Solaris Energy (NYSE:SEI) held its first-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.

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The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=uPWy7WDW

Summary

Solaris Energy reported about a gigawatt of available capacity, with plans to deploy remaining megawatts through expanding current contracts or acquiring new customers.

The company is targeting a 20-50% EBITDA uplift from balance of plant operations, with current guidance at the lower end due to conservative projections.

Solaris Energy is experiencing growth in its North American market and maintains a positive outlook on holding its oil and gas business for cash flow.

The company is focused on long-term growth, with a conservative approach to quarterly guidance, and expects to ramp up deployments over the next quarters.

Solaris Energy has secured contracts and capacity for future growth, including a 500-megawatt contract starting in 2027, and is optimistic about additional opportunities.

The JV structure is designed to distribute cash after debt servicing, providing additional funds for growth and CapEx requirements.

Full Transcript

OPERATOR

Our ability internally in these organizations shows that we've been there and 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 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 demonstrated the credibility that's required to get them comfortable. It's been helpful to refer to the uptime we've had at projects where we're operating, and it makes it easier as a consequence to negotiate your uptime requirements and new contracts. You can actually point to actual operations. Right, right. That's very helpful. So just looking at your megawatts, counting them up between the three hyperscaler contracts some install in the energy patch, 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? I think it's going to be maybe a combination of all the above. Got it. Great. Thank you very much. Turn it back. The next question comes from Dave Anderson with Barclays. Please go ahead.

Dave Anderson (Equity Analyst)

Hi, good morning. Just coming back to the balance of plant side of your business. How much of that 2 gigawatts plus you have under contract includes balance of plant and previously you've talked about 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 guidance. 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. 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 business we don't hear a lot about.

OPERATOR

The next question comes from Derek Whitfield with Texas Capital. Please go ahead.

Derek Whitfield (Equity Analyst)

Good morning all, and thanks for your time. Well, first, 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, switch gears, cables, et cetera? 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 computer, could you speak to how this came together and potentially the upside from this development as you see it today?

Amanda

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, you get great attraction across the various departments and teams in that customer's company.

OPERATOR

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

Bobby Brooks (Equity Analyst)

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? Really appreciate that. And it was awesome seeing you secure another 900 megawatts in the quarter. And some of those were buying queues 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 backlog 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 gensets off without any of the service capabilities or the balance of plant power stuff that we've. You've been touching on earlier. So I think there's more opportunities for you to buy those delivery slots that

OPERATOR

Our next question comes from Patrick Let with Stifel. Please go ahead.

Pat

Hey, good morning. It's Pat on for Steve and Gigaro, Thanks for taking the questions. Shifting to more near term here. When we think about the third quarter guide, is there any color you can give about the power deployments there and mix of third party assets and then any insights into deployment ramp into 4Q. Right. Yeah. Okay. Thanks for that. And then for the 500 megawatt contract, what sort of 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?

OPERATOR

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

Bill

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 another great outlook when we put this to work.

OPERATOR

The next question comes from Jeff LeBlanc with PPH. Please go ahead.

Jeff LeBlanc (Equity Analyst)

Good morning Bill, Amanda and team. Thank you for taking my question. Yeah, 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? Okay, thank you for the color. I'll hand the call back to the operator

OPERATOR

then. The next question comes from Scott Gruber with Citigroup. Please go ahead.

Scott Gruber (Equity Analyst)

Yes, good morning.

Scott

Yep, yep, I appreciate that. And then, you know, as you push forward with these integrated solutions and, and you're now building diversity into your, 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, with those contracts, but you're locking in capacity on shorter term contracts with fewer calories attached. But do you start to tilt away from those smaller kind of non integrated projects or do you still like that diversity in the book?

OPERATOR

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

Jeff Bellman (Equity Analyst)

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. Okay, okay, thank you very much.

OPERATOR

The next question comes from Don Crist with Johnson Rice. Please go ahead.

Don Crist (Equity Analyst)

Morning guys. Thanks for letting me in. Okay, so that can offset some of the CapEx requirements you may have in other places. Yes. All right, I appreciate it. Thanks.

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 (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.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.