Solaris Energy Infrastructure, Inc. Class A

Good morning and welcome to the Solaris Oilfield Infrastructure third quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone sign. To withdraw your question, please press star Please also note this event is being recorded. I would now like to turn the conference over to Yvonne Fletcher. Please go ahead.

Good morning and welcome to the Solaris Third Quarter 2022 Earnings Conference Call. I am joined today by our Chairman and CEO, Bill Zartler, and our President and CFO, Kyle Ramachandran. Before we begin, I'd like to remind you of our standard cautionary remarks regarding the forward-looking nature of some of the statements that we will make today. Such forward-looking statements may include comments regarding future financial results and reflect a number of known and unknown risks. Please refer to our press release issued yesterday along with other recent public filings with the Securities and Exchange Commission that outline those risks. I would also like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures Thank you, Yvonne, and thank you, everyone, for joining us this morning.

The Solaris team has delivered another strong quarter, and I'm proud to share the results with you today. During the third quarter, our fully utilized system count increased roughly 12% sequentially to 94 systems, and adjusted EBITDA grew over 14% to nearly $24 million. We paid our 16th consecutive dividend at the end of the quarter with $10 million of cash and no net debt. Last quarter, we spoke about how our investments in technology have increased both our earnings power and addressable market opportunity this cycle, and our results today continue to support that. We believe the 12% growth in our fully utilized system count outpaced the overall growth in the frack market as we deployed incremental systems to both new and existing customers due to our broader offering. We spent the last couple of years investing in technology and broadening our well site offering to include top fill solutions the auto blend unit, water and chemical silos, and a more sophisticated last mile service offering. Our goal with these investments is to provide additional efficiencies that complement the benefits already provided by our core sand storage offering. Each of these new technologies expands our total addressable market. Through our last mile services, we provide services for operator or service companies that prefer a bundled package including both sand storage and delivery. Through our top fill solutions, we have added new customers that have historically used boxes or other bottom drop solutions. And through our auto blend system, we provide efficiency savings for customers that are experiencing limitations with existing blender designs, as well as provide a reliable all-electric solution for many of the electric rack fleets coming to market. During the third quarter, approximately half of our net growth in total systems deployed was pull-through share driven by delivery of additional top fill units. Our top fill system provides a powerful combination of our reliable and industry-leading sand handling equipment with flexibility to use both high-capacity belly dump and pneumatic trucking. By using belly dump trucks, we can increase per truck payload, which drives a significant reduction in total truck miles per job. Trucking efficiency is also improved by faster unload times, which drives an increase in truck turns per day. The combination of increased payload and faster unloading times reduces the overall number of trucks and drivers required to supply sand to a well site. Fewer trips and fewer drivers lower overall trucking costs and operational risk for our customers. Safety is also improved by having fewer people on the road and on well sites. Some of the growth in the third quarter also came from customers who led us into the Rockies and Bakken where Solaris has historically had a smaller presence. The value proposition of using bottom-drop trucks in these regions can be greater than in many other areas as a result of higher payload allowances. Whereas in most basins we can reduce total trucked miles by up to 20%, in the Rockies and Bakken the reduction is even more significant, up to 35 to 40%. The trucking efficiency improvement is helping drive the backlog of demand for our top-fill technology in both existing basins that we operate in as well as historically untapped areas like the Rockies. We mentioned on our last call that nearly every customer that has a top fill system today has indicated plans to continue to use the system, and that continues to be the case today. Several of our customers have deployed multiple top fill units following initial trials with plans to continue to grow unit count. Based on the stickiness of current customers and the growing backlog of demand for these units, we believe additional investment in this technology is attractive. During the quarter, we added approximately seven fully utilized topfill units for a total of nine fully utilized topfill systems over the quarter. We expect to deploy additional units at a similar pace over the coming quarters. While it is always evolving, our near-term backlog indicates that one out of every three topfill units will drive pull-through sand systems that are currently not in use. For the fourth quarter of 2022, we expect continued pull-through demand for sand systems, which could be offset by a frack market that is expected to be flat to down due to normal seasonality around the holidays, resulting in a flat, fully utilized sand systems quarter over quarter. Turning to some of our other new technology efforts, we continue to test the ability of our full offering to handle wet sand, including modified sand silos, fluid silos, top fills, and auto blends. We believe we are close to finalizing the design of modifications for full field use in the near future. We also continue to be excited about the incremental efficiencies we can provide on well sites with our AutoBlend unit. During the third quarter, our blender revenue days were roughly the same, and we continue to see the benefit from increased automation, smaller footprint, built-in redundancy, enhanced safety, and all-electric design when compared to the downtime and costs associated with traditional blenders. We also continue to believe the new electric FRAC fleets coming into the market in 2023 provide an opportunity for continued auto blend deployment in addition to the adoption for conventional fleets. In summary, we're excited about the opportunity in front of us to grow our addressable market, profit, and return on capital through investments in new technologies that help our customers improve their operations. Solaris is uniquely positioned to grow organically at attractive returns while continuing to pay our dividend and maintain our strong liquidity. With that, I'll turn it over to Kyle for a detailed review of our financial results and guidance.