SEI earnings call analysis

NYSE:SEI Q1 2026 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Hi, and welcome to the Solaris Quarter 1, 2026 Earnings Teleconference and Webcast. All participants will be in 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 telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference to Yvonne Fletcher, Senior Vice President of Finance and Investor Relations.

Please go ahead. Yvonne Fletcher | Senior Vice President of Finance and Investor Relations

Thank you, Operator. Good morning and welcome to the Solaris First Quarter 2026 Earnings Conference Call. Joining us today are our Chairman and Co-CEO, Bill Zartler, our Co-CEO and Director, Amanda Brock, our President, Kyle Ramachandran, and our CFO, Steve Thompson. Before we begin, I'd like to remind you that some of the statements we will make today are forward-looking 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 like to point out that our earnings release in today's conference call will contain discussion of non-GAAP financial measures. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release, which is posted in the new section on our website. Additionally, we encourage you to refer to our earnings supplement slide deck, which was published last night on the investor relations section of our website under events and presentations. I'll now turn the call over to our chairman and co-CEO, Bill Zartler.

Bill Zartler | Chairman and Co-CEO

Thank you, Yvonne, and thank you, everyone, for joining us this morning. Solaris is off to an exceptional start in 2026. We are consistently executing across our current operations, successfully advancing our long-term growth strategy and growing our long-term business base. In power, we added two significant long-term contracts with two investment-grade global technology companies for over a gigawatt of contracted power generation capacity and, importantly, associated balance of plant equipment. We also closed two strategic transactions, which expanded our generation capacity over 40% to 3.1 gigawatts. We are now operating, constructing, and in the design and planning stage for multiple large behind-the-meter power projects for three distinct large technology companies for several different data centers. Building on our proven capabilities, this progress continues to confirm Solaris' strategy and leading project expertise. We also see a clear path to significantly grow our business further. While we focus on near-term execution, we are concurrently expanding our contracted power services scope to support the future growth of our high-quality customer base. We also continue to have active discussions for new projects with both current and new customers. We expect these diversifying and expanding relationships to result in meaningful incremental returns for Solaris. As we've now shown repeatedly, we will secure expansion generation capacity once we have visibility and confidence in contracting incremental capacity on a long-term basis. While we've seen that negotiating these initial complex commercial contracts can take an extended period of time to close, we are encouraged by the numerous additional growth opportunities we see with our current customers, as well as a general alignment toward a more standard contractual arrangement. We anticipated going forward that these additional opportunities will be more streamlined to contract. The broader power market continues to reinforce and support our strategy. The tailwinds we've been describing over the past several quarters remain the same, and several have strengthened. Grid interconnection delays have continued to expand, which, given the market's focus on speed to compute, has accelerated adoption of long-term behind-the-meter power solutions. Electricity affordability for residential grid customers remains at the forefront of every politician and community leader's minds. which reinforces the need for bring-your-own-power solutions like ours, and in some cases, is even essential to many communities. There is no question that behind-the-meter power solutions will play a significant role in the long-term powering of data centers and other large industrial power loads. Solaris' proven ability to deploy rapidly and compliantly, fully behind the meter, in island mode if needed, with the optionality of providing a cost-effective reliability-enhancing complement to the grid, continues to be a real differentiator. Our progress is a result of a power strategy that's not only working, but accelerating our growth, executed by a seasoned team that knows how to deliver. We've been clear about our power strategy, build a diversified, integrated power services and equipment company that can deliver what the market and our customers need, delivering turnkey solutions from the molecule to the electron, while also ensuring that our earnings stream is growing at attractive returns with improving long-term visibility. With approximately 3.1 gigawatts of secured power generation capacity, a growing exceptional customer base, and our demonstrated capability to deliver comprehensive behind-the-meter solutions to the industry where access to power is recognized as a key differentiator, we are well-positioned to see continued growth from here. With that, I'll turn it over to Kyle to walk through our commercial progress and strategic acquisition initiatives.

Kyle Ramachandran | President

Thank you, Bill, and good morning, everyone. As Bill pointed out, we've had incredible commercial success over the past couple of months. We now have over two gigawatts of power generation under long-term contracts with three different leading technology companies. Over half of that capacity was contracted in just the last two months with contract terms that have extended to 10 to 15 years. We announced our most recent long-term contract last night directly with an investment grade global technology company in which we will provide over 600 megawatts of generation with balance of plant for an initial 10-year term with an option to extend for an additional five years. We expect energization under this contract to begin ramping in late 2026. This most recent contract is in addition to the over 500 megawatt contract we announced in early February and the 900 megawatt state-wide joint venture that is currently under development. These customers selected Solaris as a trusted long-term partner because of our proven capabilities and the team we've built both organically and inorganically. We have a history of reliable execution demonstrated across multiple app-scale deployments, and these partnerships reinforce our reputation as a leader in this rapidly growing market. As Amanda will describe, these relationships are also expanding in scope well beyond generation, which further deepens our integration with customers and enhances the return profile of our contracted base over time. We've also continued to move decisively on the supply side to address the challenge we've been direct about. Demand for our solutions continues to outpace our committed and on-order capacity. On March 16th, we closed two highly strategic transactions, which together add approximately 900 megawatts of new natural gas fuel turbine capacity. The first was the acquisition of Genco Power Solutions, which will contribute 400 megawatts of incremental capacity between 2026 and 2028. including approximately 100 megawatts of currently operated and contracted capacity. The second was the purchase of 30 turbine delivery slots, providing approximately 500 megawatts of incremental capacity between early 2027 and 2029. Securing these near-term deliveries puts us in a position to serve customers on the accelerated timelines that they need. Both acquisitions also importantly meaningfully diversify our equipment supplier base as we develop relationships with multiple OEMs. As we grow toward and beyond 3,100 megawatts, working with multiple OEMs increases our operational flexibility, reduces exposure to any single supply chain, and gives us more options to configure capacity for varying customer needs. Outside of power, our logistics solution segment continues to perform well, Both our execution and demand for our services remained strong during the first quarter, and this momentum continues in the second quarter. Demand for our top-fill equipment now exceeds our deployable supply, and our forward-looking calendar is also equally tight. This business line continues to generate tremendous cash that we are reinvesting into the company. In summary, Q1 2026 was a quarter of successful execution, commercially, operationally, and financially. Our results, combined with our continued strategic efforts, building and diversifying our capabilities, positions Solaris extremely well for further growth through the remainder of 2026 and beyond. With that, I'll turn it over to Amanda.

Amanda Brock | Co-CEO and Director

Thank you, Bill and Kyle. Good morning, all. So building on our significant momentum, we want to share with you more about how we are anticipating market needs and leading with new initiatives. We're clearly delivering on our strategy to date, but as important as how we're innovating and looking to the longer term and evolving our business. Last quarter, we publicly announced our molecule to electron approach in response to a growing market need. Large technology companies are building out compute infrastructure at a speed and scale that creates many challenges, one of the most significant of which is power infrastructure. This includes not only generation capacity, but the power-related distribution, conditioning, storage, and management capabilities, as well as the equipment needed to supply fuel and minimize emissions. It became clear that our customers increasingly value a turnkey and rapidly deployable solution. Anticipating this need for a turnkey solution, we've added additional skills and strength to our core team with deep domain knowledge in these areas of expertise, as well as making initial key bolt-on acquisitions like Solaris Power Distribution Services. With these enhanced capabilities, we're in a unique position to deliver more than just generation in a time and capital-efficient manner, but we're adding significant value with enhanced project returns. Our most recent 600-plus megawatt agreement announced last night confirms our strategy and approach, which includes greater project scope, covering balance of plant and additional services in addition to generation. We will be developing and operating last mile gas delivery as well as natural gas fuel generation assets and the associated distribution storage and balance of plant infrastructure. This contract's broader scope means more capital deployed per site, closer integration with the customer's infrastructure, and depending on the capabilities we deliver, enhance returns over the contracted period. It also means that contractual relationships become more difficult to replicate and are more durable over time. We now have the capability to deploy at a speed and reliability level that the grid and traditional procurement channels will have difficulty matching. The demand for a turnkey integrated power solution extends well beyond the single agreement. Examples of our growing platform include, one, we're in advanced negotiations on adding enhanced scope as well as increased generation capacity to the long-term power contract we recently signed in February. We found that as customers evaluate specific sites and infrastructure requirements, the size and scope of our relationship and what we will be responsible for delivering to a project is growing. We are currently delivering balanced plant equipment and services at multiple existing data center and compute sites where we don't provide the generation, and even where the generation source may be the grid. We believe this increased traction is a result of our distribution capabilities and proprietary approach to power and power management. Three, while this is not part of our core offerings, we are being approached to provide consulting services to projects facing power challenges. These are customers to whom we may not provide power, but they come to us because of our technical depth which is now recognized across the market. And lastly, four, we are very excited that we've recently been asked by one of our large technology customers to participate in a pilot research program related to their development of mobile distributed compute where we are helping to design and provide expertise for balance of plant, and which could also eventually include generation. These are just several examples of opportunities that are incremental to our contractor generation base, and each one is enabled by the capabilities we've assembled over the past two years. The engineering, project management, and manufacturing teams that we've grown organically, and the distribution and control expertise we've acquired and continue to build on. Our team remains hard at work identifying and continuing to develop proprietary equipment, software, processes, and services to enhance the rapid deployment and functionality of our offering and the long-term solutions we can provide to the industry. So as we look forward, expect us to continue to innovate, investing in, and growing our capabilities. The broader our capabilities set, the more we can do for our customers, and the more deeply embedded we become in their infrastructure, and the better returns we will earn under long-term contracts. And the market need for power is not going away. This is the exciting long-term value proposition for Solaris, and we are confident in our ability to execute and continue to grow. I'll now turn the call over to Steve for a financial review.

Steve Thompson | Chief Financial Officer

Thank you, Bill, Amanda, and Kyle. Good morning, everyone. I'll begin with a review of our first quarter 2026 results. We generated revenue of $196 million and adjusted EBITDA of $84 million in the first quarter, coming in 22% higher sequentially and 79% higher year over year. These results reflect the operational momentum Bill and team described, and it's a strong foundation years. In power solutions, we operated more than 900 megawatts during the quarter, and adjusted EBITDA increased more than 30% sequentially to $72 million, driven by growth in revenue from both owned assets and third-party leased capacity. In logistics, we averaged 104 fully utilized systems, and segment-adjusted EBITDA was approximately $23 million, a 2% increase over the fourth quarter of 2025. Turning to our updated earnings guidance, For the second quarter, we're increasing total adjusted EBITDA guidance by 10% to $83 to $93 million, reflecting our confidence in near-term execution. We're providing initial third quarter guidance of $80 to $95 million, which reflects shifting power from temporary to permanent at the Stateline JV project and deliveries of new equipment in the second half of 2026 that are contracted and will begin earning revenue January 1, 2027. Looking beyond the next couple of quarters, the over 2 gigawatts of contract capacity we have in place provide line of sight into earnings and cash flow for the next 10 to 15 years. We are confident that we will see our contract capacity ramp as incremental opportunities are finalized. In our presentation, we lay out a scenario where total company adjusted EBITDA pro forma for all 3,100 megawatts delivered and operating could well exceed $1 billion annually. As the scope expansion opportunity that Amanda described continues to materialize, we see upsides to that amount. To put it in more concrete terms, any incremental capital we deploy for additional assets per site would be underwritten at returns consistent with our existing framework. That incremental deployment would layer directly into the baseline EBITDA I just described. This visibility into significant earnings growth from leading investment-grade customers credit capacity, and the balance sheet going forward. In March, we closed a $300 million credit facility, which we subsequently upsized to allow up to $200 million in additional borrowings, giving us meaningful near-term liquidity. With more than $1 billion of additional identified capital to be deployed in 2026 and 2027, we are evaluating funding alternatives which would allow us to execute our growth plan in an accretive manner and expect to provide further updates in the very near future. As we look forward, we are positioning Solaris to capitalize on an unprecedented power growth opportunity, a contracted earnings profile that continues to improve, a customer base making decade-long commitments, and an expanding scope of opportunities. I'm excited to be part of the team here, and I'm looking forward to helping the team execute on these plans. With that, we'd be happy to take your questions.

Operator | Conference Operator

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Please limit yourself to only one question and one follow-up. At this time, we'll pause momentarily to assemble our roster. The first question comes from David Arcuro with Morgan Stanley.

Please go ahead. David Arcuro | Analyst, Morgan Stanley

Oh, hi. Good morning. Thanks so much. Morgan. Well, congratulations on another contract here. I was wondering, you know, I guess the time to contracting seems to accelerate it in terms of your activity, I guess. I'm wondering if that's what you're seeing as the turnaround time. to securing new customers gotten more urgent? You know, how have those discussions changed in terms of the speed of execution?

Bill Zartler | Chairman and Co-CEO

Well, these have been banking for a while now, so they've taken a long time to get across the finish line to start with. Obviously, you know, when they're closed, it feels really good to have them done. And I think to the point we made on that is once you've agreed to general standard terms, I mean, this is an industry that this wasn't a conscious decision for them to want to do this. So, you know, walking through that and working closely with them to come up with a way that's a win-win for both has really been important. And, you know, it takes a while to get there. And once you're there, it kind of makes the evolution and growth of the relationship even easier and better going forward.

David Arcuro | Analyst, Morgan Stanley

Yeah, got it. Now that makes sense. And, you know, I was also curious – On the balance of plant business model, from here I'm wondering, do you plan to pursue that as a separate offering, or do you aim to, in most cases, combine it with generation? And I'm curious if you could touch on maybe how much you've deployed in terms of the balance of plant, the consulting services that you've mentioned in terms of that offering.

Bill Zartler | Chairman and Co-CEO

We're not going to get into numbers, but we see opportunities where we are using our expertise around balanced plants to put that to work where we're not doing generation. And I think that plays into the ability to handle multiple sources of generation as that evolves. Right now, our focus has been on the gas turbine supply of generation capacity, and we're integrating the mix of that. I think going forward, as we mentioned in the call, they're looking for a turnkey solution. And us providing everything from gas through the delivery of the electron into the building at the right voltage in the right way, whether it's a DC or an AC in the building, all of that is something that we can put into the mix and handle all that. So I think it will be a mixture. I think our ideal location would be where we do it all and manage the whole pod. And I think that does drive kind of capital per megawatt up and driving us per megawatt that we're delivering. And so it is a mixture. I think we're seeing all of it, and we'll continue to perform all of it.

Amanda Brock | Co-CEO and Director

David, what we're excited about is in the conversations that we've had and the contracts that we have closed to date, during those negotiations, as people understood what our capability was, their desire for that turnkey solution and increasing what they wanted us to deliver to the project was meaningful. And in the conversations that we are still having for future opportunities, we are seeing that same trend. As Bill said, turnkey solution, we want you to do more. And we certainly have proven that we can deploy quickly, that we can generate the power needed. And beyond that now, with the capabilities we've assembled, we do see that as a trend. But as Bill said, we have the ability to do more. Just generation, the ability to do it all, or in the cases that we've also laid out, the ability to just do projects where it's just distribution and doesn't include generation. It's a great platform for us to be offering.

David Arcuro | Analyst, Morgan Stanley

Yep, absolutely. Great.

That's helpful. Thanks so much. Operator | Conference Operator

The next question comes from Derek Pottaiser with Piper Sandler.

Please go ahead. Derek Pottaiser | Analyst, Piper Sandler

Hey, good morning. I just want to expand on David's question. You talked about the general alignment towards a more standard contractual arrangement, more streamlined to contract. Could you just provide maybe some further detail on these comments, and how we should think about you getting these power contracts over the finish line more efficiently moving forward?

Bill Zartler | Chairman and Co-CEO

Well, there's a lot of devil in detail in contracts, and we have built our businesses over the last 30 years around ensuring that we develop the right risk profile for us and the right delivery for the customer. And there's a lot of work that goes into that on both sides to ensure that both sides get what they need. I can say with assuredness that we have signed contracts that we believe don't have company ending liabilities in them. And I think they're very acceptable as we've fought hard for those positions and our customers have fought hard for other sides of that. But I think we've developed a standard I mean, when you're developing new kind of lines of businesses and they don't really have a standard contract developed for the industry, and we saw this in the water side, we saw this in the sand silo business, that we're forging new ground and developing the right contractual underpinning really does establish us as a leader and builds a relationship with the customers on what the profile of this business should look like for all.

Kyle Ramachandran | President

And I think one addition to that is through this process, I think we've really established tremendous trust. Our track record provides obviously credibility internally in these organizations that we've been there, done that in terms of providing this kind of resiliency. So I think not only have the terms come to a point where we've got a good form to move forward, but there's also over the course of those discussions, we've really established ourselves internally in organizations that don't have necessarily a, a long track record of doing these types of applications to support their compute needs. And so this is new ground for them, but I think we've demonstrated the credibility that's required to get them comfortable.

Amanda Brock | Co-CEO and Director

It's been helpful to refer to the uptime that we have had at projects where we're operating, and it makes it easier as a consequence to negotiate your uptime requirements in new contracts. You can actually point to actual operations.

Derek Pottaiser | Analyst, Piper Sandler

Right, right. That's very helpful. So just looking at your megawatts, counting them up between the three hyperscaler contracts, some are still in the energy patch. It seems like you had about a gigawatt of available capacity. How should we think about that as you deploy those remaining megawatts, whether that's expanding your current contract scope with one of the three customers or potentially going after customer number four?

Bill Zartler | Chairman and Co-CEO

I think it's going to be maybe a combination of all of the above.

Derek Pottaiser | Analyst, Piper Sandler

That's great. Thank you very much.

Turn it back. Operator | Conference Operator

The next question comes from Dave Anderson with Barclays.

Please go ahead. Dave Anderson | Analyst, Barclays

Hi, good morning. Just coming back to the balance of plant side of your business. How much of that two gigawatts plus you have under contract includes balance of plant? And previously you've talked about a potential 20% to 50% uplift from EBITDA from balance of plant. Looks like you're assuming in the presentation kind of the low end of that guy. So how do you get to the high end? Does it fluctuate depending on the capabilities delivered? Does it increase over time if you add storage? Just some more color on how that potentially works over the life of the contract.

Thank you. Kyle Ramachandran | President

Yeah, I think the 20 to 50% is still the right way to think about it. And you're correct. What we've alluded to in the updated numbers is, I'll say I'm at the lower end of that. And I think that speaks to the conservative nature of how we provide guidance. What we are articulating here is what is actually under contract signed to date. And what we have in the slide deck as well is an outline of another $800 to $1 billion of additional capex that we have very good line of sight of that getting contracted at $160 to $200 million of incremental EBITDA. So we haven't put it in as the, I think it's $875 to $925. It's sort of the outlook, if you will, that is excluded from that. But what we're articulating there is we don't have anything signed on that expansion beyond the current piece. but very good line of sight, just like we've done it on the generation side. So you're right in terms of backing into the lower end of the range based on what has been signed in the last couple of weeks, but we feel very good about the visibility that we have to expand that beyond that lower end of the range based on the visibility that we have. And yes, the final point is different customers have different needs and different approaches in terms of how they want to capitalize this as well. And so some of the customers, like in the state line instance, we're only doing generation. And as we look at the other two contracts, there's some shaping depending on the location and the customers as to what they want. But to be very clear, the generation itself requires all the balance of plant to make it all work. So we're either buying it capitalizing it and embedding it in the rate or the customer is doing it. And so it just depends on kind of what their framework looks like. The last two contracts include balance of plant.

Dave Anderson | Analyst, Barclays

Okay. Great. Thank you, Amanda. And if I could also just ask a non-power question, maybe give a little love to the side of the business. We don't hear a lot about outlook has obviously changed quite a bit now in the next 12 months. We hear a lot of talk about North America E&Ps picking up, oil prices structurally higher. How are you thinking about this business now strategically? Is this something you want to grow into? Are you considering divesting it? Or is this just kind of a nice cash flow stream that should really build over the next coming quarters and potentially years?

Bill Zartler | Chairman and Co-CEO

Thank you. Right now, it's a great business. It doesn't feel like time to monetize it. We continue to see customer growth and wins in that business. And the market in North America, as you mentioned, feels like we're on a bit of a an upswing. It may not be a rapid upswing, which is actually the better kind of slow roll into growing our production in North America is better than the spiky reactions. And so I think that the capital that's there in our customer base is very strong. And I think at this point, it's a great business for us to hold on to and evaluate as we go along. The cash is irreplaceable in a lot of ways today. And so we're enjoying that. And I think there's surprisingly been a significant number of engineering and operational synergies across the business lines that are underappreciated. The notion that we are extremely quick to solve problems on the oil field side of it, extremely quick to be able to mobilize and demode, all of those embedded skill sets and engineering talents have applied very, very well into the into the turbine industry as we and customers expect speed and want speed and speed wins and speed's important. That's something that really ports over from the oil field side of this very, very well in the culture and in the team.

Operator | Conference Operator

The next question comes from Derek Whitfield with Texas Capital.

Please go ahead. Derek Whitfield | Analyst, Texas Capital

Good morning, all, and thanks for your time. My first question Certainly congrats to you guys on your commercial success to date. It seems that your execution and balance of plant expertise is increasingly driving success for you. Maybe focusing on balance of plant, how should we think about how that could further evolve from the standpoint of your competitive offering beyond the typical transformer, switchgears, cables, etc.? ?

Bill Zartler | Chairman and Co-CEO

Well, I think it evolves a little bit on the life cycle potentially. I mean, obviously with the growing installed base of smaller turbines, the repair and maintenance function that we grow alongside of this is really important. And we're working hard to develop our own protocols and our own internal skills and capabilities to ensure that, you know, as these things, you know, they're going to have mechanical, they're mechanical things. And that means somebody's going to have to repair them from time to time. And so as we build up that skillset, fine training. Labor is a challenge. Building up our own labor training force across the board is really going to be an important element to how we grow. You know, from a balance of plant perspective, I think we have at this point, we're not going into the building and that's not an area where we will play, but everything from the building to ensuring that the gas is delivered and even if we need to and get a return on, you know, build small pipes into the into the facility for making sure that the gas is delivered in the way we need it, and then all the pressure control systems on top of that. So it's a pretty diverse offering, and we're thinking about the life cycle of this business as well, knowing that you're building something that's here going to be there for 10 to 15 to 20 years. You need to be able to take care of it.

Derek Whitfield | Analyst, Texas Capital

Great, and as my follow-up, and this is maybe for Amanda, regarding the pilot research program with one of your clients for the development of mobile distributed computers, Could you speak to how this came together and potentially the upside from this development as you see it today?

Amanda Brock | Co-CEO and Director

Yeah. We've obviously been working with that particular technology company. And when you become embedded in a company and they understand what your capabilities are, different teams get introduced to you. And that's exactly what happened here. We were introduced to another team that understood that we had distribution and design capabilities They asked us to look at a particular design they had for modular compute. We looked at it. We came up with some changes. It was an aha moment for them. And they said, great, could you please work with us on this project? So it's really a function of being embedded with a customer. We keep using that word. But once you are working with the customer and they see your capabilities and you get great attraction across the various departments and teams in that customer's company.

Operator | Conference Operator

Our next question comes from Bobby Brooks with Northland Capital Markets.

Please go ahead. Bobby Brooks | Analyst, Northland Capital Markets

Hey, good morning, guys. Thank you for taking my question. I was just curious first to hear on the customer conversations, just over the past nine months, have more potential customers entered the discussion or have the discussions just progressed to negotiations over that time from mostly the same group of folks that you were talking to, say, nine months ago?

Bill Zartler | Chairman and Co-CEO

I think that there are more customers really figuring out that the behind-the-meter strategy is going to be a very important part of their power supply for their data use. And so I think we have seen more direct customers. We've tried to focus on the end user. They're faced with quite an array of decisions on where to go put their data center and who to have build that part of it. And we've tried to be supportive of the ultimate end customer and focus on We'll put the power where you think you need it, when you need it, and allow that dynamic to be ruled. And it's been quite a dynamic. The big data users have had selection challenges in terms of where you put these data centers and the pushback from the public environment as well as the drive to provide your power with this has really led them to the final conclusion that we've kind of seen is that Bobby Brooks | Analyst, Northland Capital Markets: sites really appreciate that and and it was awesome seeing you secure another 900 megawatts in the quarter and some of those were buying cues in the slot right and so my question is do you see more opportunities to do that i ask that because it's my understanding there's a decent amount of what i'll call speculators in the queue of turbine backlogs that thought they could just kind of buy turbines and be a mini sei but they're now realizing that how much technical expertise is needed on the service side and that customers aren't interested in someone just dropping gen sets off without any of the service capabilities or the balance of plant power stuff that you've been touching on earlier. So I think there's more opportunities for you to buy those delivery slots that are more near term, but maybe I'm off base. So I just was curious to hear your thoughts.

Bill Zartler | Chairman and Co-CEO

Well, Bobby, you're hired as a sales guy. And that's exactly what, I mean, I think the notion that, you know, you can get in queue and, and, and buy all this stuff and be prepared to go put it to work as a powered land guy or as a data center developer. It's not that simple. And developing and proving and running a couple of sites now and developing how this goes really will matter. And I think that cleaning out, if you will, of the queue, I mean, that's exactly what we did in one case. And in some cases, it's not necessarily the fault of the person that bought the engines. They may have ended up with some sort of idea that you could put this in an area that the local folks were not going to let you put a data center. So, you know, we've seen some backlash publicly about where the data centers can go and where they can't go. And so, some of that is turning, you know, power back on the market. And, yes, we're positioned to be able to take that power on and put it to work in the time frames. And so, I think that that really goes to ensuring that we have all the balance of plant stuff with it, right? As Kyle mentioned, the generators, just the generator, you've got to have all the other kit with it, and that kit has some lead times and some expertise associated with it as well. So, you know, ensuring that what we ultimately deliver is a power electron to a data center requires a lot more than just a generation, and I think we're prepared to take advantage of that and then scoop up opportunistically where we see things coming up earlier in the queue that the customers are very interested in.

Kyle Ramachandran | President

And the real blue sky there is, as we've alluded to this morning, we are now partnered with three of the major leaders in this field. That puts us in a position to put that incremental capacity to work very quickly with groups that we're already working with.

Operator | Conference Operator

Our next question comes from Patrick Lett with Stiefel.

Please go ahead. Patrick Lett | Analyst, Stifel

Hey, good morning. It's Pat. I'm for Steven Jigaro. Thanks for taking the questions. Shifting to more near-term here, when we think about the third quarter gut, is there any color you can give about the power deployments there and makes the third-party assets and then any insights into deployment ramp into 4Q?

Bill Zartler | Chairman and Co-CEO

Well, I'll make a couple comments. One, we're building this business for 2030, 2029, and the quarterly ramp up here has been a pretty – steady and measured rate with a lot of mixed dynamics over the course of the last year, and I think we're going to continue to see that over the next several quarters as we ramp up. I think our, you know, where expectations of the third quarter are, I think that the market may have gotten a little exuberant about how quick things are rolling out. I think we're measured in our approach and have been generally conservative, but, you know, our long-term targets are there. The timing at which stuff gets put together, whether it's in You know, the first month and a quarter or the last month and a quarter swings the numbers still more meaningful than it should. As we grow into it, it won't. But we're in that growth phase that, you know, plus or minus a couple months does swing quarter-on-quarter numbers, which is really not our focus. Our focus is ensuring the long-term delivery of the numbers that we forecast.

Patrick Lett | Analyst, Stifel

Right, yeah. Okay, thanks for that. And then for the 500 megawatt contract, what sort of capacity should we think about this starting at beginning in 2027? And then just curious, like for the turbine delivery slots, are the prices and delivery dates sort of fixed there?

Amanda Brock | Co-CEO and Director

I'm on the turbine delivery slots. The prices are fixed. Delivery dates, we have an opportunity to move some up, which we are working on right now. So we, and again, as Kyle said in his prepared remarks, we've diversified and de-risked some of that supply chain by working with multiple OEMs. So we feel pretty good about our term deliveries, when to expect them, and certainly prices fixed.

Kyle Ramachandran | President

Yeah, the 500, they all go under contract at the beginning of the year, but there is a ramping of actual deployment based on the ramp in the data center. So it'll ramp throughout the course of 27 of actual spinning turbines, but they all go under rent under the dry lease convention that we alluded to when the contract was put in place. And then as they get deployed and start operating the sort of wet lease convention, including the equivalent of a fired hour charge comes in.

Operator | Conference Operator

Our next question comes from Jerry Rebich with Wells Fargo. Please go ahead.

spk14

Good morning. This is Kevin for Jerry Rebich. Just had a quick question on the quarter. Power Solutions revenue and EBITDA per megawatt both increased on a sequential basis from 4Q. Can you just walk through the moving pieces?

Bill Zartler | Chairman and Co-CEO

We had more equipment that we rented more of.

spk14

I'm not sure. On a per megawatt basis, sequentially.

Okay. Kyle Ramachandran | President

Yeah, there was some mixed impact there and some of the pieces of the new contracts that came into it.

Bill Zartler | Chairman and Co-CEO

Yeah, and if you have a – so using that per megawatt metric, as we mentioned earlier, if there's pure distribution that's being rented and it doesn't have a megawatt of generation capacity, that's going to show an infinite return on the megawatt. So we're really focused on a return on capital and earnings. So, yeah, the mixed shifts around there is going to move that metric around a little bit.

spk14

Understood, and then when we think about the capacity additions pipeline, how has that opportunity funnel change stayed the same versus the prior period?

Amanda Brock | Co-CEO and Director

In terms of the megawatts that we have available, I think as we've indicated, we are in detailed discussions with a number of parties, and I think Bill answered some of them are existing customers that we have signed up with, and some are new. So yes, there is a robust pipeline We're very happy to be in this position where we have got additional capacity to put to work. And if the past is an indication of the future, this is going to be, you know, another great outlook when we put this to work.

Operator | Conference Operator

The next question comes from Jeff LeBlanc with TPH.

Please go ahead. Jeff LeBlanc | Analyst, TPH

Good morning, Bill, Amanda, and team. Thank you for taking my question.

Operator | Conference Operator

Yeah.

Jeff LeBlanc | Analyst, TPH

I just had a quick one. With respect to the enhanced scope, how should we think about the lead times of the equipment embedded in your active pipeline?

Kyle Ramachandran | President

They're inside of the dates of the turbines, generally speaking, at the voltages that we're operating at. So the turbines and, quite frankly, the SCRs continue to be the long lead item in the scope. But as we're developing these projects with customers, we are sequencing the timing of placing purchase orders for all the long leads to ensure that we can meet the energization schedule that our customers have. But in general, the balance of plan where we are is still inside of where the turbines and SCRs are.

Jeff LeBlanc | Analyst, TPH

Okay. Thank you for the call. I'll hand the call back to the operator.

Operator | Conference Operator

Sure. The next question comes from Scott Gruber with Citigroup.

Please go ahead. Scott Gruber | Analyst, Citigroup

Yes, good morning. So last call, you discussed about a 20% to 50% uplift on the invested capital on these integrated projects. I want to double-check that the baseline for that uplift is against the $1.1 million per megawatt that's kind of been the blended average. And more importantly, how do we think about the return profile on the turnkey projects with greater scope? Just some color on how the payback evolves, if at all, with greater scope would be great.

Kyle Ramachandran | President

Well, I think, broadly speaking, Scott, the price of power is going up. OEM prices are going up. There's a recent big project announced by the White House in Ohio, and that's penciling out at roughly $3,500 per kilowatt as far as upfront capital. So our installed base, and even on an incremental basis, is very attractive relative to what the larger scale, longer timeline kind of opportunities are. So From a return standpoint, we still look at north of 20% unlevered returns as sort of our target. And I think with respect to the incremental megawatt going on the grid, we are still very attracted to the customers. So I think there will be puts and takes with respect to our incremental capital costs as OEM prices continue to go up, but there's a recognition within the customer base that that is just the cost of doing business at this point.

Scott Gruber | Analyst, Citigroup

Yep, yep. I appreciate that. And then, you know, as you push forward with these integrated solutions and you're now building diversity into your data center book of business, which is great to see, how do you think about the smaller oil and gas deals or any, you know, type of smaller deals in other verticals? You get... you know, end market diversity, you know, with those contracts, but you're locking in capacity. On shorter-term contracts, you know, with fewer calories attached, do you start to tilt away from those smaller kind of non-integrated projects, or do you still like that diversity in the book?

Bill Zartler | Chairman and Co-CEO

And we like, we love all of our children, Scott. No, I think the shorter-term contracts are going to be priced that way as well. So, I think that the portfolio will have a mixture of some shorter-term, longer-term, you know, and a little bit of open capacity for spot work here and there from emergencies and other places where you are going to get tremendous returns on capital. And so I think our business is going to be, you know, heavily weighted towards, from a magnitude perspective, long-term contracts with data centers or large industrial loads. And there'll be a small portion of that that's a little bit more spot and short-term that should see more attractive returns.

Operator | Conference Operator

The next question comes from Jeff Bellman with Daniel Energy Partners.

Please go ahead. Jeff Bellman | Analyst, Daniel Energy Partners

Hi. Good morning, everybody. You laid out how you're broadening into a much more integrated power platform. But I'm curious, as customers move towards these gigawatt and larger campuses, what's the hardest part of scaling your model? And I'm not asking for any specifics, but how do you decide what to build organically inside Solaris or outsource or partner with other providers?

Thanks. Bill Zartler | Chairman and Co-CEO

Well, one of the reasons we bought the distribution business was to have that in-house. And clearly we're not an OEM on transformers and switchgear and the things. So we are doing some of our own assembly work and e-house building and some construction things. And so I think it is a, a situation dependent on where we need to accelerate. I mean, we made an investment in a SCR manufacturing business earlier this year and see that as very strategic and building our relationship on that side as those are a bottleneck as well as the catalyst associated with the SCR. So I think we look at the set of equipment out there, recognize where we've got strengths and advantages, recognize where we don't, and use partner up in areas where they'll really be helpful to us and we'll be helpful to them in putting in all the work. So I think there's not really one-size-fits-all here. And obviously the bigger they are, the larger the footprint, the larger the people needs to do all the installation work and how we partner with various engineering firms and various other subcontractors to make it all work is really part of what we're doing on a regular basis.

Kyle Ramachandran | President

I think the overall sort of incremental generation source is evolving as well. And if we look at where we started, we were deploying 20 to 35 and a half megawatt units on a site. And now the incremental unit is roughly 16 and a half megawatts. And as the data centers themselves get larger, we can look at the shaping of the fleet as potentially evolving to include some larger units. We've got the 38 megawatt units going out to a data center in 2026. And so that shaping, I think, will also continue to evolve.

Jeff Bellman | Analyst, Daniel Energy Partners

Okay.

Okay. Thank you very much. Operator | Conference Operator

The next question comes from Don Crist with Johnson Rice.

Please go ahead. Don Crist | Analyst, Johnson Rice

Morning, guys. Thanks for letting me in. Just one question for me on the JV. As it bills out and starts generating more revenue, what is the source or what is the use of that capital that's going to come back to the JV? Is it to pay down debt or will you use that for, you know, cash flow to support the rest of the business? Just where is that cash flow going to go initially at least?

Kyle Ramachandran | President

Yeah, Don, there's debt servicing requirements down at the JV, interest and amortization. But beyond that, both ourselves and our partner in the JV, the reason that structure was put in place was to create the ability to distribute cash out of it. And so once the requirements on the debt facility with respect to interest and amortization are satisfied, all the cash is available to be distributed up to both Solaris and our partner. And so that will be available cash to continue to grow the business as all other sources of cash for us.

Don Crist | Analyst, Johnson Rice

Okay, so that can offset some of the CapEx requirements you may have in other places.

Derek Whitfield | Analyst, Texas Capital

Yes.

Don Crist | Analyst, Johnson Rice

All right, I appreciate it. Thanks. Good job. Thanks, Tom.

Operator | Conference Operator

This concludes our question and answer session. I would like to turn the conference back over to Bill Sartler for any closing remarks.

Bill Zartler | Chairman and Co-CEO

Thank you all for joining us today. Our first quarter demonstrated once again that our strategy is working. Our team is executing, and the company is growing quickly. We're building the company we described, a vertically integrated, behind-the-meter power business from molecule to electron, serving the data center and industrial market at scale. It's rewarding to see the milestones we're exceeding and progress we're making. A sincere thank you to all our employees, customers, and partners. Your dedication and trust are the foundation of everything we're building. We look forward to sharing our continued progress over the next quarter. Thanks again, and have a great day.

Operator | Conference Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. jsPDF 3.0.3 D:20260606090417-00'00'

NYSE:SEI Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good day and welcome to the Solaris Q4 2025 earnings teleconference and webcast. All participants will be in 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 a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Yvonne Fletcher, Senior Vice President of Finance and Investor Relations.

Please go ahead. Yvonne Fletcher | Senior Vice President, Finance and Investor Relations

Thank you, Operator. Good morning and welcome to the Solaris fourth quarter and full year 2025 earnings conference call. Joining us today are Chairman and Co-CEO Bill Zartler, our Co-CEO and Director Amanda Brock, our President, Kyle Ramachandran, and our CFO, Steve Thompson. 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. We also encourage you to refer to our earnings supplement slide deck, which was published last night on the investor relations section of our website under events and presentations. I would like to point out that our earnings release in today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable gap measures are available in our earnings release, which is posted in the news section on our website. For more details on the company's earnings guidance, please refer to the earnings supplement slide deck published on our website. I'll now turn the call over to our chairman and co-CEO, Bill Lertler.

Bill Zartler | Chairman and Co-CEO

Thank you, Yvonne, and thank you, everyone, for joining us this morning. 2025 marked a meaningful step forward for Solaris. we showed that we are successfully executing our strategy of growing and establishing a more diversified services and solutions business with accelerated earnings growth, improved long-term visibility, and multiple pathways for meaningful expansion. Through new products, services, and targeted investments, both organic and inorganic, we've strengthened our engineering, manufacturing, and operational capabilities. This has positioned us to deliver reliable, integrated power solutions to meet our customers' rapidly escalating needs. Coming out of 2025, we're serving a much wider customer base with active contracts and deployments now spanning multiple data centers, energy infrastructure, and diverse industrial and commercial end markets with generation, distribution, and full turnkey power. Our 2025 financial results highlight the success of our diversified strategy. Full-year 2025 revenue nearly doubled year-over-year to $622 million while adjusted EBITDA of $244 million more than doubled. Both of our power and logistics segments contributed meaningfully to these results. This is just the beginning of additional step change growth that we believe will accelerate through 26 and 27. Starting with our power solutions segment, which has become the primary growth engine for Solaris, power now accounts for roughly 70% of our earnings and is heading to 90% contribution as we've consistently grown the business, expanding our capabilities, the rapid demand growth for power, particularly to support data center compute needs. Our solutions have enabled customers to deploy power quickly and cost-effectively while delivering the operational reliability, high uptime, and efficiency they require, whether as an alternative or as a supplement to the grid. We've strategically positioned Solaris across the power lifecycle from molecule to electron. This integrated approach delivers true turnkey power for our customers. We can handle sourcing and delivery of clean natural gas at the right volumes of pressure, convert it through multiple generation sources, and manage the distribution, storage, and final delivery of electrons, all engineered as a cohesive system to meet the most complex and demanding load profiles. Our strategy has translated into commercial success with both existing and new customers. In 2025, we significantly expanded our partnership with our initial major data center customer. We finalized a 15-year joint venture and upsized the associated long-term power agreement for approximately 500 to 900 megawatts, providing greater visibility with substantial committed capacity for years ahead. We also acquired a specialty provider of voltage distribution and control equipment that has now been integrated into Solaris Power Solutions. This strategic acquisition has deepened our capabilities and accelerated market penetration, enabling us to deliver integrated equipment and engineered solutions to at least six different data centers across the U.S., as well as to numerous industrial and commercial sites. Building on our success, I'm excited to highlight a significant new long-term contracted customer, which further validates our strategy and reputation in the behind-the-meter power market. In early February, we announced a 10-year agreement with a five-year extension option to provide leading investment-grade global technology company with over 500 megawatts of power generation tailored to their compute needs. The initial 10-year term begins January 1, 2027, with energization targeted to be phased in at the beginning of the Q1 of 2027. This agreement validates our strategy of sourcing generation capacity in advance of a contract so that we can successfully deliver behind-the-meter power on aggressive timelines. We are actively working with this customer to deliver more services related to balance of plant equipment, such as full power control, storage and delivery infrastructure, engineering and site preparations. As we move forward, expanding our scope, we will deploy additional capital, which will provide Solaris with enhanced returns through the contracted period. We believe that we are well positioned to continue to work with this customer on behind-the-meter solutions to meet their growing compute needs. Underscoring the opportunity ahead, the four largest global technology companies have recently guided to combine capital expenditures exceeding $600 billion in 2026, focused primarily on data center infrastructure and computing. That's roughly a 70% increase from 2025 levels and nearly double the spending seen in 2024. With data center and compute power investments accelerating rapidly, Solaris is exceptionally well positioned to capitalize on the surging demand for reliable, scalable power. Our proven solutions enable us to partner effectively with leading technology companies who are contracting directly from behind the meter options to meet their urgent compute needs. I would also like to highlight the continued performance of our logistics solution segment, which is performing well and contributed over $80 million in free cash flow in 2025. In the fourth quarter, we saw activity levels for both the industry and Solaris increase, with Solaris success driven in part by increasing adoption of our top fill systems. Our top fill system utilization rate was in the mid-90% in the fourth quarter and now nearing 100% in the first quarter. This momentum is expected to carry through for the first half of 2026. supporting consistent utilization and margins while generating cash to fund our broader growth initiatives across the company. In summary, 2025 was a year of successful execution, which positioned Solaris for even greater success in 2026. We are extremely focused on delivering value for our customers and shareholders, and we're excited about 2026, which is already shaping up as another year of significant growth, new opportunities, continued execution, and results. With that, I'll turn it over to Amanda.

Amanda Brock | Co-CEO and Director

Thank you, Bill, and thank you everyone for joining us this morning. We want to spend a few minutes sharing with you how we see our opportunities evolving in the power sector. 2025 was a year of rapid change and significant tailwinds for the company. Our customer base expanded and we grew our capabilities to meet our customers' increased demand for turnkey behind-the-meter power. We focused not only on building on our proven track record in generation, but also distribution offering a comprehensive power solution, which we refer to as molecule-to-electron. We're strategically building our capabilities through organic growth and targeted acquisitions like HVMV-LV, which Bill mentioned, which has already exceeded expectations since closing last summer. This brings in-house expertise to design, manufacture, refurbish, sell, and rent specialized control and distribution equipment, such as transformers, switchgear, e-houses. And this also deepens our engineering expertise across voltages and related applications. The result is broader reach to data centers, industrials, utilities, and beyond, delivering tailored power solutions regardless of source or setup. For example, Solaris is now providing equipment and engineering support to customers where grid connections are delayed due to utility equipment and interconnection challenges. This type of diversification creates real value and expands our opportunity set significantly beyond just generation. We will continue to look for opportunities like this to expand our capabilities as a comprehensive provider of critical power infrastructure. As we evaluate opportunities across the power spectrum, emissions controls is another area of focus where Solaris has invested both organically and inorganically to enhance our capabilities. We view being best in class in emissions management as essential to our own operations and customer priorities. Organically, we've drawn on our growing internal engineering and manufacturing teams to refine and customize Selective Catalytic Reduction, or SCR, designed for improved flexibility and mobility. Additionally, we recently made a small inorganic investment in an SCR manufacturer, bolstering our ability to further integrate these technologies. Our emissions control technologies are well aligned with the EPA's recent subpart KKKK-A, Quad K, amendments to the new source performance standards. These changes provide clarification and support for operating modular and mobile turbines in temporary applications for up to 24 months, bridging the gap before permanent behind the meter air permits or grid connections are secured. Combined with our vertical integration, In emissions controls, this gives us significantly greater flexibility to deliver fast, reliable, and compliant deployments for our customers. We're continuing to see strong regulatory tailwinds from ERCOT, whose recent push to batch large load studies for requests over 75 megawatts is a necessary step forward to clearing the estimated 230 gigawatt cube backlog fueled by data center demand. However, it also spotlights the growing delays and scrutiny facing grid-based projects. Our rapid deployment behind the meter solutions mitigate these challenges for technology companies attempting to quickly deploy compute capability. Starting a project in island mode fully behind the meter can avoid significant delays associated with connecting to the grid. The growing demand for power Combined with these regulatory tailwinds, our demonstrated track record of execution and our expanded capabilities have accelerated our ongoing discussions with multiple end users to deploy more capacity. We're in advanced negotiations to contract our remaining open capacity and are actively pursuing new capacity additions to support incremental opportunities. Simply put, We believe we have more demand than we have capacity and are actively exploring innovative ways to access new capacity to ensure we can meet the growing needs of all our existing and potential new partners. We are particularly encouraged by the accelerated pace of these opportunities and the credibility we have earned through nearly two years of successful at-scale operations, including the rapid commissioning of multiple large data centers. This proven foundation gives us a clear edge as we scale further and continue to grow in the coming years. With that, I will turn the call over to Kyle for a detailed financial review.

Kyle Ramachandran | President

Thanks, Bill and Amanda, and good morning, everyone. Solaris' fourth quarter demonstrated solid execution in our power solution segment, as well as continued execution and strong free cash flow generation in our logistics solution segment. For the full year, Growth was tremendous across the Power Solutions platform, and we're excited to continue to grow this segment as well as the total company. 2025 was also a year in which we strategically positioned Solaris for growth from a financing perspective. We strengthened the balance sheet by using capital from two convertible bond issuances, established financing for our joint venture partnership with a key customer, and repaid our 2024 term loan. The combination of these activities has driven significant interest cost savings and financial flexibility for the company. As a result of these recent financings and the ongoing cash flow generation from the business, we are currently fully funded for all of our expected deliveries to reach 2,200 megawatts of power generation. We expect to have pro forma for all the scheduled equipment deliveries. This leaves our secured borrowing capacity outside of the JV completely available as an option to fund future growth outside of our planned deliveries. Our financial profile has also improved significantly with our recent commercial success. Adding a new investment-grade customer for a minimum 10-year term for over 500 megawatts adds significant visibility to our earnings and cash flow profile, providing additional financial flexibility. Turning now to a review of our fourth quarter results and our outlook for the next two quarters. During the fourth quarter, Solaris generated revenue of nearly $180 million and adjusted EBITDA of $69 million on a consolidated basis. Our adjusted EBITDA increased slightly from the prior quarter and nearly doubled as compared to the same quarter of 2024, driven by the acceleration of our power solution segment. During the quarter, logistic solutions benefited from an increase in completions activity, as well as a continued adoption of our top-fill solution, which more than offset a modest decline in power solutions due to a less favorable project mix and related timing impacts on costs. We generated revenue from approximately 780 megawatts of capacity during the fourth quarter, relatively flat with the prior quarter. Segment adjusted EBITDA from the power solutions segment was $53 million, a modest decrease from the third quarter due to costs associated with timing and mix impact. as owned generation units rotated off a utility resiliency project and into planned refurbishment before being redeployed under a long-term contract in the first quarter of 2026. This impact was more than offset by an increase in the continued selective use of third-party power generation capacity as activity continued to ramp at our second data center site, which also contributed to a lower margin base. We expect power segment adjusted EBITDA for the first quarter to increase by more than 20%, as both owned and third-party lease capacity generating revenue should increase. In our logistics segment, we averaged 93 fully utilized systems, an increase of 11% from the third quarter. Fourth quarter segment adjusted EBITDA was approximately $23 million. We expect our logistics segment adjusted EBITDA to remain relatively flat for the next two quarters. Netting these factors and considering corporate and other expenses, total adjusted EBITDA guidance for the first quarter is now $72 to $77 million, up from the prior guidance of $70 to $75 million, and a sequential increase in the fourth quarter. We are also introducing our second quarter, 2026, total adjusted EBITDA guidance of $76 to $84 million. Accounting for expected longer-term tenor expenses, on our fully delivered 2,200 megawatt generation capacity and our recent acquisition, we continue to expect pro forma total company earnings of over $600 million before considering any additional project scope or growth with our existing customers or new opportunities. Finally, I'd like to introduce and welcome Steve Tomset, who officially joined earlier this month as Solaris' new Chief Financial Officer. Steve brings a strong record as a financial executive with deep expertise in capital markets, building and leading high-performance finance and accounting teams, and guiding companies through periods of significant transformation and growth. Many members of our management team, board, employees, and investors have worked with Steve before, and we are confident he will exemplify the Solaris culture and deliver substantial value to the company. I am excited to continue as president of the company and will be able to allocate increased focus on our strategic priorities of advancing our overall growth strategy strengthening operations, and driving long-term value for our stakeholders. With that, we'd now be happy to take your questions.

Operator | Conference Operator

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. To ask a question, you may press star then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question will come from David Arcaro with Morgan Stanley.

Please go ahead. David Arcaro | Analyst, Morgan Stanley

Oh, hi. Thanks so much. Good morning. Good morning, Dave. You know, congratulations on the new customer announcement here, but I do have to ask, where do negotiations stand with additional customers now to allocate your remaining capacity, if you could elaborate on that, and what potential timing might be possible?

Bill Zartler | Chairman and Co-CEO

Well, we're in very active dialogue, and I think it keys up the discussion. We really have the history and operating philosophy of focusing on announcing deals when they're completed and done. The pipeline is extremely active. We have lots of paper flying back and forth with multiple customers, but our goal is to deliver to the public and to our shareholders signed and completed contracts that have a lot of meat in them. So the dialogue is active, and we feel very confident that we've got plenty more demand and supply, as Amanda referred to, and that we'll be seeing things unfold in due time.

Amanda Brock | Co-CEO and Director

David, these are not discussions. We were very, you know, deliberate in our wording. These are active negotiations. So, we expect to have, you know, good news here in the near future.

David Arcaro | Analyst, Morgan Stanley

Okay, excellent. Understood. That makes sense. Then I was curious, you know, you had mentioned, increasing scope here that you are seeing opportunities for. I'm wondering if you could just maybe characterize how much of a value uplift you could realize, you know, relative to maybe like the EBITDA stream and the baseline power offering, if you're starting to consider those things like balance of plant emissions control, et cetera. And wondering if that could apply to your current contracted fleet as well. Are there kind of almost upsell opportunities there?

Bill Zartler | Chairman and Co-CEO

Yeah, I think that the notion of adding additional distribution equipment and battery systems to the offering is real. I think with the current customer that with the most recent announcement, the intent is to build out that system and deliver a full turnkey power service. So as that develops, we continue to believe return on capital is the way we look at that and that return on incremental capital will be there. And I think the range is anywhere between 20 and 50%. how far upstream to the gas handling it goes and how far downstream to the actual distribution and transformation of the power goes.

David Arcaro | Analyst, Morgan Stanley

Got it.

Okay. Thank you so much. Operator | Conference Operator

Our next question comes from Derek Whitfield with Texas Capital.

Please go ahead. Derek Whitfield | Analyst, Texas Capital

Good morning all and thanks for your time and also congrats on your recent hyperscaler contract. Perhaps, Amanda, in your prepared remarks, you noted you're in advanced negotiations to contract your remaining open capacity and are actively pursuing new capacity additions to support incremental opportunities. Regarding the new capacity, are you attempting to solve for new capacity in 2027 or early 2028? And then secondly, is that really to expand with your current customers or is it really to add a third hyperscaler to the opportunity set?

Amanda Brock | Co-CEO and Director

Thanks for the question, Derek. And yes, capacity is something we've been talking about for a long time. We made it very clear that the 2.2 gigawatts was not where we were going to stop. We also, as you know, have talked about through all of our acquisitions, got a lot of domain knowledge through MER and HV in terms of where there is additional capacity. We are looking and have line of sight for additional capacity in 27 and 28, and this capacity will be for additional opportunities. We have enough capacity for the opportunities that we have signed up for at this time, even though we also expect that to expand over time.

Derek Whitfield | Analyst, Texas Capital

Terrific. And then maybe, Amanda, just staying with you, on EPA's recent Quad K amendment, it seems like a very positive development for your business and speed to market. How should we think about its practical impact for what you're facing today? And while I understand permits aren't your issue per se, there has been some noise or concerns around the Mississippi operation. So I guess in your view, A, What's your view on the business impact with Quad K Amendment? And then secondly, how are you thinking about what's taking place right now in Mississippi and if that will likely take the same direction that Memphis did?

Amanda Brock | Co-CEO and Director

So Quad K is a clarification and further sort of enabling certainty. So it comes up as a regulatory tailwind. We see this as something that we expected to come through. We were very pleased to see the 24 months So expanding the temporary ability to be there from 12 to 24, that is certainly something that very much favors the behind-the-meter options and alternatives that we offer, particularly in an environment in which speed to compute is incredibly important. So this is great for us, having this clarification. In terms of Mississippi, we really don't comment on that. And moving on to another question, where you refer to our responsibility from a permit perspective. I will say that we track that very carefully, and there are circumstances in which we are in discussions where we will, at certain locations, work with our customers as it relates to ensuring that the appropriate permits are there. Customers are increasingly asking us to take on additional scope. We are talking about this as molecule to electron. In Bill's remarks, he referred to doing more on the gas side. And obviously, as part of that, we may be doing more on the permitting side. So Quad K, great tailwinds for us.

Derek Whitfield | Analyst, Texas Capital

Great update.

Thanks. Operator | Conference Operator

Our next question comes from Bobby Brooks with Northland. Please go ahead. on behalf of Bobby Brooks\ Hi. Good morning. This is Keaton Shokey on for Bobby. Other companies have been providing or planning to provide behind-the-meter power, have come out with or announced targets on where their fleet capacity will grow to. For example, they might be at 100 megawatts today with another 300 megawatts ordered, but they've talked about getting to a full gigawatt. Yes, can you hear me? Alfred, can you hear us? Yeah, can you hear me? Can you hear me?

Operator | Conference Operator

I'm able to hear everyone. on behalf of Bobby Brooks\ Can you hear me?

Operator | Conference Operator

Yes. on behalf of Bobby Brooks\ Okay.

Operator | Conference Operator

Operator, can you hear us? Yes, I'm able to hear you.

spk00

Really, you shut down? on behalf of Bobby Brooks\ What are your thoughts on those targets? We can't hear anything.

spk00

They're saying they Operator | Conference Operator: Pardon me, ladies and gentlemen. It appears the speakers have lost connection. Please stand by while we reconnect them.

Derek Whitfield | Analyst, Texas Capital

um ¶¶ ¶¶ ¶¶ spk09: Thank you for standing by.

Operator | Conference Operator

We will now proceed with the Q&A session. Our next question comes from Bobby Brooks with Northland.

Please go ahead. Bill Zartler | Chairman and Co-CEO

No, it's Keaton. Keaton, are you there? Sorry, we lost all communications, but we're back. Can you hear us? on behalf of Bobby Brooks\ Yes, I can hear you.

Thank you. Bill Zartler | Chairman and Co-CEO

All right, so please repeat your question. Thank you. on behalf of Bobby Brooks\ Yes. Other companies providing or planning to provide behind the meter power have come out and announced targets to where their capacity will grow to. For example, they might be at 100 megawatts today with another 300 megawatts ordered because they've talked about getting to a full gigawatt by 2030. What are your thoughts on that, firstly? And then secondly, could you discuss maybe how you think about your capacity evolving through the end of the decade?

Bill Zartler | Chairman and Co-CEO

That's a good question. I mean, I think I alluded to it a little bit earlier. I mean, the pipeline of opportunities is just giant. And, you know, would we have come out when we bought MER two years ago and said we'd be at two gigs now? We didn't do that, but we did it. So I think our philosophy on how we operate is communicate to our shareholders when we have deals across the finish line and not spike the ball too early. But the pipeline of opportunities and the opportunities that is very large. I'm very confident that we will have more than we have today in a couple of years. And if you look forward, it continues to grow. There's a lot of tailwinds both in how power should work in this country for these large loads and what the right mechanical setup is for that generation behind the meter. And I think we'll play a significant role in how this evolves with our how to position this, how to position it within the greater power infrastructure and ecosystem to enable it to be there for the development of data centers as well as trying not to impact consumer pricing in a negative way.

Kyle Ramachandran | President

Yeah, and just to follow up, and we alluded to the note on the call around the hyperscalers capital spending, but this is a massive investment cycle, and we've got really attractive opportunities to build infrastructure to support their underlying investments at rates of returns that are very attractive to us under long-term contracts. And to the last point Bill made there, clearly last night in the State of the Union, affordability with respect to energy prices broadly is paramount to the administration as well as to the consumer. And I think what's very clear here is what we're offering is both economically attractive relative to the long-term costs of adding additional power onto the grid. And secondly, from a time-to-power perspective, it's a really valuable strategic opportunity for our customers to have in their quiver. on behalf of Bobby Brooks\ Great. Thank you for that very helpful additional color. And then secondly, for another follow-up, it was great to see the 500 megawatts come off the board with an investigative technology leader. What I was curious to hear was if you could provide any further color around how the deal came to fruition and the associated timeline of that deal.

Bill Zartler | Chairman and Co-CEO

Well, I mean, every deal, every transaction has its own life cycle. I think we've been in communication with most of the major customers for the past six months to a year, and they evolved, their needs have evolved, and the recognition of where they need, you know, kind of takes a while. These are big decisions. So at the end of the day, you know, the contract tender length requires a high level of approval within a very large organization. So we're nimble and quick and we'll go at the pace at which our customers can go and need the power. So, you know, they, I would on average say that the industry would agree they're taking slightly longer to put together than anyone might've expected, but they're happening and deals are closing.

Kyle Ramachandran | President

And we've been, you know, at this, strategy in operation for roughly two years, and I would say the first year was certainly in stealth mode, and more and more of the sort of track record that we've developed is being well understood by the other participants in this market, and so that has just been a process for that track record to get unfolded, and I think that's really resonating with customers.

Bill Zartler | Chairman and Co-CEO

Yeah, and philosophically, our notion of under-promising and over-delivering, both from a delivery of information to the street as well as from an operational perspective. Our operational capabilities and engineering capabilities and execution capabilities have informatically improved as we've built that out over the last year. So that gives us a lot more confidence on how we build out the balance of plan and how we deploy the equipment.

Amanda Brock | Co-CEO and Director

Keaton, to be a little specific, we do make the comment that these conversations are accelerating as people are looking at sites, as people are getting comfortable in island and mode. you know, complex deals, but we've been dealing directly with the hyperscalers themselves, which is an advantage, and these deals and the timelines are accelerating. on behalf of Bobby Brooks\ Great. Great to hear. I'll return to the queue.

Thank you. Operator | Conference Operator

Our next question comes from Derek Todhazer with Piper Sandler.

Please go ahead. Derek Todhazer | Analyst, Piper Sandler

Hey, good morning, everybody. Just wanted to go back to the capacity expansion commentary. Obviously, I know you need more than the 2.2 gigawatts than you have today, but maybe on the funding side, just how should we think about the funding mechanisms that are available to you? You obviously noted that you freed up your secured borrowing capacity, but just thinking about as you progress towards 3 gigawatts, 4 gigawatts, wherever that target may migrate over time, maybe just help us understand further as far as what funding we can expect as we continue to push the capacity targets higher.

Kyle Ramachandran | President

Yeah, I think we really cleaned up the balance sheet quite well at the end of last year and added significant liquidity into the system. That liquidity is already proving to be very advantageous from a strategic execution standpoint. We did that last year, obviously, with a couple of convertible bonds. As the maturity in the contract profile continues to grow and the notion of potentially multiple investment-grade counterparties. I really think the secured financing options for the business, both in the bank market as well as the sort of term debt market, are ample. Bringing in Stephen has been a huge help with that regard. Stephen's got extensive experience in getting out, getting rated, getting notes issued on behalf of companies. And that bandwidth is critical for us as we look at the long-term opportunities for us to finance the business. So I think, you know, as we look at it going forward, we've got really attractive cost of capital options relative to where we've been over the last couple of years.

spk09

John? That's just going to accrete to the bottom line.

Derek Todhazer | Analyst, Piper Sandler

Got it. Okay. No, that's great. I appreciate the color. And then maybe thinking about the integrated power solution, you've talked about molecule to electron. Just thinking about how you optimize your turnkey solution with the grid longer term. Obviously, we're behind the meter. We're island power today. But maybe longer term, how do you think about it potentially integrating with the grid longer just say as we move further into the 2030s, just how do you see your turnkey solution evolving as an integrated strategy and optimization with the grid over a longer period of time?

Bill Zartler | Chairman and Co-CEO

Well, we certainly believe that that will be potentially excess power ability at times to move back into the grid, complicated interconnection agreements and all that stuff. Mechanically, we have supported the grid in many ways with our equipment before, so we know how to form to the grid and perform all that. It's a matter of working closely with the utility and the regulators to ensure that what we can provide from the interconnection agreement. What we focus on today, however, is getting that power up and running at speed. The timing for those agreements is not fast, but over time, we do think it may evolve that direction.

Derek Todhazer | Analyst, Piper Sandler

Great. Appreciate all the color.

We'll turn it back. Operator | Conference Operator

The next question will come from Scott Gruber with Citigroup.

Please go ahead. Scott Gruber | Analyst, Citigroup

Yes, good morning. Good morning, Scott. Good morning. I'll let go there. Congrats on the latest contract. So how do you think about getting back into the queue for additional equipment? Do you wait to contract the additional 400 megawatts? Do you get in the queue soon? And what are your thoughts on diversifying your supplier base, just as backlogs fill across the supplier base?

Kyle Ramachandran | President

I think we've been pretty clear from the beginning that as capacity gets contracted, we will be back obtaining more capacity in multiple different options in that regard. So to your point, there's multiple OEMs. We have to date been tied pretty closely to one OEM. They've been a great partner. We'll continue to work with them. But we're obviously looking at other options. There are other new product lines coming into the market that look quite similar to the sort of workhorse asset that we've got in our generation fleet. And so we're evaluating all those options. And clearly, while we were working in conjunction with our new customer, we were also working supply chain. So this isn't like a standing start. We've had these conversations warm for quite some time. And those dialogues are very healthy. I think we've demonstrated to be a very good customer to suppliers paying on time, doing what we say we will do, and generally being pretty cooperative with that whole mix. So we are being consistent with what Bill mentioned of doing what we say. And so with respect to more capacity, that's more of the same. And so we are actively analyzing those opportunities and expect to be able to provide updates in due course.

Scott Gruber | Analyst, Citigroup

I appreciate that. It was nice to see the 1Q EBITDA bump. And 2Q grows, but it's a little bit more slowly than expectations across the street, and maybe the street was just a bit ahead of itself. But, you know, logistics, that segment is looking better. So can you just walk us through the kind of megawatts deployed, you know, across 1Q and into 2Q and Is there any uncertainty around the deployment schedule, you know, at Colossus 2 into 2Q, or are you just embedding, you know, some conservatism until you get better line of sight?

Kyle Ramachandran | President

Well, I mean, I think generally as we look at providing guidance, we always try to embed some level of conservatism, rational and reasonable, but some level of conservatism. I mean, when it comes to the timing of equipment getting deployed, most of that is out of our control. That's obviously subject to the OEMs. And if you look at how we even shaped sort of the capital guidance for the fourth quarter relative to what happened, we assumed in the guidance that we would be receiving installment invoices ahead of when we actually did. And so some of this is a function of the supply chain and where they sit with their processes. We feel very good about the Colossus II project with respect to the total 900 megawatts that will be deployed there. The exact prescriptive timing week-to-week, month-to-month, quarter-to-quarter is going to be somewhat in flux depending on OEM deliveries. It's a massive project that's being built in real time, and so there's lots of civil work that needs to take place there as well. So there's lots of puts and takes that are outside of our control, quite frankly, and so that's driving maybe somewhat of the guidance, but I don't think it has any impact whatsoever with respect to the run rate as we look at it.

Scott Gruber | Analyst, Citigroup

I appreciate the color.

Thank you. Kyle Ramachandran | President

And we're still on track for Q1 of next year to be at the full 900 megawatts that cost us. And then just, you know, finally, we have been able to use, and to Amanda's point, with respect to some of the new regulatory analysis, an ability to put more power out there on a temporary basis to allow the customer to ramp their demand potentially ahead of when the permanent power comes into play.

Scott Gruber | Analyst, Citigroup

Oh, that's a great color. Thanks, Kyle.

Turn it back. Operator | Conference Operator

Our next question comes from Steven Gengaro with Stifel.

Please go ahead. Steven Gengaro | Analyst, Stifel

Thanks, and good morning, everybody. I think, too, for me, the first, and I'm not sure how much color you can add, but when you talk about discussions that are out there for that, for, I guess, roughly incremental 400 megawatts Are we talking about discussions that are in the gigawatt range where you have multiple conversations going on, or are they more sort of isolated discussions with specific customers? Is there any way to think about and kind of quantify sort of the near-term demand for that power?

Bill Zartler | Chairman and Co-CEO

Steven, I think the discussions are as widely varied as we need 100 megawatts to we need two to three gigawatts, and how does that roll out over the course of 20, seven, eight, nine kind of timeframe, and it's with multiple customers or single customers. So the opportunity set, as Amanda mentioned, is significant. It's large. I think where we will focus on is closing with one or two customers in that 400 megawatt kind of range.

Amanda Brock | Co-CEO and Director

What happens in these negotiations, which, like we said, are negotiations, not discussions, is we will maybe start with the 400 megawatts, but because of how electrification has phased in, we will then add over time.

Steven Gengaro | Analyst, Stifel

Okay. That's helpful. Thank you. And the other question is, When you think about the price of power, and I know like when you were first deploying assets and because you're basically at the customer site, your cost of power was pretty close to grid power. And it feels like grid power or even at or below grid power. But as we have these kind of conversations about rising electricity costs over time, How do you price the power? Are you able to take advantage or at least leverage the fact that power prices are likely rising over the next decade when you're signing these longer-term contracts? How is that discussion going?

Bill Zartler | Chairman and Co-CEO

I think customers intuitively understand this and how the shape of our curve. We're really focused on return on capital, focused on protecting our costs with COLA. We're, in most cases, not buying the gas. The customers are buying their gas, so We're not at risk for that part of the expense going up, but we do see, you know, maintenance and all the regular costs that can increase over time. But I think this is a, you know, you can lock it up now and just like you might with a big power, you could do a capacity deal with some variable, which is what we're seeing both on this kind of behind the meter scale as well as co-located scale and protect and hedge for the next, you know, 10 to 20 years.

Okay. Steven Gengaro | Analyst, Stifel

Great.

Thanks for the additional color. Operator | Conference Operator

Our next question comes from Michael Dudas with Vertical Research.

Please go ahead. Scott Gruber | Analyst, Citigroup

Good morning, everyone.

Michael Dudas | Analyst, Vertical Research

Good morning. As you indicated in your prepared remarks, and certainly as we've seen in the market, you know, demand seems to be much greater than supply capacity. How is that evolving relative to the moat that you're creating, given the momentum you've put together over the past couple of years? And how does that impact relative to what you want to do in the uplift to the other services to provide for your integration? You know, is the acquisition market or the opportunities there, are there quickly enough for you to, you know, generate the value from that just to really solidify your solutions profile?

Bill Zartler | Chairman and Co-CEO

Yeah, I mean, I think, number one, this is a very big market. We will not be alone in developing power for this industry, right? The numbers are staggering. So our moat and our offering is one of experience, of operations, of knowledge, of ensuring as reliable power as possible at attractive pricing. As we build out our offering, the more our capital we can put to work and the more services we offer that we can get paid for is valuable, and I think valuable to the customer in that what we're doing ultimately is just ensuring that they get the power where they need it, when they need it, at the right voltage and type, and that will give us the amount of runway that this business needs to continue to grow very rapidly over the next several years. Excellent. Thanks, Bill.

Operator | Conference Operator

Our next question comes from Jeff LeBlanc with TPH.

Please go ahead. Jeff LeBlanc | Analyst, TPH

Good morning, Bill and Amanda. Thank you for taking my question. Good morning. In SLS, you're guiding the flat EBITDA on a sequential basis while the pressure pumpers are flagging the Winterstorm firm as having a sizable impact on Q1 profitability. Can you expand upon how your Reynolds business is insulating SEI from these types of disruptions?

Thank you. Bill Zartler | Chairman and Co-CEO

Well, we did see some downtime during the storm. So what we also see is additional growth in the business that's offsetting that. So I think we're growing maybe faster than the current pressure pumping market is just in terms of touch. The top fill offering and the savings that it offers for some of these large frack jobs is real. And so we continue to see demand there. And we're virtually sold out, as I mentioned on the call, without equipment.

So in the storm. Jeff LeBlanc | Analyst, TPH

Thank you very much. I'll hand the call back to the operator.

Operator | Conference Operator

Our next question comes from Don Crist with Johnson Rice.

Please go ahead. Don Crist | Analyst, Johnson Rice

Good morning, guys. Hope you all are doing well this morning. One macro question for me, as you're having these discussions, given all the state of the world right now with energy prices and the consumer facing kind of aspects of that. How many of your discussions are 100% behind the meter versus kind of a hybrid approach with, you know, grid versus, you know, behind the meter? Is it more, is it shifting more to where you're going to be a standalone island power plant for the life of the data center? Or is it still kind of a hybrid approach?

Bill Zartler | Chairman and Co-CEO

I think there's still a bit of a hybrid. It's probably weighted toward behind the meter for the life of the plant, although we're having discussions with a few customers around having a mobile kit that they may rent for the next 10 years that we set up in advance of grid connections that they hope to get there over some period of time. And so the mobile nature and the service of being able to set up power quickly, the tailwinds with the Quad K regulations, which is allowing some of that to happen on a temporary basis, One is the pure behind-the-meter that may end up being co-located over time, or we can go in and are looking for long-term contracts to be a bridge provider, which would mean that we may sit on sites between one and two years, but we have a contract with that customer for multiple years beyond that to move from site to site as they recognize that connections are slow. and they're building out locations maybe faster than the grid can connect to them, and they need a solution like that to complement their rapid growth.

Amanda Brock | Co-CEO and Director

Don, we are seeing, you know, as we said, there's acceleration of discussions. The tailwinds here, one, greater tenor on contracts. We always like to see that. Two, people in the last quarter, customers and end users, getting very comfortable that they can be in fully islanded mode successfully, reliably for a 10-plus-year contract. So it's all of the above, but definitely a tailwind toward people getting comfortable that maybe they don't have to connect to the grid. And we think that, you know, last night stated the union address with the ratepayer protection pledge. These discussions will continue to gain traction.

Don Crist | Analyst, Johnson Rice

Okay. Yeah, that makes a lot of sense. And just one further one for me, obviously the fourth quarter had some maintenance issues – or not issues, but maintenance costs that were elevated as you had to kind of update your equipment. But how do we look at it going forward, you know, as you – add a whole lot more new equipment? Is that maintenance schedule kind of de minimis going forward, or do you have another wave of stuff coming through in the next 12 to 15 months or so that need to go through that process?

Kyle Ramachandran | President

Yeah, Don, I think the color on the fourth quarter was around some equipment coming off of a utility project that was relatively short-term in nature, and we're doing some modifications to that equipment to get it ready for a long-term contract to serve a microgrid in the in West Texas area. So that was sort of, I'd say, more of a kind of a one-off in nature. As we've talked about historically, this equipment has an overhaul cycle, which is episodic relative to the number of hours run in the engines. And on average, they're roughly 30,000-hour overhaul cycles. So it's every four-ish kind of year timeframe, depending on the fired hours per day or per year for those engines. So, yeah, we're obviously in a period here where we're not seeing significant maintenance capital. Over time, that will be running through the business, and that's several years out from now. And then the other thing in the fourth quarter was we did secure some additional third-party equipment to meet an accelerated ramp schedule for one of our larger projects. And so we pulled that in a little bit ahead of when the equipment was deployed onto site, and so that was just some additional cost that was transitory nature in the fourth quarter.

Don Crist | Analyst, Johnson Rice

I appreciate all the color. Thanks, guys.

Turn it back. Operator | Conference Operator

This concludes our question and answer session. I would like to turn the conference back over to Bill Zartler for any closing remarks.

Bill Zartler | Chairman and Co-CEO

Thank you all for joining us today. We're excited about the strong momentum we've built in all aspects of our business in 2025. and the significant opportunities ahead. It's rewarding to see our team grow and deliver real value in this fast-evolving market. And to make a big thank you to our dedicated employees, our trusted customers, and valued supplier partners. Your commitment makes it all possible.

Thank you. Operator | Conference Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. jsPDF 3.0.3 D:20260606090418-00'00'

NYSE:SEI Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Operator | Conference Operator: Good day and welcome to the Solaris Energy Infrastructure third quarter 2025 earnings conference call. All participants will be in 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 a touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Yvonne Fletcher, Senior Vice President of Finance and Investor Relations.

Please go ahead. Yvonne Fletcher | Senior Vice President of Finance and Investor Relations

Thank you, Operator. Good morning and welcome to the Solaris Third Quarter 2025 Earnings Conference Call. Joining us today are our Chairman and Co-CEO, Bill Zartler, and our Co-CEO and Director, Amanda Brock, 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. We also encourage you to refer to our earnings supplement slide deck, which was published last night on the investor relations section of our website under events and presentation. I would like to point out that our earnings release in today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable gap measures are available in our earnings release, which is posted in the news section on our website. For more details on the company's earnings guidance, please refer to the earnings supplement slide deck published on our website. I'll now turn the call over to our chairman and co-CEO, Bill Zartler.

Bill Zartler | Chairman and Co-CEO

Thank you, Yvonne, and thank you, everyone, for joining us this morning. Solaris had a great third quarter, achieving record levels of quarterly revenue and profits. Our strong results demonstrate that we are executing well and are also showing significant progress on our growth. Solaris is at the center of what appears to be a massive and growing market opportunity. Demand for reliable and efficient power generation is accelerating as data center investment and associated power demand continues to grow at a scale and pace that is providing significant, attractive growth opportunities for Solaris. Many data centers now require more than one gigawatt of electricity demand per site which in some cases represents only the initial phase of what is likely to evolve into a multi-gigawatt facility. Many of these key artificial intelligence players are now planning numerous locations of this size with multi-year development plans. Power is a key bottleneck for many of these projects. Grid delays, extended equipment lead times, regulatory mandates, and surging demand are leading data center developers and hyperscalers to select locations where they can quickly secure significant power for multiple years. Over the course of the last 18 months, Solaris has positioned itself to provide critical infrastructure and services to support this massive investment cycle. In that short time, Solaris has quickly become recognized as a leading power solutions company. This is attributable to our successful track record of delivering a scalable, reliable, and flexible power solutions offering. In order to continue our growth trajectory, we must execute well in all aspects of the business. This includes growing a capable team while maintaining our culture, developing a strong balance sheet, and creating power offerings that optimize capacity, timing, capital, and flexibility. The optimal power solutions for our customers will likely vary based on the application, scale, location, capital efficiency, and importantly, the timing needs of each unique project. Solaris is in a position to provide our customers with the most appropriate solution or solutions for their range of needs at any particular site. We can provide multiple generation sources to our customers as well as gas supply infrastructure, power distribution equipment, and resiliency equipment such as battery energy storage systems or BESS. Our solutions can include a combination of natural gas turbines, natural gas reciprocating engines, grid power, BESS, fuel cells, and other renewable technologies. It is quickly becoming apparent that an all-of-the-above generation approach could be necessary to meet the rapidly growing power demand. Since we updated you last in July, Solaris has achieved many strategic milestones that have positioned us for substantial growth. First, we continue to demonstrate strong execution. We operated approximately 760 megawatts during the third quarter, up from approximately 150 megawatts only a year ago. Our growing proprietary operational know-how and strong track record of uptime position us as a reliable provider of power. We began successfully providing primary power to a second data center during the third quarter, highlighting our ability to again rapidly deploy power solutions supported by effective collaboration between our employees, our supply chain partners, and our customers. Second, we secured additional capacity to position our business to enable us to react swiftly, and comprehensively to the numerous meaningful commercial opportunities we are pursuing. With the order of 80 megawatts announced a few weeks ago and an additional order of just over 400 megawatts, we now expect to have pro forma generation capacity of approximately 2,200 megawatts by early 2028 compared to our prior plan for 1,700 megawatts by the first half of 2027. Third, we raised significant capital in the form of a new convertible notes pay off our existing term load, providing us the financial and operational flexibility to continue our growth. Kyle will share more detail on this shortly. Fourth, our commercial pipeline is deep and growing as we are currently evaluating a number of potential long-term opportunities. The combination of growing project size, tenor, timing, and reliability has resulted in an increasing interest in solutions like ours. Our recognized track record of execution and investments we've made in capacity has positioned us at the forefront for many of these opportunities, and we are confident that the additional capacity we have on order will convert into long-term contracts. Fifth, we have expanded our capabilities and customer base through M&A. In the third quarter, we acquired and welcomed HVMVLV, provider of specialty voltage distribution and regulation equipment and engineering services. HVMVLV stands for high voltage, medium voltage, low voltage, just so you know. Bringing these capabilities in-house further strengthens our solutions offering by giving us exposure to new high growth end markets. Importantly, these balance of plant solutions are essential across all electricity use cases regardless of generation source. Our acquisition strategy demonstrates how we are strategically both vertically integrating and expanding our technology offering, further enabling us to offer a truly power agnostic approach to meet our customers' power needs. Finally, we have welcomed additional talent to complement our existing team and drive further commercial and operational success. We've added high-impact team members to our engineering, operations, commercial, and support functions. We've also enhanced our executive leadership team with the addition of Amanda Brock as my co-CEO. Amanda has been a trusted partner of mine for the last decade and brings a proven complementary skill set to the office of the CEO. She has an extensive background in building and managing infrastructure, including both water and power, and in leading teams to success. These capabilities come to us at a critical time as we rapidly scale our operations for the significant growth ahead. As I've been asked many times, I would like to make it clear that I have no current plans to retire. This co-CEO appointment is about covering more ground and accelerating our growth. Moving now to a discussion of our logistics solution segment. I've often referred to our logistics solution business as the engine that could. Well, less than a third of our business today we would not have the success we've had in Power Solutions without the stable cash flow provided by this basis segment. This business also is a critical piece of the natural gas value chain required for the Power Solutions segment. We also continue to earn the operational and financial returns on the investments we've made in our logistics systems, which continue to help drive efficiencies for our customers. For example, we've increased our deployment of multiple Solaris systems on customer locations, which enables more efficient throughput, raw materials, and in turn helps our customers accelerate their development schedules. Year-to-date, we've deployed multiple Solaris systems on 90% of our customers' locations, which compares to approximately 60% a year ago and 40% the year before that. We believe that our technology portfolio positions Solaris as the partner of choice for operators and service companies pursuing the industry's leading-edge completion designs. During the third quarter, lower 48 oil and gas industry activity contracted to what we believe reflects a near-term trough, as evidenced by early fourth quarter activity levels. We believe this segment will continue to generate significant free cash flow while providing a highly reliable and efficient system for our customers. In summary, we are pleased with both the operational and commercial advancements achieved during the quarter. We are confident that the growing demand for our power services will continue and and we're demonstrating that confidence through our incremental generation orders as well as our continued inorganic investment. We're also taking deliberate steps to ensure that we have the right balance sheet and the right people in place to position Solaris for continued growth. As has been emphasized by our country's leaders, winning the AI race is an imperative strategic objective for the U.S. Solaris can play an important role in advancing this objective by using its technology to efficiently generate and deliver large-scale, reliable clean energy. With that, I'll turn it over to Kyle.

Kyle Ramachandran | President and CFO

Thanks, Bill, and good morning, everyone. Solaris' third quarter demonstrated another quarter of significant growth and solid execution in our power solution segment, as well as continued execution and strong free cash flow generation in our logistics solution segment. This growth and execution were driven by the dedication and skills of our team, the continued support of our customers, and the dependability and flexibility of our suppliers. During the third quarter, Power Solutions contributed more than 60% of our revenue and over three-quarters of our segment-level adjusted EBITDA. These results are attributable not only to a robust industry backdrop, but also to the value of the Solaris offering and the team's execution. As Bill highlighted, in addition to the previously announced 80 megawatts we recently ordered, we have also secured additional generation capacity for a total of approximately 500 megawatts. This brings our pro forma expected generation capacity to approximately 2.2 gigawatts by early 2028, which compares to our prior order book of approximately 1.7 gigawatts. As previously announced concurrent with our recent convertible financing, we expect the first 80 megawatts of our new orders to be delivered by year end. The remaining delivery schedule is concentrated around the second half of 2026 and the second half of 2027 with final deliveries of this most recent order occurring in early 2028. Capital expenditures associated with the 500 megawatts total approximately $450 million, consisting mostly of turbines and associated emissions control equipment. Once equipment is contracted at a particular site, we expect to add additional project scope to accommodate the unique specifications of any given location and customer need. This increased content would be expected to generate returns on invested capital comparable to the economics of our current power solutions offering. As a result of our recent financing and the ongoing cash flow generation ahead of these deliveries, we have sufficient cash to fund these incremental generation orders. In early October, Solaris raised approximately $748 million in the form of senior convertible notes due 2031 with a 0.25 percent coupon. The proceeds from this offering were used to repay our existing term loan and will be used to fund the 500 megawatt org. This financing also unlocks significant flexibility for Solaris, given the removal of restrictive covenants, as well as the meaningful incremental near-term cash flow it unlocks. Over the next four quarters, we now expect to save approximately $45 million in the form of interest and amortization savings as compared to our prior capital structure. Turning now to a review of our third quarter results and our outlook for the next two quarters. During the third quarter, Solaris generated revenue of $167 million and adjusted EBITDA of $68 million on a consolidated basis. Our adjusted EBITDA grew 12% from the prior quarter and increased more than three times as compared to the same quarter last year, driven by the acceleration of our power solutions segment. The primary driver of growth versus the prior quarter is continued activity growth in power solutions which more than offset a modest decline in logistics solutions activity. We generated revenue from approximately 760 megawatts of capacity during the third quarter, which reflects an increase of more than 27% from the prior quarter. This increase in activity was driven by increased and accelerated demand from our customers, which we are meeting using a combination of new turbine deliveries as well as selective short-term sourcing of third-party generation capacity. Segment-adjusted EBITDA for the power solution segment was $58 million, a 27 percent increase from the second quarter. We expect segment-adjusted EBITDA next quarter to be relatively flat as a full quarter's benefit from the ramp in operated megawatts and the HVMZ-LV acquisition is offset by a mixed impact from lower spot utilization and commissioning work. While we expect the recent order of 80 megawatts to have a limited impact on fourth quarter results given the expected timing of deliveries, We expect this incremental capacity to drive first quarter 2026 segment-adjusted EBITDA for power solutions higher sequentially relative to the fourth quarter of this year. In our logistics solutions segment, we averaged 84 fully utilized systems, a decline of 11% from the second quarter. We believe the third quarter represents a near-term bottom in drilling and completion activity and expect our segment-adjusted EBITDA to improve slightly in the fourth quarter. Netting these factors and considering corporate and other expenses, total adjusted EBITDA guidance for the fourth quarter is now $65 to $70 million, up from the prior guidance of $58 to $63 million, and relatively flat from the third. We're also introducing our first quarter, 2026, total adjusted EBITDA guidance of $70 to $75 million. Accounting for expected longer-term tenor are fully delivered 2,200 megawatt generation capacity, and our recent acquisition, our new estimate of pro forma earnings of the company could be over $600 million before considering any additional scope or growth with our existing customers or new opportunities. We are excited about the accelerating growth of the industry and about the significant strategic steps we've taken to maximize our opportunity to continue to grow. Our priority remains to deliver strong returns on invested capital as we continue to develop our power solutions business while sustaining leading market share and strong cash flow generation from our logistics solutions operations. With that, we'd be happy to take your questions.

Operator | Conference Operator

We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone telephone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The next question is from Dave Anderson Barclays.

Please go ahead. Dave Anderson | Analyst, Barclays

Hi, good morning. I was wondering if you could talk a little bit about how you see the supply chain today. You're placing orders now for 2028 deliveries. Is this going to get stretched out a bit more than, say, a year ago? And I would imagine the competition for OEM slots has become substantially tighter the last few months. I was wondering if you could talk about some of those challenges that you're facing as you look to build out the power business.

Thank you. Bill Zartler | Chairman and Co-CEO

Well, I think you surmised it well, David. The supply chain is growing out. We're lucky to get the slots we have with our relationships, and we're exploring, you other avenues for, for getting power. Hence the, hence I think what, what we referred to as multiple sources of generation to power these things, especially in, in, in timing wise. Um, and we're spending a lot of time on the distribution side and the equipment side. We had a team, uh, over in Asia last week, you know, looking at, at a couple of OEM flexibility options around, you know, how we, um, get ahead of transformers and switchgear and breakers and, and those kinds of things, uh, on a, on a portable basis as well as for permanent equipment. So I think that is a, That's a very important part. As I said, we needed to execute on all phases of the business, and supply chain is clearly one of those phases that's really driving a lot of things today.

Kyle Ramachandran | President and CFO

And I think that's also coming at a time where the customers are recognizing the sort of opportunity of speed here to build behind-the-meter solutions in a way that provides the right levels of reliability, the right levels of generation in a way that really aligns well with their strategic goals. And I think that's informed in terms of how we're thinking about expanding the fleet at this stage. The size of the prize appears to be growing at a rate where the sort of cost of poker, i.e. how much capacity you have available, is needing to go up. And so what we're sort of What I'm indicating here is the size of each of these opportunities is growing. And so, we've added capacity here, sort of second half of 27. And as we look at making further orders beyond this, you're spot on. The delivery dates are extended. But we've got a tremendous track record, I think, of finding unique ways to find capacity. We continue to benefit from a team that's got tremendous experience and legacy in looking at generation over decades all over the world. And I think that really positions us somewhat differently than than maybe others in the market that are kind of just getting into it. So we've got literally decades of experience both on the generation side as well as on all the distribution side within the company now that we're really able to benefit from.

Dave Anderson | Analyst, Barclays

So I think there's actually a big distinction about how you're actually already managing the megawatts today. And you've talked about the balance of plant and how kind of the challenge is to actually manage this power is more than just owning it. You made that acquisition over the summer, the HVMVLV. I did it. The acquisition in terms of the balance of plant. I also noticed this quarter the megawatts and revenue per megawatts increased about 10% this quarter. Are we starting to already see the impacts on the balance of plant, or is that more about efficiency and utilization of the equipment? And can you tell me how we should be thinking about modeling that going forward? Is that a number that should be kind of steadily increasing over time?

Kyle Ramachandran | President and CFO

There's a lot of puts and takes in that. And I think if we specifically look at the third quarter, what we were able to do was to deploy a significant amount of additional generation that was sort of beyond what we initially guided to. And so we are benefiting in the third quarter with some level of contribution from some of our commissioning efforts. I think the fundamental returns on the equipment are still sort of in line with where we've indicated in the past. The other kind of puts and takes on it align with duration. And as we think about different customer mix and different duration mix, there could be some different ways of looking at returns.

Dave Anderson | Analyst, Barclays

Okay.

Kyle Ramachandran | President and CFO

Thank you, Kyle.

Thank you. Operator | Conference Operator

The next question is from Derek Whitfield, Texas Capital.

Please go ahead. Derek Whitfield | Analyst, Texas Capital

Good morning, all. Congrats on your update. And Amanda, congrats on your appointment.

Amanda Brock | Co-CEO and Director

Thank you.

Derek Whitfield | Analyst, Texas Capital

For my first question, I wanted to focus more on the competitive landscape. With this announcement, it's clear that you feel confident in your ability to place your power generation capacity. With that said, to what degree did the recent announcements from Halliburton and Liberty change your view on the size of the growth opportunity for Solaris?

Bill Zartler | Chairman and Co-CEO

We're having our own discussions, and what others do don't necessarily impact it. I don't think that this is a very, very large market if you look at the numbers, and it's going to require multiple companies to perform to satisfy the needs of the growing power demand. So I think that has not changed our outlook at all in any way.

Kyle Ramachandran | President and CFO

Yeah, and I'd say just to put it in context, so the 2,200 megawatts we're talking about here, to satisfy the leading-edge sort of incremental demand, data center, I'm not sure that satisfies even two at this stage. So the sizes of these infrastructure projects continue to grow to Bill's point such that it's just a large market.

Derek Whitfield | Analyst, Texas Capital

Yeah, fair point. And maybe just to build on that, based on the flurry of recent power AI development announcements across West Texas and the amount of BTC miners that are converting to data centers, Do you guys see an opportunity to co-bid these developments with those operators to meet reliability needs of the end client?

Bill Zartler | Chairman and Co-CEO

I think that's one of the points on the flexible generation here is that the distribution equipment and the packaging up of multiple sources and the way that gets run is something that I think we're developing a pretty good expertise on. And I think that will be the way some of this gets executed is a combination of multiple sources, whether it's excess grid power that a Bitcoin miner may have been using, whether they've got some on-site backup generation that flexes and we put some new kind of permanent power or bridge to backup kind of power on-site, I think is going to really be what the ultimate solution looks like for the size of this activity and the timing needs that the industry has.

Kyle Ramachandran | President and CFO

In our fleet, if you think about just max flexibility with respect to, in general, the mobility of the actual equipment, also the size of These are medium-sized gas turbines that are able to be mowed and rigged up quite quickly relative to some of the other larger equipment that may be more permanent in nature. And so to your point, as the opportunities shift around in terms of geography, we really benefit from that. And that also ties into our legacy business. One of the real keys of success of the 10-plus years track record of the legacy Solaris business has been the fact that we've had equipment that can go anywhere at a moment's time's notice. And so that's allowed us to be very nimble, and I think that'll continue to be a paramount sort of culture tenant to our business.

Bill Zartler | Chairman and Co-CEO

And as I add to the engineering team that's associated with the legacy business and our ability to take a look at this power generation business and modify equipment to make it more mobile, I think the oil field led the way in developing and partnering to make the mobile turbines to start with, and then the addition of of mobility around the Cadillac reforming technology. We've modified and built our own with our own in-house engineering mobile SCRs that pair up quite quickly, quite easily, minimize downtime for the emission control system. So I think that combination of engineering know-how and the focus on mobility and quick execution has been paramount to the continued success in both businesses.

Derek Whitfield | Analyst, Texas Capital

Great update.

Thanks for your time. Operator | Conference Operator

The next question is from .

Please go ahead. Don | Analyst

Good morning, guys. Hopefully, you all are doing well this morning. Given that I'm one of the only analysts that covered both ARIS and Solaris, I have kind of unique impact or relation to Amanda. Just quick question on the co-CEO role. Is it expected to be kind of divide and conquer, or are you all going to make kind of decisions together? And kind of second part of that question, Amanda, I know you've only been there a week or so, but your initial impressions on kind of how the team is put together and your initial impressions, you know, as you kind of get into work? I'll let you start, yeah.

Amanda Brock | Co-CEO and Director

Certainly, and thanks, Don. So, look, I'm very happy to be here. With this team, I've known Kyle since, you know, I think 2017, and it's great to still be side by side with Bill. And anybody who knows Bill and I knows that we are different but have very sort of complementary skill sets. So some of it is, and Bill will talk about it, you know, divide and conquer so we can cover more ground. And, of course, you know, not getting in each other's way and make decisions that are going to enhance the effectiveness and to use Kyle's word, nimbleness of the company. In terms of observations, actually, this is the beginning of week three because there was no downtime, and it is really drinking from the proverbial fire hose. The speed at which this market is moving is unprecedented, and there are huge tailwinds and opportunities for us as we focus on delivering these power solutions into a market where power is emerging as a critical bottleneck. The deals we're engaging on and the deals that I've gone straight in to work on are real and tangible with very credible counterparties. We have a distinct advantage to have already demonstrated our ability to deliver. I mean, we've been out there, we've been operating, and that just gives you a real perspective. And as Bill has repeatedly emphasized, we've got this track record of executing on large scale and getting larger data center projects, and have developed know-how, software, proprietary processes that we can apply on new projects, and that is an advantage. So, high-quality opportunities for continued growth. I'm very optimistic. I'm happy to be here, and there's one incredible road ahead of us. So, Bill?

Bill Zartler | Chairman and Co-CEO

You know, as the divide and conquer, you just covered it all, so no need to double up.

Scott Gruber | Analyst, Citigroup

Sure.

Don | Analyst

I appreciate that color. You know, a big question coming into this earnings cycle is going to be whether or not you announced a new contract or not. But I think you have said in past calls and whatnot that you wouldn't order any additional equipment if you weren't close on another contract signing for a data center or a large project. Is that still the case? And, you know, I know you don't want to give specific timing, but should we assume something in the next, you know, 90 to 180 days that could kind of soak up all that equipment you have on order today?

Bill Zartler | Chairman and Co-CEO

That is still the case, and your assumptions are pretty good.

Okay. Don | Analyst

I appreciate the call. Thanks. I'll turn it back. Thanks, Don.

Operator | Conference Operator

The next question is from Derek Potheiser at Piper Sandler.

Please go ahead. Derek Potheiser | Analyst, Piper Sandler

Hey, good morning. Maybe just a bigger picture question. I want to discuss the type of advantage HVMVLV gives you when you're bidding on these large data center projects, and we're talking a gigawatt plus here. So obviously there's a lot of companies out there going for this behind-the-meter power market. It creates a lot of confusion for investors, who's best positioned and what's the differentiating factor. Maybe you could just help us understand your differentiating factor versus your peers, including this integrated solution, which has just both been bolstered by HVMVLV. Just help us and investors how we should really think about that.

Bill Zartler | Chairman and Co-CEO

I think you think about it from actual operations and skill sets, and then when we add on power, what comes out of the generator isn't what feeds the data center or any other utility. You have to regulate that power. You have to convert it to the right voltage level. You have to get it to what the building needs. You have to control power. lots of elements of that with switchgears, and you've got to protect it with breakers and switchgears. So the notion that the rest of that stuff really does drive the generation source, and as we mentioned, there's going to be multiple sources of generation to supply this demand because it's too fast and too quick. And as that happens, it's more and more imperative that you pair up the right set of electrical distribution equipment downstream of that. As an edge and the ability to engineer, design, and operate those systems, I think we have a pretty unique advantage with that with respect to the turbines. The modeling of these businesses, and I think we set a little bit of a trap up on megawatts times a dollar equals this times the multiples of value, but there's a lot more to this around protecting that business, building the moat around the operating processes and technology and the pieces of electrical equipment that, that blew it all together. So, you know, there's a house, a set of bricks doesn't really work without the mortar and that's the mortar in this business.

Derek Potheiser | Analyst, Piper Sandler

Got it. That's helpful. Um, and then maybe back to your comments about your, all the above power approach, you know, historically you've been heavy on the turbines, obviously the 5.7, 16 and a half 38, but sounds like you'll be exploring, you know, the battery, systems, potentially resits? Just, you know, could you help us understand kind of that all the above approach and then maybe just your latest, you know, the additional 400 megawatts? Was that all turbines? Was that a mix of a different type of kit? Just maybe a little bit more color around that.

Bill Zartler | Chairman and Co-CEO

Yeah, and I think we will, the view forward is the turbine is going to be the workhorse of the power generation industry. It's no different than the way the utilities work. The gas turbine is driving our system in this country of power. So that will be our workhorse as we complement things for timing and flexibility. The turbines have unique curves with heat and altitude that change their output. And so pairing that up with an engine that doesn't have quite the turndown in the heat, like a large reciprocating generation and generator, and we're running them as part of the kit today. So it's not It's a small piece. Does it grow slightly? I think we'll see it growing as part of the generation piece slightly going forward. Batteries are an important part of this. It comes down to what is the reliability that you're looking for. In data centers, there's an element of this that they have to have. virtually 100% reliability when it hits the cooling system to keep the buildings cool and the chips from melting down. The investment is enormous. So thinking about how batteries both provide protection against the volatile loads coming out of the chips, as well as very short-term bridges as you flex with your redundancy built into the power grid. And not every data center is the same. And so there's not a standard design gigawatt data center. They're built in multiple data halls. The data halls can be powered independently. They can be powered together. They can power the cooling systems different from the chip systems. And so the notion that it's just kind of one-size-fits-all is there, and that's one of the other reasons why the distribution part of this is so important, so you can match up what the actual data center power needs look like with the generation equipment.

Derek Potheiser | Analyst, Piper Sandler

Got it. Very helpful, caller. Thank you all for the back. Thanks, guys.

Operator | Conference Operator

The next question is from Scott Gruber, Citigroup.

Please go ahead. Scott Gruber | Analyst, Citigroup

Yes, good morning. You know some gross capex in your 27 outlook. I'm curious about the state line JV, you know, once the 900 megawatts is deployed. Is the JV expected to send cash back up to Solaris or do you pay down the term loan or does that cash get recycled back into expanding the JV? Just some thoughts on how to think about the JV and the JV cash flow once the 900 megawatts is deployed?

Kyle Ramachandran | President and CFO

Yeah, good question, Scott. I think there's debt down at the JV, and so that does need to be serviced with respect to interest and amortization. But there's a fair amount of flexibility within the constructs of that debt instrument that do allow us to send cash up to both ourselves, as well as our partner in that JV. Options with respect to what to do with that cash, the board of the JV, which is composed of both Solaris and our customer, can choose to distribute the cash, or to your point, we can make a choice of keeping cash there and continue to invest at that level to provide additional power to that customer, which obviously has ongoing and growing power needs and demands. So a lot of flexibility in that structure, and we were able to obviously finance that at a pretty attractive rate with respect to the advance rate on the equipment. So that structure, you know, we feel is going to provide a lot of flexibility and ability to drive returns for us.

Scott Gruber | Analyst, Citigroup

Thanks for that, Kyle. And then just some color on how you see Megawatch deployed over the next several quarters and how you see the transition from you know, third-party re-rents to wholly owned capacity based upon the delivery schedule and what seems to be, you know, greater, obviously greater demand, you know, from the customer. When do you see kind of fully getting to kind of fully owned capacity in the field?

Kyle Ramachandran | President and CFO

Okay. Good question. Obviously, that's continued to change and extend as we've added capacity into the order book. As we look at next year, there's really two legs of growth as far as operating capacity. The first is the JV getting stood up with respect to its permanent generation, and we are supporting the power needs of our customer that will ultimately be funded with the JV vis-a-vis some of the re-rented assets today as well as some of our own assets. So next year we'll see the construction of roughly 900 megawatts of permanent power for the JV. And then we'll also see delivery of about 400 megawatts that was placed back in March of this year. So those are the two avenues of growth for 26. And then as we look into 27, it's primarily the order that we just placed. One small additional note, we did pick up some capacity in the fourth quarter of this year. which will have a full impact beginning in the first quarter of next year. So as we look at the full stood-up fleet, it's sort of a second half of 28 is sort of how I would look at it.

Scott Gruber | Analyst, Citigroup

Got it.

I appreciate the call. Kyle Ramachandran | President and CFO

Thank you.

Scott Gruber | Analyst, Citigroup

Thanks, Jeff.

Operator | Conference Operator

Next question is from Jeff LeBlanc, TPH.

Please go ahead. Jeff LeBlanc | Analyst, TPH

Good morning. Thank you for taking my question. Morning, Jeff. Hi. Bill, in the prepared remarks, you mentioned locations involving to multiple gigawatt sites over the next several years. Given this opportunity set, could you help frame the size of your customer pipeline? And is it safe to assume that by the end of the decade, your operating fleet will be larger than 2.2 gigawatts?

Thank you. Bill Zartler | Chairman and Co-CEO

I think the pipeline is enormous, and that's a technical term. It's just so much activity, it's frightening. I've never seen anything like it in my life. it's probably fair to say that we'll be beyond what we have on order today operating in a couple years.

Jeff LeBlanc | Analyst, TPH

Thank you very much. I'll turn the call back to the operator.

Thank you. Operator | Conference Operator

The next question is from Michael Dudas, Vertical Research.

Please go ahead. Michael Dudas | Analyst, Vertical Research

Good morning, everyone. Good morning. Good morning, Michael. Two questions. One, Bill, could you maybe share some of the – circumstances surrounding the second data center order that you cited in the press release. And secondly, as you are negotiating regarding contract tenor, any further confidence, thoughts on length? Is that still a sticking point given where people are expecting, you know, grid connections out into the future or other BTM solutions? Just wanted to get a sense of that's still part of the negotiations.

Yes. Bill Zartler | Chairman and Co-CEO

I think the second data center that we stood up during the second quarter was known and predicted and it's rolling into our joint venture, State Line Power LLC. So we have it running on a temporary power with full emissions control and then we're constructing the gigawatt plus power plant starting really in the next quarter, rolling into next year as we ramp up the deliveries of equipment to roll into the permanent site for that facility. So if That's up and running. We got it up and running very quickly over the course of the quarter, and it's stable, and we'll be rolling it into the permanent site really beginning 1st of January or so thereafter. What was the second question? Contract tenor. Oh, contract tenor. It's clearly morphing to longer term. I think that the grid delays, the announcement of grid delays, the magnitude of the power the SB6 approach from the government coming up, the recognition that these guys are going to need this power for a while is really morphing average contract tenors out significantly from where the thought was maybe a year ago about what this business needed to be. So it's morphing into more of a behind-the-meter permanent power or permanent power to a portion of it becomes backup if the grid gets there at a lower cost. But I think there's a heightened sensitivity within the regulatory framework and the public about power prices going up and the notion that the behind the meter helps defray some of that, I think, is an important element that our customers are evaluating.

Michael Dudas | Analyst, Vertical Research

I appreciate it. Just a quick follow-up. When you talk about behind the meter and all the above approach that you've talked about throughout this call, could you maybe rank where other approaches are in solutions relative to what Solaris on the gas, on your core gas turbine side is, and how that may incorporate your lead time or your ability to kind of secure these projects relative to other solutions in the market behind you.

Bill Zartler | Chairman and Co-CEO

Well, I think the other solutions are, you know, finding a specific grid location where there may be excess power and pulling that down. Most of that at this point with the size of the data centers is need some element of either backup or complementary prime power. And so as those sites or nodes that may have excess power on the grid, they're getting filled up, and that is getting scarcer and scarcer, and those are now being complemented by power solutions like ours. I think the others in the market that are doing this, I think the Williams team is a very professional organization. They run a lot of equipment and assets around the country, and they're doing it. similar to, I think, the approach we're taking with equipment and long-term tender contracts. And I think the market is recognizing that it will be powered on the increment by natural gas, whether that's actually over the next 10 years, whether that's a backup behind the meter or whether that's an additional utility-based big turbine running on the grid. So it will all be fired by natural gas on the increment for the stable power that's needed to run those data centers.

Kyle Ramachandran | President and CFO

I think just one small piece to add. When we allude to other sources of generation to complement our turbine workhorse, as Bill referred to it as, that allows us to extend the turbine capacity that we have today. In other words, if we're able to complement with a larger size or amount of gas resips as well as potentially fuel cells, that allows us to extend the turbine capacity that we have today on balance sheet to a broader amount of megawatts from a total demand from a data center perspective. So in other words, we've got, I would say, the critical piece that's got the longest lead time associated with it secured with the gas turbines. And if we're able to complement that with additional sources of generation, whether it be a combined cycle plant that's getting stood up either interconnected to the grid or in an islanded mode or its resips or something like fuel cells, it gives us optionality to continue to extend and grow the 2200 megawatts with not necessarily adding specific turbines inside of the sort of timeframe where we could be bringing on other sources of generation.

Michael Dudas | Analyst, Vertical Research

Excellent, Kyle. Thank you, Bill.

Operator | Conference Operator

The next question is from Bobby Brooks, Northland Capital Markets.

Please go ahead. Bobby Brooks | Analyst, Northland Capital Markets

Hey, good morning, guys. Thank you for taking my question, and congrats, Amanda, on the co-CEO role. I just wanted to have a quick follow-up for Kyle, mentioning how adding new power generation can kind of extend the core turbine power that you have on the balance sheet. I'm just curious, in your future contract negotiations, has that worked into the contract where it's like, hey, we'll provide you 400 megawatts of power, but it's not specific as to what type of asset is generating that power?

Just curious on that. Kyle Ramachandran | President and CFO

Sort of a mix of all, I would say. So I think the key asset we have today to engage with customers is our order book as it sits today. But as we discuss with them, here's what it is, generally speaking, the needs are greater than that. And so as we're looking at putting together contracts, it's sort of step one, locking what we've got on balance sheet, and step two is their demands ultimately are larger, and we're giving them options and flexibility around different levers to pull to increase the total capacity. So it also could be a combination of other gas turbines that we haven't secured to date. So I think every opportunity we're discussing, we've got a great, somewhat of a starter kit for the customer's needs, and additional capacity can be met with additional gas turbines, reciprocating engines, or other forms of generation. So we've got the optionality.

Bobby Brooks | Analyst, Northland Capital Markets

Got it. That makes a lot of sense. And then I was just hoping to get a bit more insight of how you guys have been consistently able to secure more managed megawatts near term the last few quarters. Obviously, I can appreciate that you want to keep the specifics close to the chest, but could you maybe just walk us through at a high level how these opportunities arise and ultimately how you execute on them? And then the second piece is, is it right to think that the 160 megawatt sequential step up was The majority of that was re-rented capacity, or were you able to secure any early deliveries?

Bill Zartler | Chairman and Co-CEO

So I think Kyle kind of mentioned earlier, we've got the MER team and the HVNDLV team has decades and decades of experience in the market globally, and we've scoured the market both in the U.S. and internationally to find equipment that we could put to work, mostly on a rental basis. We evaluated purchasing some of it, and we might, but we have not done that yet. But it is really about our ability to go find those pieces of the puzzle and put them to work and have the distribution equipment ready to go to make it all work together.

Bobby Brooks | Analyst, Northland Capital Markets

Fair enough. Appreciate the call, Eric.

Operator | Conference Operator

Thanks. This was the last question. I would like to turn the conference back to Mr. Zartler for any closing remarks.

Bill Zartler | Chairman and Co-CEO

Thank you. Thank you, everyone, for joining us today. I'm excited about the continued growth we've achieved to date as well as the growth that's to come. Excited to see the Solaris family continue to grow both organically and through acquisitions. Our success is a testament to the dedication and hard work of our employees, the trust of our customers, and the strong partnerships with our suppliers. Thank you for being part of the Solaris team. We believe we are just getting started and continuing to meet the industry's growing and urgent needs for comprehensive power solutions. We look forward to sharing our progress with you in a few months.

Thank you. Operator | Conference Operator

Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect. jsPDF 3.0.3 D:20260606090420-00'00'