~an exercise~~previous exercises of the Redemption Right or the Call Right (each as defined in the Solaris LLC Agreement) and additional tax basis arising from any payments Solaris Inc. makes under the Tax Receivable Agreement.

The projection of future taxable income involves significant judgment. Actual taxable income may differ from our estimates, which could significantly impact our liability under the Tax Receivable Agreement. Therefore, in accordance with ASC 450, Contingencies, we have recorded a liability under the Tax Receivable Agreement related to the tax savings we may realize from certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of Solaris LLC Units in connection with the IPO or pursuant to ~~an excise~~previous exercises of the Redemption Right or the Call Right (each as defined in the Solaris LLC Agreement) and additional tax basis arising from any payments Solaris Inc. makes under the Tax Receivable Agreement. Solaris LLC may make ~~tax~~cash distributions to Solaris Inc. in order for Solaris Inc. to satisfy its obligations under the Tax Receivable Agreement and will be required to distribute cash pro rata to each of the other members of Solaris LLC, in accordance with the number of Solaris LLC Units owned by each member at that time.

On June 27, 2023, the Tax Receivable Agreement was amended to replace the references to one year LIBOR with references to the 12-month term SOFR published by CME Group Benchmark Administration Limited plus 71.513 basis points, which is the benchmark replacement rate and additional margin that, under the Adjustable Interest Rate (LIBOR) Act of 2021, would have otherwise been inserted in place of references to LIBOR in the Tax Receivable Agreement following June 30, 2023.

8. Concentrations

For the three months ended September 30, 2023, two customers accounted for 13% and 12% of the Company’s revenues. For the three months ended September 30, 2022, one customer accounted for 23% of the Company’s revenues. For the nine months ended September 30, 2023,March 31, 2024, three customers accounted for ~~12%~~14%, 12% and 11% of the Company’s revenues. For the ~~nine~~three months ended ~~September 30, 2022, one customer~~March 31, 2023, three customers accounted for ~~21%~~13%, 12% and 11% of the Company’s revenues. As of ~~September 30, 2023,~~March 31, 2024, two customers accounted for ~~16%~~12% and ~~14%~~11% of the Company’s accounts receivable. As of December 31, ~~2022, one customer~~2023, two customers accounted for ~~22%~~12% and 10% of the Company’s accounts receivable.

For the three months ended ~~September 30, 2023, one supplier accounted for 11% of the Company’s total purchases. For the nine months ended September 30, 2023,~~March 31, 2024, one supplier accounted for 10% of the Company’s total purchases. For the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, no supplier accounted for more than 10% of the Company’s total purchases. As of ~~September 30, 2023, two~~March 31, 2024, three suppliers accounted for ~~16%~~19%, 13% and 11% of the Company’s accounts payable. As of December 31, ~~2022, one supplier~~2023, two suppliers accounted for ~~13%~~17% and 12% of the Company’s accounts payable.

9. Commitments and Contingencies

Tax Matters

We are subject to a number of state and local taxes that are not income-based. As many of these taxes are subject to assessment and audit by the taxing authorities, it is possible that an assessment or audit could result in additional taxes

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due. We accrue additional taxes when we determine that it is probable that we will have incurred a liability and we can reasonably estimate the amount of the liability. On June 16, 2022, Cause Number CV20-09-372, styled Solaris Oilfield Site Services v. Brown County Appraisal District, was presented to the 35th District Court of Brown County, Texas. The 35^th District Court of Brown County ruled in favor of Brown County Appraisal District regarding the disqualification of our equipment for certain property tax exemptions. On July 20, 2022, we filed an appeal with the Eleventh District of Texas – Eastland Court of Appeals, and an appellate hearing relating thereto was held on April 13, 2023. ~~We anticipate that a~~A final ruling from the Eastland Court of Appeals ~~will be delivered sometime~~was received on April 18, 2024. The appellate court ruled in ~~the fourth quarter~~our favor and upheld most, but not all, of ~~2023.~~our disputed property tax exemptions. In connection therewith, we have recognized $3.1 million in accrued liabilities as of ~~September 30, 2023.~~March 31, 2024. No additional contingencies were recognized during the three ~~and nine~~ months ~~period~~ ended ~~September 30, 2023.~~March 31, 2024. If this ~~litigation~~decision is appealed to the Texas Supreme Court and is ultimately resolved against us, in whole or in part, it is possible that the resolution of this matter could be material to our condensed consolidated results of operations or cash flows.

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Litigation and Claims

In the normal course of business, the Company is subjected to various claims, legal actions, contract negotiations and disputes. The Company provides for losses, if any, in the year in which they can be reasonably estimated. In management’s opinion, there are currently no such matters outstanding that would have a material effect on the accompanying condensed consolidated financial ~~statements.~~statements other than the following.

On February 28, 2024, the Company was served with a lawsuit by Masaba Inc. in the Wyoming District Court related to alleged intellectual property infringement. The complaint seeks, among other relief, unspecified compensatory damages, rescission, pre-judgment and post-judgment interest, costs and expenses. The Company believes these claims are without merit and will vigorously defend against them. At this time, we are unable to predict the ultimate outcome of this case or estimate the range of possible loss, if any.

Purchase Obligations

In the normal course of business, the Company enters into purchase obligations for products and services, primarily related to equipment or parts for manufacturing equipment. As of ~~September 30, 2023,~~March 31, 2024, we had purchase obligations of approximately ~~$6.2~~$2.8 million payable within the next twelve months.

~~See~~Other Commitments

The Company has executed a guarantee of lease agreement with Solaris Energy Management, LLC, a related party of the Company, related to the rental of office space. The total future guarantee under the guarantee of lease agreement with Solaris Energy Management, LLC is $2.7 million as of March 31, 2024. Refer to Note 1010. “Related Party Transactions” for ~~contingent payments~~additional information regarding related ~~to contracts with customers.~~party transactions recognized.

10. Related Party Transactions

The Company recognizes certain costs incurred in relation to transactions incurred in connection with the amended and restated administrative services agreement, dated May 17, 2017, between Solaris LLC and Solaris Energy Management, LLC, a company owned by William A. Zartler, the Chief Executive Officer and Chairman of the Board. These services include rent paid for office space, travel services, personnel, consulting and administrative costs. For the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ Solaris LLC paid ~~$0.3~~$0.1 million and $0.2, respectively, for these services, included in selling, general and administrative costs in the condensed consolidated statement of operations. For the nine months ended September 30, 2023 and 2022, Solaris LLC paid $0.8 and $0.7,$0.5 million, respectively, for these services, included in selling, general and administrative costs in the condensed consolidated statement of operations. As of ~~September 30, 2023,~~March 31, 2024 and December 31, ~~2022,~~2023, the Company included $0.1 million and $0.1 million, respectively, in prepaid expenses and other current assets on the condensed consolidated balance sheets. ~~Additionally, as of September 30, 2023 and December 31, 2022, the Company included $0.1 and $0.1, respectively, of accruals to related parties in accrued liabilities on the consolidated balance sheet~~.

As of ~~September 30, 2023,~~March 31, 2024, THRC Holdings, LP, an entity managed by THRC Management, LLC (collectively “THRC”), held shares representing a ~~11.1%~~11.2% ownership of the Company’s Class A common stock outstanding and ~~7.5%~~7.6% ownership of the total shares outstanding. THRC is affiliated with certain of the Company’s customers, including ProFrac Services, LLC and certain of the Company’s suppliers including Automatize Logistics, LLC, IOT-EQ, LLC and Cisco Logistics, LLC (together the “THRC Affiliates”). For the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and September 30, 2022,~~ the Company recognized revenues related to our service offering provided to the THRC Affiliates of $~~5.2~~3.3 million and $2.9, respectively. For the nine months ended September 30, 2023 and September 30, 2022, the Company recognized revenues related to our service offering provided to the THRC Affiliates of $17.4 and $13.6,$4.9 million, respectively. Accounts receivable related to THRC Affiliates as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 was ~~$7.1~~$2.7 million and ~~$4.9,~~$2.4 million, respectively.

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For the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and September 30, 2022,~~ the Company recognized cost of services provided by THRC Affiliates of ~~$0.3~~$0.0 million and ~~$1.4,~~$1.1 million, respectively. For the nine months ended September 30, 2023 and September 30, 2022, the Company recognized cost of services provided by THRC Affiliates of $1.9 and $3.1, respectively. As of September 30, 2023 and December 31, 2022, thereThere was ~~$1.5 and $0.3, respectively, of~~$0.0 in accounts payable related to THRC ~~Affiliates.~~Affiliates as of March 31, 2024 and December 31, 2023.

Solaris is the dedicated wellsite sand storage provider (“Services”) to certain THRC Affiliates. Solaris provides volume-based pricing for the Services and may be required to pay up to $4.0 million in payments throughout a term ending in 2024, contingent upon the ability of these affiliates to meet minimum Services revenue thresholds. As of ~~September 30,~~March 31, 2024 and December 31, 2023, there was no accounts payable to THRC Affiliates related to these ~~services is $1.4, which was recognized in revenues.~~

On January 31, 2023, the Company made payments of $1.1 under the Tax Receivable Agreement. Solaris LLC made a cash distribution to Solaris Inc. of $1.1 to satisfy these obligations and concurrently made a cash distribution on a pro rata basis to each of the other members of Solaris LLC of $0.4.

services.

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References to “we,” “us,” “our,” “Solaris Inc.” or the “Company” refer to Solaris Oilfield Infrastructure, Inc. (either individually or together with its subsidiaries, as the context requires). The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying financial statements and related notes. The following discussion contains “forward-looking statements” that reflect our plans, estimates, beliefs and expected performance. Our actual results may differ materially from those anticipated as discussed in these forward-looking statements as a result of a variety of risks and uncertainties, including those described above in “Cautionary Statement Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report and “Risk Factors” included in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, as updated by our subsequent filings with the SEC, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements except as otherwise required by law.

Overview

We design and manufacture specialized equipment, which combined with field technician support, last mile and mobilization logistics services and our software solutions, enables us to provide a service offering that helps oil and natural gas operators and their suppliers drive efficiencies that reduce operational footprint and costs during the completion phase of well development. ~~The majority of our revenue is currently derived from providing equipment and services related to our mobile proppant and fluid management systems and our last mile logistics management services.~~ We also generate revenue from new technology and offerings that work in conjunction with our mobile proppant and fluid management systems, including our proprietary top fill equipment and AutoBlend™ integrated electric blender. Our equipment and services are deployed acrossservice most active oil and natural gas basins in the United States.

Recent Trends and Outlook

WTI oil prices have increased during the second half of 2023 to a range between $80 and $95 per barrel compared to a range between the high $60s and low $80s per barrel during the first half of 2023. Henry Hub natural gas prices have remained in a range between $2 and $3 per MMBtu for most of 2023, which reflects a 50-70% decrease from price levels in 2022. More recently at the start of fourth quarter, natural gas prices averaged over $3 per MMBtu. Since the start of the year, the Baker Hughes US Land Rig Count is down over 20% from year end 2022 levels, driven primarily by the decline in natural gas prices. While oil prices also softened compared to their peak in 2022, they remain at healthy levels to support a sustained level of oil-directed US drilling and completion activity, which comprises approximately 80% of the total Baker Hughes US rig count. Therefore, we expect oil-related drilling and completion activity to remain stable for the foreseeable future and further improvements in natural gas prices could drive improvement in gas-related drilling and completion activity in 2024.

~~Overall, demand~~Demand for our ~~offerings~~services is predominantly influenced by the level of oil and natural gas well drilling and completion ~~activity. While our fully utilized systems are highly correlated with US land rig count~~ activity ~~over longer periods, timing differences between~~in the U.S. Through mid-April 2024, U.S. drilling and completion activity, ~~can result~~as measured by the Baker Hughes U.S. Land Rig Count, was down 1% year to date, which reflects the net impact of a slight increase in ~~lags~~the number of ~~one~~oil-directed rigs and a 9% decrease in gas-directed rigs. Average WTI oil prices increased over 15% from the low-$70s per barrel range at year-end 2023 to ~~two quarters or longer. During 2023,~~the low-$80s per barrel range in April 2024. Average Henry Hub natural gas prices declined over 30% from the start of the year to below $2 per MMBtu, which was the primary driver of the decrease in gas-directed drilling activity.

For the first quarter ended March 31, 2024, our fully utilized total system count ~~growth has outpaced~~averaged 102 systems, which was roughly flat from 103 systems for the fourth quarter ended December 31, 2023 and was relatively in line with the Baker Hughes rig count ~~trend due primarily to new technology-led growth with new and existing customers. An~~trend. A small increase in pricing at the start of ~~the year~~2024 and incremental earnings from our new ~~products have also~~services allowed us to ~~maintain strong~~grow earnings despite ~~a decline~~the softness in drilling and completion activity. As a result, our operating profit grew over 8% sequentially despite the industry activity ~~during 2023.~~decline.

Today oil-directed drilling activity comprises over 80% of the total Baker Hughes U.S. Land rig count. Oil prices currently remain in the low-$80s per barrel range, which we believe should support a sustained level of oil-directed U.S. drilling and completion activity. For the remainder of 2024, we expect the Company’s revenue and profitability to track the overall direction of U.S. drilling and completion activity, which we expect will be negatively impacted by low natural gas prices and industry efficiency gains, partially offset by stable oil-directed activity.

Our capital expenditures of approximately $3 million in first quarter 2024 were down ~~20% in the third quarter of 2023~~over 50% compared to the ~~second~~fourth quarter of 2023. WeThe Company continues to expect full year 2024 capital expenditures to be below $15 million, which reflects an over 75% decrease from total capital expenditures in 2023 following the completion of our ~~pace of~~prior growth capital ~~expenditure to continue to slow~~program in ~~the remainder of 2023 and into 2024 as we complete the build out of these new product lines, which~~2023. This reduction in capital expenditures should allow us to generate significantly increased cash ~~flow.~~flow in 2024.

The sustainability of favorable supply-demand dynamics and a strong commodity environment will depend on multiple factors, including any supply chain disruptions, potential regulatory changes, uncertainty around a potential economic slowdown and potential impacts from geopolitical disruptions, including the war in Ukraine and ~~the recent conflict~~continued conflicts in the ~~Israel-Gaza region.~~Middle East. Additionally, consolidation can drive procurement strategy changes, which has

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historically resulted in both market share gains and losses for the Company. We expect both consolidation and financial discipline will likely continue to be important themes for the energy industry going forward.

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Results of Operations

Three ~~and Nine~~ Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three ~~and Nine~~ Months Ended ~~September 30, 2022~~March 31, 2023


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2023		2022		Change		2023		2022		Change		2024		2023		Change

	(in thousands)						(in thousands)









													(in thousands)

Revenue		64,427		89,376		(24,949)		212,180		222,342		(10,162)		64,635		77,828		(13,193)
Revenue - related parties		5,249		2,949		2,300		17,420		13,609		3,811		3,255		4,894		(1,639)
Total revenue		69,676		92,325		(22,649)		229,600		235,951		(6,351)		67,890		82,722		(14,832)
Operating costs and expenses:
Cost of services (excluding depreciation)		42,102		64,171		(22,069)		140,977		163,079		(22,102)
Cost of services (exclusive of depreciation and amortization)														39,887		53,223		(13,336)
Depreciation and amortization		9,179		7,716		1,463		26,667		21,777		4,890		9,934		8,417		1,517
Property tax contingency		—		—		—		—		3,072		(3,072)
Selling, general and administrative		6,359		5,929		430		19,722		17,202		2,520		7,990		6,538		1,452
Impairment of fixed assets		1,423		—		1,423		1,423		—		1,423
Other operating (income)/expense, net		613		524		89		150		(899)		1,049
Other operating (income) expense, net														123		(338)		461
Total operating costs and expenses		59,676		78,340		(18,664)		188,939		204,231		(15,292)		57,934		67,840		(9,906)
Operating income		10,000		13,985		(3,985)		40,661		31,720		8,941		9,956		14,882		(4,926)
Interest expense, net		(1,057)		(141)		(916)		(2,395)		(308)		(2,087)		(799)		(459)		(340)
Total other expense		(1,057)		(141)		(916)		(2,395)		(308)		(2,087)
Income before income tax expense		8,943		13,844		(4,901)		38,266		31,412		6,854		9,157		14,423		(5,266)
Expense for income taxes		(1,305)		(2,332)		1,027		(6,450)		(5,889)		(561)
Provision for income taxes														(1,857)		(2,486)		629
Net income		7,638		11,512		(3,874)		31,816		25,523		6,293		7,300		11,937		(4,637)
Less: net income related to non-controlling interests		(2,704)		(4,106)		1,402		(11,781)		(9,162)		(2,619)		(2,983)		(4,368)		1,385
Net income attributable to Solaris	$	4,934	$	7,406	$	(2,472)	$	20,035	$	16,361	$	3,674
Net income attributable to Solaris Oilfield Infrastructure, Inc.													$	4,317	$	7,569	$	(3,252)

Revenue

Revenue decreased ~~$22.6~~$14.8 million, or ~~25%~~18%, to ~~$69.7~~$67.9 million for the three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~$92.3~~$82.7 million for the three months ended ~~September 30, 2022.~~March 31, 2023. The decrease in revenue is primarily related to a decrease in last mile tonnage for the three months ended ~~September 30, 2023~~March 31, 2024 compared to the three months ended ~~September 30, 2022.~~March 31, 2023. The decrease in revenue was ~~partially offset with an increase~~also due to a decrease in total fully utilized systems to 102 from ~~105 to 108~~118 systems for the three months ended ~~September 30, 2022~~March 31, 2024 and September 30, 2023, respectively. Revenue decreased $6.4 million, or 3%, to $229.6 million for the nine months ended September 30, 2023 compared to $236.0 million for the nine months ended September 30, 2022. The decrease in revenue is primarily related to a decrease in last mile tonnage for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease in revenue was partially offset with an increase in total fully utilized systems from 90 to 111 systems for the nine months ended September 30, 2022 and September 30,March 31, 2023, respectively.

Cost of Services

Cost of services, excluding depreciation and amortization expense, decreased ~~$22.1~~$13.3 million, or ~~34%~~25%, to ~~$42.1~~$39.9 million for the three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~$64.2~~$53.2 million for the three months ended September 30, 2022. Cost of services, excluding depreciation and amortization expense, decreased $22.1 million, or 14%, to $141.0 million for the nine months ended September 30, 2023, compared to $163.1 million for the nine months ended September 30, 2022.March 31, 2023. The decrease is primarily related to a decrease in last mile tonnage and lower system count for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 compared to the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. Cost of services,

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excluding depreciation and amortization, as a percentage of revenue was ~~60%~~59% and ~~61%~~64% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~respectively,~~respectively.

Depreciation and ~~70%~~Amortization

Depreciation and ~~69%~~amortization increased $1.5 million, or 18%, to $9.9 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively.~~

~~Property Tax Contingency~~

~~We are subject~~March 31, 2024, compared to ~~a number of state~~$8.4 million for the three months ended March 31, 2023. Depreciation increased primarily due to investment in capital spending to develop and ~~local taxes that are not income-based. As many of these taxes are subject to assessment and audit by~~upgrade the taxing authorities, it is possible that an assessment or audit could result in additional taxes due. We accrue for additional taxes when we determine that it is probable that we will have incurred a liability and we can reasonably estimate the amount of the liability. On June 16, 2022, Cause Number CV20-09-372, styled Solaris Oilfield Site Services v. Brown County Appraisal District, was presented to the 35th District Court of Brown County, Texas. The 35th District Court of Brown County ruled in favor of Brown County Appraisal District regarding the disqualification of our equipment for certain property tax exemptions. On July 20, 2022, we filed an appeal with the Eleventh District of Texas – Eastland Court of Appeals, and an appellate hearing relating thereto was held on April 13, 2023. We anticipate that a final ruling from the Eastland Court of Appeals will be delivered sometimesystems fleet, resulting in the ~~fourth quarter~~addition of 2023. In connection therewith, we have recognized $3.1 million in Accrued Liabilities as of September 30, 2023. No additional contingencies were recognized during the three and nine months period ended September 30, 2023. If this litigation is ultimately resolved against us, in whole or in part, it is possible that the resolution of this matter could be materialdepreciable assets from March 31, 2023 to ~~our consolidated results of operations or cash flows.~~March 31, 2024.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased ~~$0.4~~$1.5 million, or 7%23%, to ~~$6.4~~$8.0 million for the three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~$5.9~~$6.5 million for the three months ended ~~September 30, 2022. Selling, general and administrative expenses increased $2.5 million, or 15%, to $19.7 million for the nine months ended September 30,~~March 31, 2023, ~~compared to $17.2 million for the nine months ended September 30, 2022. Selling, general and administrative expenses increased~~ primarily due to ~~increases~~increase in ~~headcount~~salaries, benefits and ~~professional fees.~~

~~Impairment of Fixed Assets~~

During the three and nine months ended September 30, 2023, we entered into a non-binding sale agreement with a third party to sell certain fixed assets. These fixed assets met the criteria as assets held for sale and are included as such on the condensed consolidated balance sheet at September 30, 2023. As the carrying value of the fixed assets classified as held for sale exceeded their fair value less estimated costs to sell, we recorded an impairment loss of $1.4 million in the condensed consolidated statement of operations for the three and nine months ended September 30, 2023.

~~Other Operating (Income) Expense~~

Other operating (income) expense increased $0.1 million, or 17%, to expense of $0.6 million for the three months ended September 30, 2023 compared to expense of $0.5 million for the three months ended September 30, 2022. Other operating (income) expense increased $1.0 million, or 117%, to expense of $0.2 million for the nine months ended September 30, 2023 compared to income ofwages by $0.9 million, ~~for the nine months ended September 30, 2022. Other operating income for the three and nine months ended September 30, 2023 primarily relate~~of which $0.4 million is from stock-based compensation due to ~~excise tax for share buybacks, loss on sale~~new grants of assets and credit losses, partially offset with sales tax rebates. Other operating (income) expense in the three and nine months ended September 30, 2022 primarily relate to change in the TRA liability, credit losses, gain on insurance claims and other settlements, loss on disposalrestricted stock awards.

Table of ~~assets, and costs related to the evaluation of potential acquisitions.~~Contents

Provision for Income Taxes

During the three months ended ~~September 30, 2023,~~March 31, 2024, we recognized a combined United States federal and state expense for income taxes of ~~$1.3~~$1.9 million, a decrease of ~~$1.0~~$0.6 million as compared to the ~~$2.3~~$2.5 million income tax expense we recognized during the three months ended ~~September 30, 2022.~~March 31, 2023. This change was attributable to changes in operating gains. During the nine months ended September 30, 2023, we recognized a combined United States federal and state expense for income taxes of $6.5 million, an increase of $0.6 million as compared to the $5.9 million income tax expense we recognized during the nine months ended September 30, 2022.~~This change was attributable to changes in~~

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operating gains. The effective combined United States federal and state income tax rates were ~~14.6%~~20.3% and ~~16.8%~~17.2% for the three months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022, respectively. The effective combined United States federal and state income tax rates were 16.9% and 18.7% for the nine months ended September 30, 2023 and 2022,~~ respectively. The effective tax rate differed from the statutory rate primarily due to Solaris LLC’s treatment as a partnership for United States federal income tax purposes.

Comparison of Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA

We view EBITDA and Adjusted EBITDA as important indicators of performance. We use them to assess our results of operations because it allows us, our investors and our lenders to compare our operating performance on a consistent basis across periods by removing the effects of varying levels of interest expense due to our capital structure, depreciation and amortization due to our asset base and other items that impact the comparability of financial results from period to period. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding trends and other factors affecting our business in addition to measures calculated under generally accepted accounting principles in the United States (“GAAP”).

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 any extraordinary, unusual or non-recurring gains, losses or expenses.

EBITDA and Adjusted EBITDA should not be considered in isolation or as substitutes for an analysis of our results of operation and financial condition as reported in accordance with ~~accounting standards generally accepted in the United States (“GAAP”).~~GAAP. 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.~~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						Three months ended
	September 30,						September 30,						March 31,
	2023		2022		Change		2023		2022		Change		2024		2023		Change

	(in thousands)						(in thousands)









													(in thousands)
Net income	$	7,638	$	11,512	$	(3,874)	$	31,816	$	25,523	$	6,293	$	7,300	$	11,937	$	(4,637)
Depreciation and amortization		9,179		7,716		1,463		26,667		21,777		4,890		9,934		8,417		1,517
Interest expense, net		1,057		141		916		2,395		308		2,087		799		459		340
Income taxes (1)		1,305		2,332		(1,027)		6,450		5,889		561		1,857		2,486		(629)
EBITDA	$	19,179	$	21,701	$	(2,522)	$	67,328	$	53,497	$	13,831	$	19,890	$	23,299	$	(3,409)
Property tax contingency (2)		—		—		—		—		3,072		(3,072)
Stock-based compensation expense (3)		1,917		1,553		364		5,821		4,665		1,156
Loss on disposal of assets		746		989		(243)		390		1,025		(635)
Impairment of fixed assets (4)		1,423		—		1,423		1,423		—		1,423
Change in payables related to Tax Receivable Agreement (5)		—		—		—		—		(654)		654
Other (6)		163		(309)		472		409		(867)		1,276
Stock-based compensation expense (2)														2,217		1,980		237
(Gain) loss on disposal of assets														12		(361)		373
Credit losses														300		—		300
Other (3)														268		200		68
Adjusted EBITDA	$	23,428	$	23,934	$	(506)	$	75,371	$	60,738	$	14,633	$	22,687	$	25,118	$	(2,431)

(1)	United States 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~~and performance-based restricted ~~stock.~~stock units.

~~(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)~~(3)

Other includes ~~accrued excise tax on share repurchases, gains on insurance claims, credit losses or recoveries~~the net effect of inventory write-offs, transaction costs and other settlements.

2317

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Three ~~and Nine~~ Months Ended ~~September 30, 2023~~March 31, 2024 Compared to Three ~~and Nine~~ Months Ended ~~September 30, 2022:~~March 31, 2023: EBITDA and Adjusted EBITDA

EBITDA decreased ~~$2.5~~$3.4 million to ~~$19.2~~$19.9 million for the three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~$21.7~~$23.3 million for the three months ended ~~September 30, 2022.~~March 31, 2023. Adjusted EBITDA decreased ~~$0.5~~$2.4 million to ~~$23.4~~$22.7 million for the three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~$23.9~~$25.1 million for the three months ended September 30, 2022. EBITDA increased $13.8 million to $67.3 million for the nine months ended September 30, 2023 compared to $53.5 million for the nine months ended September 30, 2022. Adjusted EBITDA increased $14.6 million to $75.4 million for the nine months ended September 30, 2023 compared to $60.7 million for the nine months ended September 30, 2022.March 31, 2023. The changes in EBITDA and Adjusted EBITDA were primarily due to the changes in revenues and expenses, discussed above.

Liquidity and Capital Resources

Overview

Our primary sources of liquidity to date have been cash flows from operations, borrowings under our credit ~~agreements~~agreement and proceeds from equity offerings. Our primary uses of capital have been to fund ongoing operations, capital expenditures to support organic growth, including our fleet development and related maintenance and fleet upgrades, repurchase shares of Class A common stock in the open market, and pay dividends. Although no assurance can be given, depending upon market conditions and other factors, we may also have the ability to issue additional equity and debt if needed.

As of ~~September 30, 2023,~~March 31, 2024, cash and cash equivalents totaled ~~$3.5~~$3.4 million. We have ~~$37.0~~$30.0 million in borrowings outstanding under ~~our~~that certain Amended and Restated Credit ~~Agreement.~~Agreement, dated as of April 28, 2023, as amended (the “Credit Agreement”). As of ~~September 30, 2023,~~March 31, 2024, the Company has the ability to draw up to an additional ~~$38.0~~$37.5 million under the amended Credit Agreement. We believe that our cash on hand, operating cash flow and available borrowings under our Credit Agreement will provide sufficient liquidity to address our future cash needs, including capital expenditures, working capital investments, and dividends for the next 12 months and beyond.

Share Repurchase Program

The Company’s Board of Directors authorized a share repurchase program on March 1, 2023, with an approved limit of $50.0 million and no set term limits. During the three months ended March 31, 2024, we purchased and retired 1,108,349 shares of Class A common stock at an aggregate cost of $8.1 million, or $7.30 per share, under the share repurchase program. As of ~~September 30, 2023,~~March 31, 2024, we have purchased ~~3,078,500~~and retired 4,272,127 shares of Class A common stock for ~~$25.8~~$34.6 million, or ~~$8.38~~$8.09 per share, resulting in ~~$24.2~~$15.4 million remaining under the authorized share repurchase program.

All purchases made pursuant to the authorized share repurchase plan were made in accordance with applicable securities laws from time to time in the open-market or through private transactions, depending on market conditions. Going forward, future purchases may be made pursuant to a trading plan meeting the requirements of Rule 10b-18 or Rule 10b-5 under the Exchange Act, and may be discontinued at any time.

The Inflation Reduction Act of 2022 provides for, among other things, the imposition of a new 1% U.S. federal excise tax on certain repurchases of stock by publicly traded U.S. corporations such as us after December 31, 2022. Accordingly, this excise tax will apply to our share repurchase program in 2023 and in subsequent taxable years. The Biden Administration has proposed increasing the amount of the excise tax from 1% to 4%; however, it is unclear whether such a change in the amount of the excise tax will be enacted and, if enacted, how soon any such change could take effect.

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Cash Flows

The following table summarizes our cash flows for the periods indicated:


	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2023		2022		Change		2024		2023		Change

	(in thousands)








							(in thousands)
Net cash provided by operating activities	$	66,341	$	43,912	$	22,429	$	16,875	$	16,849	$	26
Net cash used in investing activities		(54,830)		(57,797)		2,967		(3,348)		(18,826)		15,478
Net cash used in financing activities		(16,895)		(12,179)		(4,716)		(15,936)		(4,683)		(11,253)
Net change in cash	$	(5,384)	$	(26,064)	$	20,680	$	(2,409)	$	(6,660)	$	4,251

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Significant Sources and Uses of Cash Flows

Operating Activities. Net cash provided by operating activities was ~~$66.3~~$16.9 million for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to net cash provided by operating activities of ~~$43.9~~$16.8 million for the ~~nine~~three months ended ~~September 30, 2022. The increase of $22.4 million in operating cash flow was primarily attributable to increased profitability from operations.~~March 31, 2023.

Investing Activities. Net cash used in investing activities was ~~$54.8~~$3.3 million for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, compared to net cash used in investing activities of ~~$57.8~~$18.8 million for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. The decrease in investing activities of ~~$3.0~~$15.5 million is primarily due to a reduction in capital expenditures ~~and proceeds on sale~~following the completion of ~~disposal of $2.0 million.~~our prior growth capital program in 2023.

Financing Activities. Net cash used in financing activities of ~~$16.9~~$15.9 million for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was primarily related to the repurchase of shares for ~~$25.8~~$8.1 million, quarterly dividends of ~~$10.4~~$3.6 million to Class A common stock shareholders, distributions to Solaris LLC unitholders of ~~$5.0~~$1.6 million, $1.5 million of payments related to taxes on the vesting of stock-based compensation and payments under finance leases and insurance of $1.0 million. Net cash used in financing activities of $4.7 million for the three months ended March 31, 2023 was primarily related to the repurchase of shares for $14.4 million, quarterly dividends of $3.7 million to Class A common stock shareholders, distributions to Solaris LLC unitholders of $2.0 million, payments under finance leases and insurance of ~~$1.9 million, payments under insurance premium financing of $1.4~~$1.3 million, and ~~$1.4~~$1.3 million of payments related to taxes on the vesting of stock-based compensation, partially offset by net borrowings under the Credit Agreement of ~~$29.0~~$18.0 million. Net cash used in financing activities of $12.2 million for the nine months ended September 30, 2022 was primarily related to quarterly dividends of $10.3 million to Class A common stock shareholders, $4.3 million in distributions to Solaris LLC unitholders, payments under finance leases of $1.1 million, $1.1 million of payments related to vesting of stock-based compensation and payments under insurance premium financing of $1.0 million, offset by net borrowings under the Credit Agreement of $6.0 million.

~~Capital Sources~~

~~Senior Secured Credit Facility~~

See Note 5. “Senior Secured Credit Facility” to our condensed consolidated financial statements as of September 30, 2023, included in this Quarterly Report, for a discussion of our senior secured credit facility.

Future Sources and Uses of Cash

Our material cash commitments consist primarily of obligations under our Credit Agreement, Tax Receivable Agreement, finance and operating leases for property and equipment, and purchase obligations as a part of normal operations. We have no material off balance sheet arrangements as of ~~September 30, 2023,~~March 31, 2024, except for purchase commitments under supply agreements disclosed below.

As of ~~September 30, 2023,~~March 31, 2024, we expect to pay approximately $0.1 million in commitment fees on our Credit Agreement within the next twelve months, calculated based on the unused portion of lender commitments, at the applicable commitment fee rate of 0.375%. As of ~~September 30, 2023,~~March 31, 2024, if our borrowings under the Credit Agreement remain at ~~$37.0~~$30.0 million, we expect to pay approximately ~~$3.1~~$2.5 million in interest within the next twelve months, calculated based on the weighted average interest rate on the borrowings outstanding as of ~~September 30, 2023~~March 31, 2024 of approximately ~~8.34%~~8.32%.

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As of ~~September 30, 2023,~~March 31, 2024, we had purchase obligations of approximately ~~$6.2~~$2.8 million payable within the next twelve months.

Critical Accounting Estimates

We had no material changes in our critical accounting estimates during the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 for additional information.

~~Recent Accounting Pronouncements~~

~~Recently Adopted Accounting Standards~~

~~None.~~

~~Recently Issued Accounting Standards~~

See Note 2. “Summary of Significant Accounting Policies – Recently Issued Accounting Standards” to our condensed consolidated financial statements included in this Quarterly Report, for a discussion of recently issued accounting standards.

Off Balance Sheet Arrangements

We have no material off balance sheet arrangements. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such financing arrangements, except for purchase commitments under supply agreements.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

For quantitative and qualitative disclosures about market risk, see Part II, Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023. Our exposure to market risk has not changed materially since December 31, ~~2022.~~2023.

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Credit Risk

The majority of our accounts receivable have payment terms of 60 days or less. As of ~~September 30, 2023,~~March 31, 2024, two customers accounted for ~~16%~~12% and ~~14%~~11% of our total accounts receivable. As of December 31, ~~2022, one customer collectively~~2023, two customers accounted for ~~22%~~12% and 10% of our total accounts receivable. We mitigate the associated credit risk by performing credit evaluations and monitoring the payment patterns of our customers. Please see Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 for more information regarding credit risk of our customers.

Item 4.Controls and Procedures

Disclosure Controls and Procedures

In accordance with Exchange Act Rules 13a-15 and 15d-15, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of ~~September 30, 2023.~~March 31, 2024. Disclosure controls refer to controls and procedures designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is accumulated and communicated by our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure and is recorded, processed, and summarized and reported within the time periods specified in the rules and forms of the SEC. Based on the evaluation of our disclosure controls and procedures as of ~~September 30, 2023,~~March 31, 2024, our principal executive officer and

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principal financial officer have concluded that, as of such date, our disclosure controls and procedures were ~~not~~ effective ~~due to the material weakness~~ in our internal control over financial ~~reporting described below.~~reporting.

As discussed in our Annual Report on Form 10-K for the year ended December 31, 2022, management identified a material weakness related to ineffective information technology general controls (“ITGCs”) in the areas of user access, application change management, operating system and logical access controls and segregation of duties for a third-party information technology (“IT”) system that supports the Company’s financial reporting process for its last mile logistics services, which includes the costs of providing that service and the associated pass through revenues. The material weakness did not result in any identified misstatements to the financial statements and there were no changes to previously released financial results.

~~Remediation Plan for Material Weakness~~

In response to the material weakness, management, with oversight of the Audit Committee of the Company’s Board of Directors, has substantially completed its design and implementation of what we believe are effective measures to strengthen our internal controls over financial reporting and remediate the material weakness. Our internal control remediation efforts included:

●

~~developed and implemented an internal use software to replace the third-party IT system;~~

●

~~enhanced risk assessment procedures and controls related to internally developed and third-party IT systems used by the Company; and~~

●

~~implemented an IT management review and testing plan to monitor ITGCs with a specific focus on systems supporting our financial reporting process.~~

While these remedial actions are substantially complete, they continue to be subject to ongoing management evaluation and must operate effectively for a sufficient period of time before management considers the material weakness fully remediated.

Changes in Internal Control over Financial Reporting

~~Except for the changes discussed above, there~~There were no changes in our system of internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended ~~September 30, 2023~~March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Due to the nature of our business, we may become, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities. In the opinion of our management, there are no pending litigation, disputes or claims against us which, if decided adversely, will have a material adverse effect on our financial condition, cash flows or results of operations.

~~On June 16, 2022, Cause Number CV20-09-372, styled~~ ~~Solaris Oilfield Site Services v. Brown County Appraisal District~~~~, was presented~~Please refer to the ~~35th District Court of Brown County, Texas. The 35~~^th ~~District Court of Brown County ruled~~information in favor of Brown County Appraisal District regarding the disqualification of our equipment for certain property tax exemptions. On July 20, 2022, we filed an appeal with the Eleventh District of Texas – Eastland Court of Appeals,Note 9. Commitments and ~~an appellate hearing relating thereto was held on April 13, 2023. We anticipate that a final ruling from the Eastland Court of Appeals will be delivered sometime~~Contingencies included in the fourth quarter of 2023. In connection therewith, we have recognized $3.1 million in Accrued Liabilities as of September 30, 2023. No additional contingencies were recognized during the three and nine months ended September 30, 2023. If this litigation is ultimately resolved against us, in whole or in part, it is possible that the resolution of this matter could be materialnotes to ~~our~~unaudited condensed consolidated ~~results of operations or cash flows.~~financial statements contained herein.

Item 1A. Risk Factors

Factors that could materially adversely affect our business, financial condition, operating results or liquidity and the trading price of our Class A common stock are described under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, as filed with the SEC on ~~March 9, 2023.~~February 27, 2024. As of the date of this filing, there have been no material updates to the risk factors previously disclosed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ~~and Issuer Purchases of Equity Securities~~

Unregistered Sales of Equity Securities

None.

~~Table of Contents~~

Issuer Purchases of Equity Securities

The following table presents the total number of shares of our Class A common stock that we purchased during the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, and the average price paid per share:


				Total Number of						Total Number of
				Shares		Maximum Dollar				Shares		Maximum Dollar
				Purchased		Value of Shares				Purchased		Value of Shares
	Total Number of	Average Price		as Part of Publicly		that May Yet be	Total Number of	Average Price		as Part of Publicly		that May Yet be
	Shares	Paid Per		Announced		Purchased Under	Shares	Paid Per		Announced		Purchased Under
Period	Purchased (1)	Share		Plan (2)		the Plan (2)	Purchased (1)	Share		Plan (2)		the Plan (2)
January 1 - January 31	—	$	—	—	$	50,000,000	474,726	$	7.17	474,726	$	20,128,802
February 1 - February 28	—		—	—		50,000,000	633,623		7.40	633,623		15,440,555
March 1 - March 31	1,788,838		8.82	1,641,000		35,557,509	181,707		8.47	—		15,440,555
April 1 - April 30	1,957		8.75	—		35,557,509
May 1 - May 31	1,144,100		7.81	1,144,100		26,627,518
June 1 - June 30	294,146		8.23	293,400		24,212,452
July 1 - July 31	876		8.72	—		24,212,452
August 1 - August 31	884		10.57	—		24,212,452
September 1 - September 30	—		—	—		24,212,452
Total	3,230,801	$	8.41	3,078,500			1,290,056	$	7.47	1,108,349

(1)

Includes ~~3,078,500~~1,108,349 shares repurchased as part of the share repurchase ~~plan~~program and ~~152,301~~181,707 shares purchased to satisfy tax withholding obligations upon the vesting of restricted stock awarded to certain of our employees.

(2)

InOn March 1, 2023, the Company’s board of directors authorized a plan to repurchase up to $50 million of our Class A common stock.

Item 3.Defaults upon Senior Securities

None.

Item 4.Mine Safety Disclosures

None.

Item 5.Other Information

Table of Contents

During the three months ended ~~September 30, 2023,~~March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Table of Contents

Item 6.Exhibits

Exhibit No.		Description

3.1		Amended and Restated Certificate of Incorporation of Solaris Oilfield Infrastructure, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (File No. 001-38090) filed with the Commission on May 23, 2017).

3.2		Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Solaris Oilfield Infrastructure, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K (File No. 001-38090) filed with the Commission on May 22, 2023).

3.3		Amended and Restated Bylaws of Solaris Oilfield Infrastructure, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 8-K (File No. 001-38090) filed with the Commission on May 23, 2017).

31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**		Certification of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2**		Certification of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*		Inline XBRL Instance Document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit 101)

* Filed herewith.

** Furnished herewith. Pursuant to SEC Release No. 33-8212, this certification will be treated as “accompanying” this Quarterly Report on Form 10-Q and not “filed” as part of such report for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of Section 18 of the Exchange Act, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Act, except to the extent that the registrant specifically incorporates it by reference.

# Certain schedules, annexes or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K, but will be furnished supplementally to the SEC upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	SOLARIS OILFIELD INFRASTRUCTURE, INC.

~~October 30, 2023~~April 26, 2024	By:	/s/ William A. Zartler
		William A. Zartler
		Chairman and Chief Executive Officer
		(Principal Executive Officer)




~~October 30, 2023~~April 26, 2024	By:	/s/ Kyle S. Ramachandran
		Kyle S. Ramachandran
		President and Chief Financial Officer
		(Principal Financial Officer)

3124


		Page
Cautionary Statement Regarding Forward-Looking Statements		1
PART I: FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2015
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2619
Item 4.	Controls and Procedures	2620
PART II: OTHER INFORMATION		2821
Item 1.	Legal Proceedings	2821
Item 1A.	Risk Factors	2821
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds ~~and Issuer Purchases of Equity Securities~~	2821
Item 3.	Defaults upon Senior Securities	2921
Item 4.	Mine Safety Disclosures	2921
Item 5.	Other Information	2921
Item 6.	Exhibits	3023
SIGNATURES		3124


Year Ending December 31,	Operating Leases		Finance Leases
2023 (remainder of)	$	0.6		0.7
2024		2.6		2.7
2025		2.4		2.0
2026		2.3		0.5
2027		2.3		—
2028		2.0		—
Thereafter		9.5		—
Total future minimum lease payments		21.7		5.9
Less: effects of discounting		(6.9)		(0.4)
Total lease liabilities	$	14.8	$	5.5


	Nine Months Ended		Nine Months Ended
	September 30, 2023		September 30, 2022
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1.1	$	0.9
Financing cash flows from finance leases		1.9		1.1


	Restricted Stock Awards
	Number of Shares		Weighted Average Grant Date Fair Value ($)
Unvested at January 1, 2023	1,295,728	$	10.33
Awarded	790,201		9.19
Vested	(548,992)		9.74
Forfeited	(9,648)		9.82
Unvested at March 31, 2023	1,527,289	$	9.71
Awarded	16,038		7.48
Vested	(7,606)		10.70
Forfeited	(26,924)		9.66
Unvested at June 30, 2023	1,508,797	$	9.68
Awarded	128,355		10.53
Vested	(85,160)		10.58
Forfeited	(26,078)		9.51
Unvested at September 30, 2023	1,525,914	$	9.69


		Weighted-Average
		Grant Date Fair
	Number of Units	Value ($)
Outstanding at January 1, 2023	—	$	—
Granted	176,898		11.92
Forfeited	—		—
Outstanding at March 31, 2023	176,898	$	11.92
Granted	—		—
Forfeited	(4,686)		11.92
Outstanding at June 30, 2023	172,212	$	11.92
Granted	—		—
Forfeited	—		—
Outstanding at September 30, 2023	172,212	$	11.92