Solaris Oilfield Infrastructure (SOI) Q4 Results - Feb 26

[dan_s]

SOI is a small-cap oilfield services company that has a pristine balance sheet, is profitable, has gained market share, and pays a nice dividend.

Fourth Quarter 2023 Summary Results and Shareholder Return Highlights

Revenue of $63 million

Net income of $7 million, or $0.14 per diluted Class A share; Adjusted pro forma net income of $7 million, or $0.15 per fully diluted share < Below my forecast of $8.6 million net income.

Adjusted EBITDA of $21 million

Generated $24 million of cash flow from operations and $16 million in free cash flow; reduced borrowings outstanding on the credit facility by $7 million < Free Cash Flow beat my forecast.

Returned a total of $47 million to shareholders in 2023 through share repurchases and dividends

Solaris’ fourth quarter 2023 dividend of $0.12 per share, which was paid on December 11, 2023, was a 9% increase from the prior quarter and represented Solaris’ third per-share dividend raise since initiation in 2018

Approved first quarter 2024 dividend of $0.12 per share on February 19, 2024, to be paid on March 21, 2024, which, once paid, will represent Solaris’ 22nd consecutive dividend < Over 6.2% dividend yield.

Repurchased approximately 85,000 shares for $0.7 million during the fourth quarter of 2023; from January 19, 2024 to February 9, 2024, repurchased an additional 1.1 million shares for approximately $8 million

HOUSTON, February 26, 2024--(BUSINESS WIRE)--Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) ("Solaris" or the "Company"), today announced fourth quarter and full year 2023 financial and operational results.

"2023 was a strong year for Solaris on multiple fronts. We generated positive free cash flow, raised our dividend per share twice, returned $47 million to shareholders through dividends and share repurchases and grew Adjusted EBITDA by 15% from the prior year as we built a fleet of new equipment and deployed more Solaris systems on the well sites we service," Chairman and Chief Executive Officer Bill Zartler commented.

"Looking to 2024, we expect to generate significantly higher free cash flow as we harvest cash from the organic investments we made over the last couple of years. We believe this additional cash flow should support continued shareholder returns and maintain our healthy balance sheet, while creating optionality in our long-term strategy for capital allocation, including organic and inorganic investments."

Shareholder Returns

On October 25, 2023, Solaris’ Board of Directors approved a cash dividend of $0.12 per share of Class A common stock, which was paid on December 11, 2023 to holders of record as of December 1, 2023, and a distribution of $0.12 per unit for holders of units in Solaris Oilfield Infrastructure, LLC ("Solaris LLC," and such holders "Solaris LLC Unitholders"), subject to the same payment and record date, or approximately $5 million in aggregate to shareholders. This represented a 9% raise in Solaris’ per-share dividend as compared to the third quarter of 2023 and the third dividend raise in Solaris’ history since initiation in 2018.

On February 19, 2024, Solaris’s Board of Directors approved a first quarter 2024 cash dividend of $0.12 per share of Class A common stock, to be paid on March 21, 2024 to holders of record as of March 11, 2024, and a distribution of $0.12 per unit to Solaris LLC Unitholders, which is subject to the same payment and record dates, or approximately $5 million in aggregate to shareholders.

Solaris repurchased 85,278 shares during the fourth quarter of 2023 for $0.7 million. From January 19, 2024 to February 9, 2024, Solaris repurchased an additional 1.1 million shares for approximately $8.1 million. Approximately $15 million remains in the current share repurchase authorization. Since initiating the repurchase authorization in the first quarter of 2023, Solaris has repurchased a total of 4.3 million shares of Class A common stock.

Pro forma for the announced first quarter 2024 dividend and share repurchases to date, Solaris has returned approximately $172 million cumulatively to shareholders through dividends and share repurchases since 2018, of which $47 million was returned in 2023. These shareholder returns also reflect a 20% increase in Solaris’ dividend per share since initiation and an approximately 9% net reduction in total shares outstanding over the last five years.

Free Cash Flow, Capital Expenditures and Liquidity

Free cash flow (defined as net cash provided by operating activities less investment in property, plant and equipment) after asset disposals was positive $16 million in the fourth quarter of 2023, including a working capital source of $4 million and capital expenditures of $7 million.

Capital expenditures in the fourth quarter of 2023 were approximately $7 million, down over 50% from the third quarter of 2023, and were primarily related to manufacturing of top fill systems. Capital expenditures for full year 2023 were $64 million and Solaris expects full year 2024 capital expenditures to be less than $15 million, an approximately 75% year over year reduction.

As of December 31, 2023, Solaris had $6 million of cash on the balance sheet. Solaris reduced net borrowings on the credit facility by $7 million and ended the fourth quarter of 2023 with $30 million in borrowings outstanding and $47 million of liquidity. Net debt (defined as total debt outstanding less cash) at the end of the fourth quarter of 2023 declined to $24 million compared to $34 million at the end of the third quarter of 2023.

[dan_s]

I keep SOI in the Small-Cap Growth Portfolio because it is a classic American Success Story. They "Built a Better Mouse Trap" and now they are #1 in managing frac sand during well completions.
SOI closed at $7.71 today.
My updated valuation of $13.60 is just 4X operating cash flow per share.
I expect more dividend increases this year because lower capex = more free cash flow.