Solaris Energy Infrastructure, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Announced and closed the acquisition of Mobile Energy Rentals, renaming the company to Solaris Energy Infrastructure to reflect broader solution offering.
• Delivered strong service quality across legacy and newly acquired businesses.
• Third quarter results: $75 million in revenue, $22 million in adjusted EBITDA, with a 20-day stub period from Power Solutions in September. Returned $5 million to shareholders in dividends and announced a $0.12 per share dividend for the fourth quarter.
• Power Solutions segment integration and commercial opportunities advancing rapidly; running over 220 MW and signed contracts for over 80% of pro forma capacity.
• Solaris Logistics segment activity in Q4 expected to decline ~10% due to E&P budget exhaustion, but rebound in Q1 with customer wins. Free cash flow expected to inflect positively in the second half of 2025.

Segment Performance

• Solaris Logistics Solutions (legacy business): Generated revenue of $70 million in the third quarter with segment adjusted EBITDA of $24 million. Revenue was down 5% sequentially due to lower last mile trucking volumes and a slight decline in activity to 91 fully utilized systems. The segment generated $18 million of free cash flow in the third quarter. Expect activity to decline ~10% in the fourth quarter of 2024 due to seasonal factors but rebound in the first quarter of 2025.
• Solaris Power Solutions (acquired MER business): Represented by the acquired Mobile Energy Rentals, the segment was active for the final 20 days of the third quarter. Currently running more than 220 megawatts of power and has signed new customer contracts for more than 80% of pro forma capacity under 2-4 year agreements.

Guidance

• Fourth Quarter 2024: Total SG&A expected at approximately $9.5 million. Adjusted EBITDA预计 between $33 million and $36 million. Interest expense expected at ~$9 million, pro forma tax rate ~26%, pro forma diluted share count ~61 million shares.
• First Quarter 2025: Adjusted EBITDA expected in excess of $40 million due to quicker deployment of megawatts in Power Solutions and visibility from recent contracts.
• Capital Expenditures: Q4 2024 ~$130 million, Q1 2025 ~$75 million, Q2 2025 ~$75 million, Q3 2025 ~$15 million. Free cash flow expected to inflect positive in the second half of 2025.

Risks

• Tight equipment availability in the market impacting power deployment.
• Prolonged grid connectivity delays affecting the timing of power solutions delivery.
• Seasonal declines in activity for the Logistics segment due to E&P budget exhaustion.

Question and Answer

• Q: On mobile energy rental equipment availability and profitability per megawatt deployed.

A: Equipment availability remains very tight in the market, but pricing is flat to up. Profitability per MW is tied to market conditions and customer contract terms.

• Q: End market breakdown for Power Solutions.

A: Approximately 75% of power is in the data center market, with large hyperscale data centers and various energy companies as customers.

• Q: Options on turbine capacity and value of slots.

A: Slots are valuable and tied to customer demand. The team is working on medium-term solutions with OEMs for evolving power needs.

• Q: Additional capacity growth and contract line of sight.

A: Incremental orders are tied to customer needs. 15% of pro forma capacity is available, and confident in contracting remaining order capacity.

• Q: Natural gas requirements for the units.

A: Varies by unit; embedded in heat rates and specs. Competitive with alternative baseload power, especially with stranded field gas in oilfield applications.