Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2024 | Apr. 15, 2024 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2024 | |
Document Transition Report | false | |
Entity File Number | 001-38090 | |
Entity Registrant Name | SOLARIS OILFIELD INFRASTRUCTURE, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 81-5223109 | |
Entity Address, Address Line One | 9651 Katy Freeway, Suite 300 | |
Entity Address, City or Town | Houston | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 77024 | |
City Area Code | 281 | |
Local Phone Number | 501-3070 | |
Title of 12(b) Security | Class A Common Stock, $0.01 par value | |
Trading Symbol | SOI | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0001697500 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2024 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Class A Common Stock | ||
Document and Entity Information | ||
Entity Common Stock, Shares Outstanding | 30,350,534 | |
Class B Common Stock | ||
Document and Entity Information | ||
Entity Common Stock, Shares Outstanding | 13,671,971 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Current assets: | ||
Cash and cash equivalents | $ 3,424 | $ 5,833 |
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 |
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, $0.01 par value, 50,000 shares authorized, none issued and outstanding | ||
Additional paid-in capital | 182,723 | 188,379 |
Retained earnings | 17,125 | 17,314 |
Total stockholders' equity attributable to Solaris Oilfield Infrastructure, Inc. | 200,131 | 205,983 |
Non-controlling interest | 109,717 | 109,597 |
Total stockholders' equity | 309,848 | 315,580 |
Total liabilities and stockholders' equity | 457,070 | 468,297 |
Nonrelated Party | ||
Current assets: | ||
Accounts receivable | 46,411 | 44,916 |
Related Party | ||
Current assets: | ||
Accounts receivable | 2,721 | 2,378 |
Class A Common Stock | ||
Stockholders' equity: | ||
Common Stock | 283 | 290 |
Class B Common Stock | ||
Stockholders' equity: | ||
Common Stock |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Allowance for credit losses, current | $ 404 | $ 104 |
Allowance for credit losses, noncurrent | $ 862 | $ 862 |
Preferred stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 50,000 | 50,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 600,000 | 600,000 |
Common stock, shares issued | 28,330 | 28,967 |
Common stock, shares outstanding | 28,330 | 28,967 |
Class B Common Stock | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized | 180,000 | 180,000 |
Common stock, shares issued | 13,674 | 13,674 |
Common stock, shares outstanding | 13,674 | 13,674 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Revenue: | ||
Revenue | $ 67,890 | $ 82,722 |
Operating costs and expenses: | ||
Cost of services (exclusive of depreciation and amortization) | 39,887 | 53,223 |
Depreciation and amortization | 9,934 | 8,417 |
Selling, general and administrative | 7,990 | 6,538 |
Other operating (income) expense, net | 123 | (338) |
Total operating costs and expenses | 57,934 | 67,840 |
Operating income | 9,956 | 14,882 |
Interest expense, net | (799) | (459) |
Income before income tax expense | 9,157 | 14,423 |
Provision for income taxes | (1,857) | (2,486) |
Net income | 7,300 | 11,937 |
Less: net income related to non-controlling interests | (2,983) | (4,368) |
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 stockholders | 4,040 | 7,219 |
Nonrelated Party | ||
Revenue: | ||
Revenue | 64,635 | 77,828 |
Related Party | ||
Revenue: | ||
Revenue | $ 3,255 | $ 4,894 |
Class A Common Stock | ||
Operating costs and expenses: | ||
Earnings per share of Class A common stock - basic (in dollars per share) | $ 0.14 | $ 0.23 |
Earnings per share of Class A common stock - diluted (in dollars per share) | $ 0.14 | $ 0.23 |
Basic weighted-average shares of Class A common stock outstanding (in shares) | 28,586,853 | 31,214,271 |
Diluted weighted-average shares of Class A common stock outstanding (in shares) | 28,586,853 | 31,214,271 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands | Common Stock Class A Common Stock | Common Stock Class B Common Stock | Additional Paid-in Capital | Retained Earnings | Non-controlling Interest | Total |
Balance at beginning of period at Dec. 31, 2022 | $ 317 | $ 202,551 | $ 12,847 | $ 101,414 | $ 317,129 | |
Balance at beginning of period (in shares) at Dec. 31, 2022 | 31,641 | 13,674 | ||||
Changes in Stockholders' Equity | ||||||
Share repurchase and retirements | $ (17) | (10,543) | (3,295) | (572) | (14,427) | |
Share repurchases and retirements (in shares) | (1,641) | |||||
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 | $ 5 | 903 | (908) | |||
Vesting of restricted stock (in shares) | 547 | |||||
Cancelled shares withheld for taxes from vesting of restricted stock | $ (1) | (536) | (384) | (415) | (1,336) | |
Cancelled shares withheld for taxes from vesting of restricted stock (in shares) | (148) | |||||
Distributions to non-controlling interest unitholders | (1,985) | (1,985) | ||||
Dividends paid (Class A common stock) | (3,656) | (3,656) | ||||
Net income | 7,569 | 4,368 | 11,937 | |||
Balance at end of period at Mar. 31, 2023 | $ 304 | 194,463 | 13,081 | 102,562 | 310,410 | |
Balance at end of period (in shares) at Mar. 31, 2023 | 30,399 | 13,674 | ||||
Balance at beginning of period at Dec. 31, 2023 | $ 290 | 188,379 | 17,314 | 109,597 | 315,580 | |
Balance at beginning of period (in shares) at Dec. 31, 2023 | 28,967 | 13,674 | ||||
Changes in Stockholders' Equity | ||||||
Share repurchase and retirements | $ (11) | (7,031) | (858) | (233) | (8,133) | |
Share repurchases and retirements (in shares) | (1,108) | |||||
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 | $ 6 | 1,731 | (1,737) | |||
Vesting of restricted stock (in shares) | 653 | |||||
Cancelled shares withheld for taxes from vesting of restricted stock | $ (2) | (1,515) | (22) | (1,539) | ||
Cancelled shares withheld for taxes from vesting of restricted stock (in shares) | (182) | |||||
Distributions to non-controlling interest unitholders | (1,641) | (1,641) | ||||
Dividends paid (Class A common stock) | (3,648) | (3,648) | ||||
Net income | 4,317 | 2,983 | 7,300 | |||
Balance at end of period at Mar. 31, 2024 | $ 283 | $ 182,723 | $ 17,125 | $ 109,717 | $ 309,848 | |
Balance at end of period (in shares) at Mar. 31, 2024 | 28,330 | 13,674 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | ||
Cash dividends paid (in dollars per share) | $ 0.12 | $ 0.11 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Cash flows from operating activities: | ||
Net income | $ 7,300 | $ 11,937 |
Adjustment to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 9,934 | 8,417 |
(Gain) loss on disposal of assets | 12 | (22) |
Stock-based compensation | 2,217 | 1,980 |
Amortization of debt issuance costs | 43 | 31 |
Allowance for credit losses | 300 | |
Inventory write-off | 223 | |
Deferred income tax expense | 1,727 | 2,329 |
Other | 31 | 10 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (1,795) | (3,581) |
Accounts receivable - related party | (343) | 1,086 |
Prepaid expenses and other current assets | 951 | 905 |
Inventories | (448) | (4,071) |
Accounts payable | (131) | 2,042 |
Accrued liabilities | (3,146) | (3,122) |
Payments pursuant to tax receivable agreement | (1,092) | |
Net cash provided by operating activities | 16,875 | 16,849 |
Cash flows from investing activities: | ||
Investment in property, plant and equipment | (3,358) | (18,949) |
Proceeds from disposal of property, plant and equipment | 10 | 123 |
Net cash used in investing activities | (3,348) | (18,826) |
Cash flows from financing activities: | ||
Share repurchases and retirements | (8,092) | (14,427) |
Distributions to non-controlling interest unitholders | (1,641) | (1,985) |
Dividend 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 | 4,000 | 18,000 |
Repayment of credit agreement | (4,000) | |
Net cash used in financing activities | (15,936) | (4,683) |
Net decrease in cash and cash equivalents | (2,409) | (6,660) |
Cash and cash equivalents at beginning of period | 5,833 | 8,835 |
Cash and cash equivalents at end of period | 3,424 | 2,175 |
Investing: | ||
Capitalized depreciation in property, plant and equipment | 120 | 129 |
Capitalized stock based compensation | 134 | 174 |
Property and equipment additions incurred but not paid at period-end | 331 | 5,015 |
Reclassification of assets held for sale to property, plant, and equipment | 3,000 | |
Additions to fixed assets through finance leases | 933 | |
Cash paid for: | ||
Interest | 758 | 335 |
Income taxes | $ 76 | $ 1 |
Organization and Background of
Organization and Background of Business | 3 Months Ended |
Mar. 31, 2024 | |
Organization and Background of Business | |
Organization and Background of Business | 1. Organization and Background of Business Description of Business 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. We service most active oil and natural gas basins in the United States. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2024 | |
Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 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 months ended March 31, 2024 and 2023 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, 2023 and notes thereto. All material intercompany transactions and balances have been eliminated upon consolidation. Allowance for Credit Losses The following activity related to our allowance for credit losses on customer receivables for the quarter ended March 31, 2024 reflects the estimated impact of the 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 control, or the customer’s ability to benefit from our services and 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 – 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 – 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 assets or liabilities; and ● Level 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. The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts receivable, prepaids and other current assets, accounts payable and accruals, and other current liabilities approximate their fair value due to their short-term nature. The carrying amounts of the Company’s borrowings under the credit agreement approximate fair value based on their nature, terms, and variable interest rates. |
Property, Plant and Equipment
Property, Plant and Equipment | 3 Months Ended |
Mar. 31, 2024 | |
Property, Plant and Equipment | |
Property, Plant and Equipment | Property, plant and equipment consists of the following: March 31, December 31, 2024 2023 Systems and related equipment $ 440.5 $ 434.4 Systems in process 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 3.9 Land 0.6 0.6 Furniture and fixtures 1.3 1.3 Property, plant and equipment, gross $ 491.1 $ 485.5 Less: accumulated depreciation (170.2) (160.4) Property, plant and equipment, net $ 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. |
Accrued Liabilities
Accrued Liabilities | 3 Months Ended |
Mar. 31, 2024 | |
Accrued Liabilities | |
Accrued Liabilities | 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 |
Senior Secured Credit Facility
Senior Secured Credit Facility | 3 Months Ended |
Mar. 31, 2024 | |
Senior Secured Credit Facility | |
Senior Secured Credit Facility | 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. 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. |
Equity
Equity | 3 Months Ended |
Mar. 31, 2024 | |
Equity | |
Equity | Dividends Solaris LLC paid dividend distributions totaling $5.3 million and $5.2 million to all Solaris LLC unitholders in the three months ended March 31, 2024 and 2023, respectively, of which $3.6 million and $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. 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. During the three months ended March 31, 2024, Solaris Inc. purchased and retired 1,108,349 shares of the Company’s Class A common stock at an aggregate cost of $8.1 million, or $7.30 per share, under the share repurchase program. As of 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 1% U.S. federal excise tax on certain repurchases of stock by publicly traded U.S. corporations enacted as part of the Inflation Reduction Act of 2022 applies to our share repurchase program. Earnings Per Share Basic 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 earnings per share is computed giving effect to all potentially dilutive shares. The following table sets forth the calculation of earnings per share for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, Basic earnings per share: 2024 2023 Numerator (in millions) Net income attributable to Solaris Oilfield Infrastructure, Inc. $ 4.3 $ 7.6 Less: income attributable to participating securities (1) (0.3) (0.4) Net income attributable to common stockholders $ 4.0 $ 7.2 Denominator 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 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. The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted earnings per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion: Three Months Ended March 31, 2024 2023 Class B common stock 13,671,971 13,671,971 Restricted stock awards 1,654,925 1,374,760 Performance-based restricted stock awards 209,890 176,898 Stock options 6,605 5,440 Total 15,543,391 15,229,069 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2024 | |
Income Taxes | |
Income Taxes | 7. Income Taxes Income Taxes 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 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. Payables Related to the Tax Receivable Agreement |
Concentrations
Concentrations | 3 Months Ended |
Mar. 31, 2024 | |
Concentrations | |
Concentrations | 8. Concentrations For the three months ended March 31, 2024, three customers accounted for 14%, 12% and 11% of the Company’s revenues. For the three months ended March 31, 2023, three customers accounted for 13%, 12% and 11% of the Company’s revenues. As of March 31, 2024, two customers accounted for 12% and 11% of the Company’s accounts receivable. As of December 31, 2023, two customers accounted for 12% and 10% of the Company’s accounts receivable. For the three months ended March 31, 2024, one supplier accounted for 10% of the Company’s total purchases. For the three months ended March 31, 2023, no supplier accounted for more than 10% of the Company’s total purchases. As of March 31, 2024, three suppliers accounted for 19%, 13% and 11% of the Company’s accounts payable. As of December 31, 2023, two suppliers accounted for 17% and 12% of the Company’s accounts payable. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2024 | |
Commitments and Contingencies | |
Commitments and Contingencies | 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 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 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 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 March 31, 2024, we had purchase obligations of approximately $2.8 million payable within the next twelve months. 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 10. “Related Party Transactions” for additional information regarding related party transactions recognized. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2024 | |
Related Party Transactions | |
Related Party Transactions | 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 March 31, 2024 and 2023, Solaris LLC paid $0.1 million and $0.5 million, respectively, for these services, included in selling, general and administrative costs in the condensed consolidated statement of operations. As of March 31, 2024 and December 31, 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. As of March 31, 2024, THRC Holdings, LP, an entity managed by THRC Management, LLC (collectively “THRC”), held shares representing a 11.2% ownership of the Company’s Class A common stock outstanding and 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 March 31, 2024 and 2023, the Company recognized revenues related to our service offering provided to the THRC Affiliates of 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 March 31, 2024 and December 31, 2023, there was no accounts payable to THRC Affiliates related to these services. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2024 | |
Summary of Significant Accounting Policies | |
Basis of Presentation and Consolidation | 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 months ended March 31, 2024 and 2023 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, 2023 and notes thereto. All material intercompany transactions and balances have been eliminated upon consolidation. |
Allowance for Credit Losses | The following activity related to our allowance for credit losses on customer receivables for the quarter ended March 31, 2024 reflects the estimated impact of the 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 | 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 control, or the customer’s ability to benefit from our services and 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 | 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 – 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 – 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 assets or liabilities; and ● Level 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. The carrying amounts reported in the balance sheet for cash and cash equivalents, accounts receivable, prepaids and other current assets, accounts payable and accruals, and other current liabilities approximate their fair value due to their short-term nature. The carrying amounts of the Company’s borrowings under the credit agreement approximate fair value based on their nature, terms, and variable interest rates. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Summary of Significant Accounting Policies | |
Schedule of allowance for credit losses | Balance, December 31, 2023 $ 1.0 Provision for credit losses, net of recoveries 0.3 Write-offs — Balance, March 31, 2024 $ 1.3 |
Schedule of disaggregated revenues from contracts | 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 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Property, Plant and Equipment | |
Schedule of property plant and equipment | March 31, December 31, 2024 2023 Systems and related equipment $ 440.5 $ 434.4 Systems in process 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 3.9 Land 0.6 0.6 Furniture and fixtures 1.3 1.3 Property, plant and equipment, gross $ 491.1 $ 485.5 Less: accumulated depreciation (170.2) (160.4) Property, plant and equipment, net $ 320.9 $ 325.1 |
Accrued Liabilities (Tables)
Accrued Liabilities (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Accrued Liabilities | |
Schedule of accrued liabilities | 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 |
Equity (Tables)
Equity (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Equity | |
Schedule of earnings per share calculation | Three Months Ended March 31, Basic earnings per share: 2024 2023 Numerator (in millions) Net income attributable to Solaris Oilfield Infrastructure, Inc. $ 4.3 $ 7.6 Less: income attributable to participating securities (1) (0.3) (0.4) Net income attributable to common stockholders $ 4.0 $ 7.2 Denominator 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 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. |
Schedule of antidilutive shares | Three Months Ended March 31, 2024 2023 Class B common stock 13,671,971 13,671,971 Restricted stock awards 1,654,925 1,374,760 Performance-based restricted stock awards 209,890 176,898 Stock options 6,605 5,440 Total 15,543,391 15,229,069 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Credit Losses (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2024 USD ($) | |
Summary of Significant Accounting Policies | |
Allowance for credit losses, beginning | $ 1 |
Provision for credit losses, net of recoveries | 0.3 |
Allowance for credit losses, ending | $ 1.3 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Revenues Disaggregated (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 67,890 | $ 82,722 |
Wellsite services | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | 67,700 | 82,500 |
Transloading and Other | ||
Disaggregation of Revenue [Line Items] | ||
Revenue | $ 200 | $ 200 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 491,100 | $ 485,500 | |
Less: accumulated depreciation | (170,200) | (160,400) | |
Property, plant and equipment, net | 320,885 | 325,121 | |
Depreciation expense | 9,800 | $ 8,200 | |
Reclassification of assets held for sale to property, plant, and equipment | 3,000 | ||
Systems and related equipment | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 440,500 | 434,400 | |
Systems in process | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 20,600 | 21,100 | |
Vehicles | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 13,500 | 13,500 | |
Machinery and equipment | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 5,800 | 5,800 | |
Buildings | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 4,900 | 4,900 | |
Computer hardware and software | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 3,900 | 3,900 | |
Land | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | 600 | 600 | |
Furniture and fixtures | |||
Property, Plant and Equipment | |||
Property, plant and equipment, gross | $ 1,300 | $ 1,300 |
Accrued Liabilities (Details)
Accrued Liabilities (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Accrued Liabilities | ||
Property, plant and equipment | $ 100 | $ 800 |
Employee related expenses | 3,600 | 7,600 |
Selling, general and administrative | 900 | 1,300 |
Cost of services | 4,700 | 3,500 |
Excise, franchise and sales taxes | 1,600 | 1,500 |
Ad valorem taxes | 5,600 | 5,600 |
Accrued liabilities | $ 16,489 | $ 20,292 |
Senior Secured Credit Facility
Senior Secured Credit Facility (Details) - 2023 Credit Agreement - USD ($) $ in Millions | Mar. 31, 2024 | Dec. 31, 2023 |
Senior Secured Credit Facility | ||
Outstanding credit facility | $ 30 | $ 30 |
Remaining borrowing capacity | $ 37.5 |
Equity - Dividends (Details)
Equity - Dividends (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Equity | ||
Distributions paid to unit holders | $ 1,641 | $ 1,985 |
Dividend paid to common stock | 3,648 | 3,656 |
Solaris LLC | ||
Equity | ||
Distributions paid to unit holders | $ 5,300 | $ 5,200 |
Equity - Share Repurchase (Deta
Equity - Share Repurchase (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 13 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2024 | Mar. 01, 2023 | |
Equity | |||
Remaining authorized for future repurchases | $ 15.4 | $ 15.4 | |
Stock repurchase excise tax, percentage | 1% | 1% | |
Class A Common Stock | |||
Equity | |||
Repurchased and retired (in shares) | 1,108,349 | 4,272,127 | |
Repurchased and retired | $ 8.1 | $ 34.6 | |
Average price (in dollars per share) | $ 7.30 | $ 8.09 | |
Class A Common Stock | Maximum | |||
Equity | |||
Share Repurchase, Authorized | $ 50 |
Equity - EPS (Details)
Equity - EPS (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Numerator | ||
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 stockholders | $ 4,040 | $ 7,219 |
Class A Common Stock | ||
Denominator | ||
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 |
Earnings per share of Class A common stock - basic (in dollars per share) | $ 0.14 | $ 0.23 |
Earnings per share of Class A common stock - diluted (in dollars per share) | $ 0.14 | $ 0.23 |
Equity - Antidilutive (Details)
Equity - Antidilutive (Details) - shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Potentially dilutive shares | ||
Excluded from EPS calculation (in shares) | 15,543,391 | 15,229,069 |
Class B Common Stock | ||
Potentially dilutive shares | ||
Excluded from EPS calculation (in shares) | 13,671,971 | 13,671,971 |
Restricted stock awards | ||
Potentially dilutive shares | ||
Excluded from EPS calculation (in shares) | 1,654,925 | 1,374,760 |
Performance-based restricted stock awards | ||
Potentially dilutive shares | ||
Excluded from EPS calculation (in shares) | 209,890 | 176,898 |
Employee Stock Option | ||
Potentially dilutive shares | ||
Excluded from EPS calculation (in shares) | 6,605 | 5,440 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Income tax expense | $ 1,857 | $ 2,486 |
Effective tax rate | 20.30% | 17.20% |
Distributions paid to unit holders | $ 1,641 | $ 1,985 |
Solaris LLC | ||
Distributions paid to unit holders | $ 5,300 | $ 5,200 |
Tax Receivable Agreement | ||
Benefit of remaining cash savings (as a percent) | 85% | |
Tax Receivable Agreement | Related Party | ||
Total notes payable | $ 71,500 |
Concentrations (Details)
Concentrations (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Revenue | Customer | One Customer | |||
Concentrations | |||
Concentration risk (as a percent) | 14% | 13% | |
Revenue | Customer | Two Customers | |||
Concentrations | |||
Concentration risk (as a percent) | 12% | 12% | |
Revenue | Customer | Three Customers | |||
Concentrations | |||
Concentration risk (as a percent) | 11% | 11% | |
Accounts receivable | Customer | One Customer | |||
Concentrations | |||
Concentration risk (as a percent) | 12% | 12% | |
Accounts receivable | Customer | Two Customers | |||
Concentrations | |||
Concentration risk (as a percent) | 11% | 10% | |
Purchases | Supplier | One Supplier | |||
Concentrations | |||
Concentration risk (as a percent) | 10% | ||
Accounts payables | Supplier | One Supplier | |||
Concentrations | |||
Concentration risk (as a percent) | 19% | 17% | |
Accounts payables | Supplier | Two Suppliers | |||
Concentrations | |||
Concentration risk (as a percent) | 13% | 12% | |
Accounts payables | Supplier | Supplier Three | |||
Concentrations | |||
Concentration risk (as a percent) | 11% |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Mar. 31, 2024 USD ($) |
Purchase obligations payable within the next twelve months | $ 2.8 |
Related Party | Solaris Energy Management, LLC | |
Other commitments | 2.7 |
Accrued tax expense | |
Other commitments | $ 3.1 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Related Party Transactions | |||
Other current liabilities | $ 408 | ||
Revenue | $ 67,890 | $ 82,722 | |
Distributions paid to unit holders | 1,641 | 1,985 | |
Related Party | |||
Related Party Transactions | |||
Revenue | 3,255 | 4,894 | |
Related Party | William A. Zartler | |||
Related Party Transactions | |||
Payment made to related party | 100 | 500 | |
Related Party | William A. Zartler | Prepaid operating expenses and other current assets | |||
Related Party Transactions | |||
Due from related party | 100 | 100 | |
Related Party | Solaris Energy Management, LLC | |||
Related Party Transactions | |||
Other commitments | 2,700 | ||
Related Party | THRC Affiliates | |||
Related Party Transactions | |||
Due from related party | 2,700 | 2,400 | |
Other current liabilities | 0 | $ 0 | |
Revenue | 3,300 | 4,900 | |
Related party costs | 0 | 1,100 | |
Related Party | THRC Affiliates - Services | |||
Related Party Transactions | |||
Other current liabilities | 0 | ||
Other commitments | 4,000 | ||
Solaris LLC | |||
Related Party Transactions | |||
Distributions paid to unit holders | $ 5,300 | $ 5,200 | |
THRC | Solaris Oilfield Infrastructure | |||
Related Party Transactions | |||
Noncontrolling interest (as a percent) | 7.60% | ||
THRC | Solaris Oilfield Infrastructure | Class A Common Stock | |||
Related Party Transactions | |||
Noncontrolling interest (as a percent) | 11.20% |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Pay vs Performance Disclosure | ||
Net Income (Loss) | $ 4,317 | $ 7,569 |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Mar. 31, 2024 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |