Barclays CEO Energy-Power Conference Presentation September 6, 2018
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Barclays CEO Energy-Power Conference Presentation September 6, 2018
Disclaimer
Forward-Looking Statements
The information in this presentation includes “forward-looking statements.” All statements, other than statements of historical fact included in this presentation,
regarding our management, strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of
management are forward-looking statements. When used in this presentation, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project”
and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These
forward-looking statements are based on Solaris’ current expectations and assumptions about future events and are based on currently available information as to
the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements
described under the heading “Risk Factors” included in Solaris’ Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 6, 2018
and subsequent Quarterly Reports, including the From 10-1 filed with the Securities and Exchange Commission on August 1, 2018. We caution you that these
forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident
to the transportation, storage and delivery of proppant. These risks include, but are not limited to, the level of domestic capital spending by the oil and natural gas
industry natural or man-made disasters and other external events that may disrupt our manufacturing operations, volatility of oil and natural gas prices, changes in
general economic and geopolitical conditions, large or multiple customer defaults including defaults resulting from actual or potential insolvencies, technological
advancements in well service technologies, competitive conditions in our industry, our ability to fully protect our intellectual property rights and changes in the
long-term supply of and demand for oil and natural gas. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect,
our actual results and plans could differ materially from those expressed in any forward-looking statements.
You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this presentation. Except as otherwise required
by applicable law, we disclaim any duty to update and do not intend to update any forward-looking statements, all of which are expressly qualified by the statements
in this section, to reflect events or circumstances after the date of this presentation.
This presentation includes financial measures that are not presented in accordance with generally accepted accounting principles ("GAAP"), including EBITDA and
Adjusted EBITDA. While management believes such measures are useful for investors, they do not have any standardized meaning and are therefore unlikely to be
comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures should not be used as a replacement for, and
should not be considered in isolation from, financial measures that are in accordance with GAAP. Please see the Appendix for reconciliations of those measures to
comparable GAAP measures.
Industry and Market Data
This presentation has been prepared by Solaris and includes market data and other statistical information from third-party sources, including independent industry
publications, government publications or other published independent sources. Although Solaris believes these third-party sources are reliable as of their respective
dates, Solaris has not independently verified the accuracy or completeness of this information. Some data are also based on the Solaris’s good faith estimates, which
are derived from its review of internal sources as well as the third-party sources described above.
Trademarks and Logos
Solaris owns or has rights to various trademarks, service marks and trade names that is uses in connection with the operation of its business. This presentation also
contains trademarks, service marks and trade names of third parties, which are the property of their respective owners. Solaris’ use or display of third parties’
trademarks, service marks, trade names or products in this presentation is not intended to and does not imply, a relationship with Solaris or an endorsement or
sponsorship by or of Solaris. Solely for convenience, the trademarks, service marks and trade names referred to in this presentation may appear without the ©, TM
or SM symbols, but the omission of such references is not intended to indicate, in any way, that Solaris will not assert, to the fullest extent under applicable law, its
rights or the right of the applicable owner of these trademarks, service marks and trade names. 1
Company Snapshot
Ticker SOI (NYSE)
IPO Date May 11, 2017
Market Cap ~$800 million
Long-term Debt $0.0 million
2019 Consensus
4.3x
EV/EBITDA Multiple(2)
2019 Consensus FCF
11%
Yield(2)
Ownership (1) EBITDA Growth (2)
in $ millions $1 2 6
Management
1 7%
Float 54 % Yorktown
23%
$4 0
Other $7
6% $2
2015 2016 2017 2018E
(1) As of August 30, 2018
(2) 2018E reflects Consensus FACTSET estimates
2
Leading Independent Provider of Well Site Logistics
Solutions
Leading Well Site Storage and Delivery Systems Digitalizing the Supply Chain
Drive supply chain efficiencies through real time, remote
monitoring of proppant inventory across supply chain:
PropView® and Railtronix™
Fleet of 138 Mobile Proppant Management Systems that address Kingfisher Transload Facility
challenges related to the transportation, storage and delivery of High-capacity, unit train capable transload facility in
proppant Kingfisher, Oklahoma supporting STACK/SCOOP
Manufacturing capacity of up to 8 systems per month Underpinned with seven-year contract with leading
STACK E&P operator
Manufacture and rent Systems directly to leading E&P operators
and pressure pumpers
>95% of fleet deployed to customers with multiple Systems
Blue-chip, diverse customer mix, including leading E&P
companies and pressure pumpers
3
Solaris Has A Culture And History Of Innovation
Number of Systems in Fleet May-2018
Q1-2017 Reconciling
Key Events Urethane Fill Solution Deployed
Oct-2015
PropViewTM Pipe Extension
WTI Price
Deployed Jan-2018
Beta Deployed Non-
Q4-2016 pneumatic
Jul-2015 Deployed
Repurchased
First 12-pack
and
Deployed Dec-2017
Upgraded
sold Systems Railtronix
May-2015 Acquisition
First Central
Sep-2016
Conveyer Aug-2017
PropViewTM
Belt Built Kingfisher
Mobile App
Ground
Deployed
Mar-2015 Breaking
Redesigned Control
Apr-2016 May-2017
System Using
Dual IPO on
Allen-Bradley
Discharge NYSE
Deployed
Sep-2014
Acquisition of
Manufacturing Feb-2016
Facility and IP System
Tarping
Deployed
April-2014
License
Agreement with
Loadcraft
Solaris’ Has the Culture and Team to Constantly Improve Product and Service Offering
4
Solaris Active Across Lower-48
Solaris Currently has 138 Systems Operating Across Eight Basins
MARCELLUS / UTICA
ROCKIES
9
0 1
1
SCOOP/STACK
DELAWARE 18
3
40
BARNETT
MIDLAND
EAGLE FORD 0 1
25
27
9
35
HAYNESVILLE
13
22
9
9 2
Systems at IPO (May 11, 2017) Systems as of August 30, 2018
5
Diverse, Blue Chip Operator and Pressure Pumper
Customer Base
Select Operator Customers Select Pressure Pumping Customers
Solaris has a broad and growing customer mix
6
Growth Driven by Overall Market Growth
Combined with Technology Displacement
Well Site Sand Storage Systems by
Increasing Sand Intensity Levels Are Pervasive Technology Type (1)
MM Lbs MM Tons Traditional SandKing Traditional SandKing
technology has lost
14 30 share to boxes and
Total Proppant Demand (MM tons) Other New Technologies silos, with Solaris’
systems having the
Proppant per Well (MM lbs) fastest market
12 SOI
25 adoption rate
519
10
20
~450
8 399
15 25%
6 314
10 253
4
45%
5
2
0 0 30%
1Q14
4Q14
1Q16
4Q16
1Q18
1Q15
4Q15
1Q17
4Q17
3Q14
3Q16
3Q15
3Q17
2Q14
2Q16
2Q18
2Q15
2Q17
Source: Company data, Coras Research Dec-14 Dec-15 Dec-16 Dec-17 Current
(1) Reflects estimated marketed US Frac fleet count to approximate number of well site sand storage systems
7
Bringing Order to Chaos:
Solaris Versus Traditional Technology
Issues with Traditional Offerings
Inadequate on-site
inventory and offloading
Traditional Rolling
capacity Sand Kings Storage
Complicated operations
and expansive well site
footprint
Opaque inventory
information and limited
communication
HS&E issues, including
silica dust
Our Solution
Solaris’ Mobile Proppant Management System
Supply chain buffer
Solaris’
Greater storage and Solution
proppant accessibility
More accessible
unloading points
Enclosed system with
fewer moving parts and
dust suppression
Efficient use of space
Fully automated
Real-time data
8
Elegant Solution to a Complicated Problem
High Capacity Throughput
Simple, modern, fully-integrated control system
High volume input and output capacity
Mobile and flexible equipment
Supply Chain Savings Well Site Savings
Increased on-site inventory / Increased inventory stage
access to inventory execution efficiency
Built-in dust control
Increased truck offloading points
Lower labor requirements
Smaller truck fleet size required
to deliver proppant
Proppant inventory loss savings
Decreased truck demurrage
Reduced fuel requirements
Real-time inventory levels and
consumption rates Increased asset utilization
Seamless Rig-Up and Integration Simultaneous Belly Dump and Pneumatic Loading
Belly Dump Pneumatic
Truck Truck
9Proppant Logistics are Bottleneck Prone; In Basin
Sand Increases Need for Wellsite Inventory Buffer
Illustrative Solaris Data Illustrative
Proppant Flow 20 MM lb Completion Solution Proppant Flow 20 MM lb Completion
~10,000 tons of ~10,000 tons of
SAND MINE sand SAND MINE sand
IN BASIN / REGIONAL SAND SUPPLY CHAIN
NORTHERN WHITE SAND SUPPLY CHAIN
~100 railcars
RAIL TO BASIN
Lost buffer of inventory
along the supply chain
~10,000 tons of
TRANSLOAD throughput
STORAGE FACILITY
DELIVERY TO THE ~400 truck loads DELIVERY TO THE ~400 truck loads
and
WELLSITE PropView ® WELLSITE
~2.5 million lbs / ~2.5 million lbs /
6 silos; or PropView ® 6 silos; or
WELLSITE STORAGE ~5.0 million lbs / WELLSITE STORAGE ~5.0 million lbs /
AND DELIVERY 12 silos AND DELIVERY 12 silos
Solaris Provides Key Buffers and Data Along Supply Chain
10Value Proposition to Customers: Trusted Solution and Low Cost Insurance Policy Solaris System Costs
Our Patented Design
Two issued patents; two utility patent applications and one provisional patent application relating to Systems, services and other technologies
Silo Loading and Delivery Process Aerial View of System
Generator Dual Conveyor Belts Generator
Six to twelve silos per Gravity Silo
System Silos
Four fill tubes per silo
2.5 to 5 million lbs of
inventory available at the
blender
Base
unit
~50,000 pounds of
proppant per truckload
Shuttle Blender
Shuttle Conveyor Belt Conveyor Belt
Electrically driven belts
Single point of control for the entire system
12Digitalization of the Supply Chain
PropView®: Real-Time, Remotely Available Inventory Data
PropView® provides real-time inventory levels, both at the well site and remotely via any browser or Solaris’ App.
13Digitalization of the Supply Chain
PropView® + Railtronix™: Real-Time Inventory Data
The Railtronix™ / PropView® integration provides real-time visibility of proppant from source mine to well head
14Kingfisher Facility Fully Operational
New High-Capacity Transload Facility Long-Term Contract with Leading STACK E&P Operator
The only independent, high-speed, unit-train capable Seven-year agreement
transload facility dedicated to the STACK/SCOOP
Minimum quarterly proppant volume commitment provides run-rate
300 acres directly on the Union Pacific Railroad annual revenue of $13 million
Within 50 miles of 67 active horizontal rigs (1) Rail-to-truck operations commenced January 2018; dedicated unit
train loop and 30,000 tons of silo storage commencing August 2018
Began transloading service in January 2018
Completed phase one construction in July 2018 Customer is a multi-basin Solaris Mobile Proppant Management
System customer
Central to Current STACK / SCOOP Rig Activity Proximity to Operators’ Acreage Will Reduce Supply Chain Costs
50 mile
radius
100 mile 50 mile
radius radius
100 mile
Legend radius
Horizontal Oil Rig
Source: Baker Hughes North America Rotary Rig Count. Source: 1Derrick.
(1) Source: IHS Enerdeq, as of March 6, 2018.
15Kingfisher Facility Phase One Construction
Completed
300 Acres Central to the STACK/SCOOP Plays
30,000 Tons of Storage Unit Train Loop
Manifest Loop
Rail-to-truck Service
16Bringing Order to Chaos…Again
Solaris’ New Mobile Chemical Silo Systems
Chemicals, acid, friction reducer, biocide, etc. stored in multiple totes and iso-containers today
Replaced with 3 silos with inventory control and monitoring, precise flow measurement and improved HS&E
Footprint will be
reduced to three
Solaris silos
17Continued Growth in Solaris’ Financial Performance…
Quarterly Revenue and Revenue Days ($ in Millions) Q2 2018 Performance Commentary
$47 .2
2Q 2018 revenue and Adjusted EBITDA grew 31% and 37%,
respectively, versus 1Q 2018
$36.0
Growth in revenue and Adjusted EBITDA are primarily
$25.2 attributable to an increase in revenue days
$1 8.5
− 2Q 18 revenue days grew to 9,850, a 28% sequential
increase
− Average rental rates flat versus Q1 2018
3Q 17 4Q 17 1Q 18 2Q 18 Added 24 systems to the fleet in 2Q 2018
Revenue 4,564 6,146 7,673
Days: 9,850 − Ended quarter with 122 systems in fleet
Quarterly Adjusted EBITDA and Margin ($ in Millions) Capex ($ in Millions)
$30.0 $49.9
$44.9
$41 .2
$21 .9
$1 5.2 $27 .6
$1 1 .2
3Q 17 4Q 17 1Q 18 2Q 18 3Q 17 4Q 17 1Q 18 2Q 18
Ending
Margin: 61% 60% 61% 64% Fleet 59 77 98 122
Size:
18…Driven by Sustained Margins Over Cycles and
Secular Growth
100% 3 5,046 36,000
Sy stem Rental and Service Gross Margin / Adjusted EBITDA Margin %
90%
80%
7 5%
27,000
7 0%
70%
6 5%
62%
58% 59 %
60%
Rev enue Days
50% 1 6 ,712 18,000
40% 37 %
30%
9,000
20% 5,745
1 2%
10% 2 ,579
0% -
2015 2016 2017 Annualized 1H 2018
System Rental and Service Margin % Adjusted EBITDA Margin Revenue Days
(1)
(1) 1H 2018 revenue days, gross margin and Adjusted EBITDA margin annualized.
19Drivers of Solaris Growth in 2018 and Beyond
Leading well site storage and inventory management solution and continuing to grow, e.g.,
manufacturing up to 8 systems per month
Kingfisher Phase One completed July 2018. Opportunities to drive additional
volumes through facility
Continued integration and expansion of inventory management data solutions –
expansion of Railtronix and PropView offerings
R&D efforts to improve supply chain management and well site handling of other
well site consumables, including chemicals, friction reducers, etc.
Free cash flow generation in 2019…return to shareholders, fund continued growth and
M&A activity
20Appendix
EBITDA and Adjusted EBITDA Reconciliation
Three months ended, Y ear ended
($ in 000s) June 30, 2018 March 31, 2018 December 31, 2017 September 30, 2017 December 31, 2017 December 31, 2016 December 31, 2015
N et i ncome (l oss) $21 ,448 $1 3,41 5 $9,244 $7 ,406 $22,487 $2,803 $(1 ,37 3)
Depr eciation and amor tization 2,359 1 ,7 42 6,635 3,7 92 2,395
3,984 3,202
Inter est expense, net 26 27 97 23 22
71 84
(1)
Inc ome taxes 24,7 62 61 7 25,899 43 67
3,27 7 2,027
EBI TDA $28,780 $18,728 $36,391 $9,792 $55,118 $6,661 $1,111
IPO b onuses (2) 581 61 7 4,627 - -
307 588
Stoc k -b ased c ompensation expense (3) 1 ,039 7 95 2,21 1 1 27 64
939 925
(4)
N on-r ec urring cash b onuses - - - - -
- 1 ,67 9
Loss on di sposal of assets 47 41 498 - -
23 3
N on-r ec urring organizational costs (5) - - 348 - -
- -
Change i n payables r elated to parties
(22,939) (83) (23,022) - --
pur suant to tax r eceivable agreement (6) - -
Sand mi ni ng and terminal business
- - - - - - 446
dev el opment c osts (7)
N on-r ec urring supplier settlement (8) - - - - - - 38
(9)
Other 1 07 36 1 43 - -
- -
Adjusted EBI TDA $30,049 $21,923 $15,226 $11,198 $39,923 $6,788 $1,659
EBI TDA and Adjusted EBI TDA
Margins:
EBITDA $28,7 80 $1 8,7 28 $36,391 $9,7 92 $55,1 1 8 $6,661 $1 ,1 1 1
÷ Rev enue 25,204 1 8,47 8 67 ,395 1 8,1 57 1 4,205
47 ,1 55 36,01 8
EBI TDA Margin 61% 52% 144% 53% 82% 37% 8%
A djusted EBITDA $30,049 $21 ,923 $1 5,226 $1 1 ,1 98 $39,923 $6,7 88 $1 ,659
÷ Rev enue 25,204 1 8,47 8 67 ,395 1 8,1 57 1 4,205
47 ,1 55 36,01 8
Adjusted EBI TDA Margin 64% 61% 60% 61% 59% 37% 12%
(1) Income taxes include add back for federal and state taxes, including $22,637 in the three months and twelve months ended December 31, 2017 related to the Tax Cuts and Jobs Act.
(2) Stock-based compensation expense related to restricted stock awards with one-year vesting that were granted to certain employees and consultants in connection with the Offering.
(3) Represents stock-based compensation expense related to restricted stock awards with three-year vesting and options issued under the Plan.
(4) Certain performance-based cash awards paid in connection with the purchase of Railtronix upon the achievement of certain financial milestones.
(5) Certain non-recurring organization costs in 2017 associated with our IPO.
(6) Other income related to the change in payables related to parties pursuant to the tax receivable agreement includes ($21,936) related to the Tax Cuts and Jobs Act.
(7) Represents salaries and related expenses, professional fees, transactional costs, rent and travel expenses incurred in the development of sand mining and terminal assets, which expenses did not recur
in 2016.
(8) Represents reserve for deposits made to a supplier, the majority of which was recovered.
(9) Non-recurring transaction costs.
22System Rental and Service Gross Margin
Reconciliation
Six months ended Year ended
($ in 000s) June 30, 2018 December 31, 2017 December 31, 2016 December 31, 2015
System rental and service Revenue:
Proppant management system rental $62,532 $54,653 $14,594 $8,296
Proppant management system services 17,446 12,537 3,563 3,167
Total system rental and service revenue $79,978 $67,190 $18,157 $11,463
System rental and services operating costs:
Cost of proppant system rental 3,101 2,627 1,431 994
Cost of proppant system services 20,785 14,184 4,916 3,847
Total cost of system rental and services $23,886 $16,811 $6,347 $4,841
System rental and service gross margin $56,092 $50,379 $11,810 $6,622
System rental and service gross margin $56,092 $50,379 $11,810 $6,622
÷ System rental and service revenue 79,978 67,190 18,157 11,463
System rental and service gross margin % 70% 75% 65% 58%
23Margins Driven By System Design and Protected by
High Switching Cost
High Switching Costs Relative to Savings from
Margin Structure is Sustainable
Potential Cheaper Solutions
Low Personnel Requirement Risk of Switching is Material
Solaris rents proprietary Systems, but we do not Risk includes running out of sand or malfunctioning
operate the Systems equipment – causes delayed completions
TRAIN, MAINTAIN, MOBILIZE E&P companies: risk of higher well costs and
delayed revenue
Low Maintenance Spend Pressure pumpers: risk of fewer stages pumper per
day
Solaris’ equipment is not under pressure and has
minimal moving parts
More Than Just a Silo
Virtually 100% uptime with maintenance performed
in the field Customers rely on Solaris inventory data to manage
entire supply chain
Economies of Scale Alternative storage solutions not plug and play or
comprehensive supply chain solution
Solaris is the leading provider of next generation
proppant well site storage and inventory management
solutions (~30% market share today)
Growing fleet at up to 8 systems / month
Internal manufacturing model drives low
manufacturing costs and ability to iterate on design
modifications easily
24Solaris System Versus Containerized Solutions
Solaris System on “Postage Stamp” Size Location Containerized System on Location
Solaris System Containerized System
Maximum Storage on Location 2.5 Million Pounds 1.68 Million Pounds
Implied Proppant Storage per Square Foot 1,040 Pounds ~300 Pounds
Well Site Equipment 6 Silos, 2 Base Units, 1 Conveyor 40 Boxes, Rig Mats, 1 Conveyor, Min. 1 Forklift
Personnel Required to Operate Equipment 1 3–4
Proppant Offloading Method 24 Fill Tubes 1 Forklift
Truckloads Required to Complete a 25 Million Pound Well 520 ~595
Onsite Non-Truck Equipment Movements 0 ~2,380 Forklift Movements
Frequency of Non-Truck Equipment Movements
N/A Box Move Every 2.5 Minutes
During Fracing Operations
Fewer People, Less Moving Parts, Dust
HS&E Benefits Dust Reduction
Reduction
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