Solaris Energy Infrastructure (SEI) Q4 Results - Feb 22

[dan_s]

On February 21st Solaris Energy Infrastructure, Inc. (NYSE:SEI) ("Solaris" or the "Company"), announced significant continued momentum within its business, along with fourth quarter 2024 financial and operational results. < SEI gained 22.56% on Friday to close at $35.96, getting close to my valuation of $38.00.

Fourth Quarter 2024 Summary Results and Key Business Updates

Revenue – Revenue of $96 million increased 28% sequentially from the third quarter 2024 due to a full quarter of contribution from Solaris Power Solutions following the closing of the acquisition of Mobile Energy Rentals LLC ("MER," and such acquisition, the "MER Acquisition") on September 11, 2024, as well as continued activity growth within Solaris Power Solutions. < My Q4 revenue forecast was $100 million.

Profitability

Net income of $14 million and $0.19 per diluted Class A share; Adjusted pro forma net income of $7 million and $0.12 per fully diluted share < Beat my forecast of $6.08 million net income.

Total Adjusted EBITDA of $37 million

Cash Flow and Capital Expenditures – Net cash from operating activities was $13 million in the fourth quarter 2024, and capital expenditures were approximately $127 million, which primarily consisted of progress and delivery payments for power equipment. Net cash used in investing activities was approximately $115 million.

Balance Sheet and Liquidity – As of December 31, 2024, Solaris had $325 million in outstanding borrowings and $160 million in total cash, of which $46 million was restricted for certain growth capital expenditures. The year-end cash balance reflected the impact from the net proceeds of approximately $156 million from an underwritten public offering of 6.5 million shares of Class A common stock on December 11, 2024.

Power Solutions Growth Update – Recently secured an additional 700 megawatts ("MW") of gas-powered turbines with majority of deliveries expected to occur throughout 2026, bringing Solaris’ pro forma operated power fleet to approximately 1,400 MW by the first half of 2027. Total expected capital expenditures, including allowance for balance-of-plant and emissions control technology, associated with these orders are estimated to be approximately $600 million.

Establishing Long-term Partnership with Key Customer – New commercial contract for a minimum of 500 MW for an initial term of six years to support construction of a new data center; finalizing 50.1% / 49.9% Joint Venture with customer to co-own the power plant equipment for this data center

Guidance Update – The Company expects first quarter 2025 Total Adjusted EBITDA to be between $44 and $48 million and second quarter Total Adjusted EBITDA to be between $50 and $55 million < Compares to my EBITDA forecasts of $46 million for Q1 and $51.5 million for Q2 2025.

Shareholder Returns – Approved first quarter 2025 dividend of $0.12 per share on February 18, 2025, to be paid on March 21, 2025, to holders of record as of March 11, 2025, which, once paid, will represent Solaris’ 26th consecutive dividend and, combined with share repurchases, will result in a total of $198 million cumulatively returned to shareholders. < SEI is a "Strong Growth + Income" stock. The upside for the "Behind-the-Meter Power Business" is SIGNIFICANT.

CEO Commentary

"The fourth quarter of 2024 was our first complete quarter operating our new Solaris Power Solutions segment and the team continues to execute well on our strategy of using the stable cash flow from our Solaris Logistics Solutions business to help fund the tremendous growth opportunity for behind-the-meter power deployments across a variety of end markets," commented Bill Zartler, Solaris’ Chairman and Chief Executive Officer. "We continue to see an acceleration of demand for behind-the-meter projects and, to support this growth, we have secured approximately 700 megawatts of new power generation capacity, which will effectively double our operated fleet over the next two years. This additional capacity will allow us both to service growth from our current customer base as well as to continue to expand our offering with new customers."

"The Solaris Logistics Solutions segment has demonstrated a strong rebound in activity early in 2025 relative to the seasonal softness experienced in the fourth quarter. The increase in activity is due to continued market adoption of multiple types of Solaris systems on an increased number of well sites and a reset of completion budgets."

"We are excited with recent results from both business segments, the growing opportunity set we are seeing in the distributed power space, and the exceptional team and innovative culture that we continue to build. We believe we will continue to drive total shareholder value by growing the company, continuing to pay our dividend, and maintaining a balanced and attractive financial profile."

[dan_s]

I have increased my current valuation to $42/share, but at this point I will admit that my valuation is a bit of a Wild Ass Guess.

SEI is an engineering firm that has the potential for significant revenue growth. AI data centers much have reliable electricity, and they will pay any price to get it.

My current valuation increases to $42.00.

My updated forecast/valuation model has been posted to the EPG website.

[aja57]

Stock got slapped around today. Down 17% on 300% increase in volume. Looks like there is some concern for securities fraud investigation.

[dan_s]

Up more than 10% today on heavy volume.

When the stock price of a small-cap like this ramps up quickly ($8.30 to over $35.00 in less than 8 months), it is because buyers outnumber the sellers by a wide margin. Investors that buy a lot of the stock are wise to tighten up their stop loss orders to lock in those big gains. One large seller can trigger a selloff like we saw yesterday.

SEI has a highly respected management team.

Most of the law firms that start these "fraud investigations" are not highly respected.

In late February three highly respected energy sector analysts updated their price targets to $48, $50 and $57. None of the analysts that cover SEI have lowered their price targets.