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Solaris Oilfield Second Quarter 2019 Results

Share Print Bookmark    |    Tuesday,July 30,2019

Solaris Oilfield Infrastructure, Inc. reported financial results for the second quarter 2019.

Second Quarter 2019 Highlights 

• Net income of $22.5 million, or $0.42 per diluted Class A share, for the quarter ended June 30, 2019, which includes a $0.01 per diluted Class A share write-off of certain unamortized debt issuance costs related to lenders under the 2018 Credit Agreement which are no longer parties to the 2019 Credit Agreement
• Adjusted pro forma net income of $21.2 million, or $0.44 per diluted share
• Adjusted EBITDA of $35.2 million for the quarter ended June 30, 2019
• Net cash provided by operating activities of $34.4 million for the quarter ended June 30, 2019
• Positive free cash flow¹ of $26.1 million for the quarter ended June 30, 2019
• Paid a regular quarterly dividend of $0.10 per share on June 26, 2019

Second Quarter 2019 Financial Review

Solaris reported net income of $22.5 million, or $0.42 per diluted Class A share, for second quarter 2019, compared to net income of $23.4 million, or $0.43 per diluted Class A share, in first quarter 2019 and net income of $21.4 million, or $0.40 per diluted Class A share, in second quarter 2018. Adjusted pro forma net income for second quarter 2019 was $21.2 million, or $0.44 per fully diluted share, which was down $0.4 million on a total dollar basis and down $0.02 per fully diluted share from first quarter 2019 and increased $1.5 million and $0.02 per fully diluted share compared to second quarter 2018. A description of adjusted pro forma net income and a reconciliation to net income attributable to Solaris, its most directly comparable generally accepted accounting principles (“GAAP”) measure, and the computation of adjusted pro forma earnings per fully diluted share are provided below.

Adjusted EBITDA for second quarter 2019 was $35.2 million, an increase of $0.1 million compared to first quarter 2019 and an increase of $5.1 million from second quarter 2018. A description of adjusted EBITDA and a reconciliation to net income, its most directly comparable GAAP measure, is provided below.

Revenues were $64.1 million for second quarter 2019, an increase of $9.0 million, or 16%, compared to first quarter 2019, and an increase of $16.9 million, or 36%, compared to second quarter 2018. The sequential revenue increase was primarily driven by an increase in last mile management, in addition to an increase in the number of systems deployed.

During the second quarter 2019, an average of 123 mobile proppant management systems were fully utilized, an 8% increase from the 114 fully utilized systems averaged in the first quarter of 2019, and a 14% increase compared to second quarter 2018. The sequential increase in fully utilized systems during the second quarter of 2019 was primarily due to system additions by both new and existing customers against a backdrop of a relatively flat frac crew count.

Capital Expenditures, Free Cash Flow and Liquidity

The Company invested $8.3 million during second quarter 2019, which included investments in its mobile proppant and chemical management systems. The Company currently has 164 mobile proppant management systems and 8 completed mobile chemical systems in its fleet; completion of the next 6 mobile chemical management systems has been delayed pending further design enhancements resulting from recent field trial learnings. The Company expects capital expenditures for the full year 2019 in the range of $40-50 million.

Free cash flow (defined as net cash provided by operating activities less investment in property, plant and equipment) during second quarter 2019 was $26.1 million, which represented the second consecutive quarter of positive free cash flow for the Company. Year-to-date 2019, the Company has generated $28.7 million of free cash flow.

On April 26, 2019, the Company amended its credit facility to increase the revolver to $50 million, with availability based on a total leverage covenant of 2.5x total debt to EBITDA. The amendment increases the company’s revolver size by $30 million and includes an accordion feature, which could increase total availability under the facility to $75 million. As of June 30, 2019, the Company had approximately $80 million of liquidity, including approximately $30 million in cash and $50 million of availability under its undrawn credit facility.

Operational Update and Outlook

Based on current industry activity levels, the Company believes it has approximately one third of overall U.S. wellsite proppant storage market share, which continues to represent the leading share. The Company expects to end the third quarter 2019 with 166 mobile proppant management systems with no plans for further fleet additions for the remainder of the year. The Company expects to have 14 mobile chemical management systems in the rental fleet once design enhancements have been integrated across all systems included in the first phase of its mobile chemical management system manufacturing plan.

CEO Bill Zartler commented: “The Solaris team was able to deploy systems with both new and existing customers in the second quarter despite a relatively flat US frac crew count as we continue to demonstrate the savings, efficiency and safety our solutions provide. Looking at the back half of the year, we expect our customers’ recent efficiency gains and commitment to capital discipline likely lead to softness in US completions activity. While Solaris will not be immune to these market trends, we believe we can offset some of these headwinds with additional customer wins as we remain focused on collaborating with customers to drive additional efficiencies on the well site.”

Quarterly Cash Dividend

On June 4, 2019, the Company announced that its Board of Directors had declared its third consecutive quarterly cash dividend of $0.10 per share of Class A common stock, which was paid on June 26, 2019 to holders of record as of June 14, 2019. A distribution of $0.10 per unit was also approved for holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC”).