Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) Q3 2018 Earnings Conference Call - Final Transcript

Nov 01, 2018 • 08:30 am ET


Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) Q3 2018 Earnings Conference Call - Final Transcript


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Good morning, and welcome to the Solaris Oilfield Third Quarter 2018 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation there will be an opportunity to ask questions. (Operator Instructions) Please note, this event is being recorded.

I would now like to turn the conference over to Yvonne Fletcher, SVP of Finance and IR. Please go ahead.

Yvonne Fletcher

Good morning, and welcome to the Solaris third quarter 2018 earnings conference call. I'm joined today by our Chairman and CEO, Bill Zartler; our President and CFO, Kyle Ramachandran; and our COO, Kelly Price.

(Forward-Looking Cautionary Statement)

With that, I'll now turn the call over to our Chairman and CEO, Bill Zartler.

William Zartler

Thank you, Yvonne and welcome, everyone. I'm pleased to share with you today another quarter of solid execution from the Solaris team. During the third quarter, we grew our adjusted EBITDA 21% sequentially to over $36 million by adding 24 systems to the fleet and growing revenue days by 20% quarter-over-quarter to 11,848 days. Our team was able to execute on this growth despite the industry backdrop of flattening frac market in the third quarter, which is a testament to the efficiency, reliability and value-add that our technology brings to our customers.

Our growth in a flat market implies that we were able to gain market share in the quarter. We estimate we currently have roughly 1/3 share of the US market in our Mobile Proppant Management Systems business. While we can't predict where market share will ultimately end up, we continue to see opportunities to place systems, both with existing customers, where our share is underrepresented as well as new potential customers, some of which have not tried the Solaris system because they have legacy contracts with other solutions, have not yet switched away from buying bundled services or the other proppant solutions that have worked fine in the past are starting to show shortcomings as the industry grows. We have systems deployed across the major US basins with exposure to both oil and gas production and recently mobilized two fleets to the Bakken.

I'd like to highlight a few industry trends that should continue to support growth for our business. First, the industry continues to shift a meaningful amount of its sand procurement away from Northern White to in-basin sand, which lowers the absolute amount of in-transit inventory and focuses the management of that inventory around the trucking piece of the value supply chain, which can be highly unpredictable. We believe that variability drives an increased need for inventory buffer on the wellsite as well as our advanced software solutions to improve real-time dispatching of trucks.

Second, we're also seeing a continued shift toward efficient and manufacturing-type development, including completion using, two or three well zipper fracs and multi-wellpad development, which speeds up the rate of sand consumption and drives the need for wellsite storage buffer and increased supply-chain visibility. The Solaris solution, which includes advanced software solutions and 12-pack configurations, are well suited