Q1 2025 Solaris Energy Infrastructure Inc Earnings Call
Speaker Change: [music].
Good morning, and welcome to the Solaris first quarter 'twenty 25 earnings conference call.
All participants will be in listen only mode.
Or do you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
After todays presentation, there will be an opportunity to ask questions.
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 has been recorded.
I would like to now turn the conference over to Yvonne Fletcher Senior Vice President of Finance and Investor Relations. Please go ahead.
Speaker Change: Thank you operator, good morning, and welcome to the Solaris first quarter 2025 earnings conference call. Joining us today are our chairman and CEO, they'll partner 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 statement.
We will make today.
Speaker Change: Such forward looking statements may include comments regarding future financial results and reflect a number of known and unknown risks.
Speaker Change: Please refer to our press release issued yesterday, along with other recent public filings with the Securities and Exchange Commission that outline those risks.
Speaker Change: 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.
Speaker Change: I would like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance.
Speaker Change: The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP reconciliation.
Speaker Change: Reconciliations to comparable GAAP measures are available in our earnings release, which is posted in the news section on our website.
Speaker Change: Now I'll turn the call over to our chairman and CEO Bill Harlan.
Bill Harlan: Thank you Yvonne and thank you everyone for joining us this morning.
Bill Harlan: As first quarter results reflect strong performance from both of our business segments. This was the second full quarter executing with our combined business units focusing on generating strong free cash flow from our legacy logistics solution business and reinvesting that cash into our growing power solutions business.
Bill Harlan: Strong performance from both segments and the continued benefits we are observing from integration highlight the complementary nature of these two businesses are.
Bill Harlan: I will begin with an update on our power solutions commercial and growth strategy, including a discussion of several exciting developments announced in our first quarter earnings press release last night.
Bill Harlan: And our prior update in late February we announced that Soliris signed an initial six year contract with a major customer for approximately 500 megawatts of power generation capacity to support our new data center campus and that equipment to support this contract was to be capitalized within a joint venture.
Bill Harlan: Last night, we announced that the commercial contract has been upsized to approximately 900 megawatts for an extended initial tenor of seven years. We also announced that we have closed on the joint venture agreement under which Soliris will perform as manager empower operator of the joint venture.
Bill Harlan: The structure of the upsize JV remains unchanged from prior communication with Soliris owning 51% of the partnership and our partner and customer retaining 49, 1%.
Bill Harlan: We are excited about the opportunity to partner with and provide primary power for a fast moving customer who is one of the leaders in the evolving artificial intelligence industry. We believe this joint venture demonstrates the value of Soliris provides as a partner in providing reliable power solutions that extend beyond temporary bridge power needs.
Bill Harlan: The extended tenor of the Upsized commercial contract improves earnings visibility of our power solutions business into 2033.
Bill Harlan: The average tenure in our power solutions contract book now exceeds five years as to compared to about six months less than a year ago, when we announced the acquisition of M. A R.
Bill Harlan: This upsizing of the contract and J D resulted in the effective full year commitment of our power fleet at a time when secular power demand continues to grow with numerous opportunities in our commercial pipeline coalescing around the second half of 2026.
Bill Harlan: Given this backdrop, we secured approximately 330 megawatts of additional generation capacity of our manufacturing partner to continue to service the needs of new and existing customers.
Bill Harlan: This capacity was not easy to obtain as the OEM supply chain has gotten progressively tighter since our initial orders.
Bill Harlan: We expect to take delivery of the majority of this most recent order in the second half of 2026, which results in a new pro forma total capacity of approximately 1700 megawatts operated by Soliris of which we will own approximately 1250 megawatts on a net basis after giving effect to our 51% inter.
Bill Harlan: Just in the joint venture.
Bill Harlan: On the new pro forma delivered total fleet of 1700 megawatts, we remain approximately 70% contracted with around 500 megawatts of open capacity to bid into the growing number of opportunities. We continue to pursue these opportunities include a combination of datacenter opportunities.
Bill Harlan: With new potential customers projects for energy production and processing facilities and various other industrial applications.
Bill Harlan: The data center opportunity presents both unique challenges and exciting prospects, we continue to receive inquiries for larger applications, which render the traditional methods of power procurement and reliability planning a challenge for those prospective customers a large data center used to be under 50 megawatts and would rather rely primary.
Bill Harlan: Our grid power with a bank of reciprocating generators standby backup.
Bill Harlan: It is becoming increasingly evident that the largest data centers will tap a variety of sources for their primary secondary and emergency backup power.
Bill Harlan: Modern data centers have grown to several hundred megawatts with leading edge capacity, surpassing 1000 megawatts managing loads at this scale is challenging for anyone including grid operators by co locating generation on site as part of their primary power mix power consumers gain the ability to diversify their energy source and the control some of their own.
Bill Harlan: Primary and built in backup power that can operate either independent of or in conjunction with the grid.
Bill Harlan: By using best in glass gas turbines and associated equipment, such as F. C ours customers gain additional benefits of tower density capability to moderately scale and relatively low emissions and water use profiles under the Soliris power as a service model. These benefits can be provided.
Bill Harlan: Our compelling all in costs, often competitive with the delivered price of Baseload grid power.
Bill Harlan: Considering total cost of ownership our model is akin to a fixed capacity payment and with a variable commodity price input via the natural gas that is paid for by the customer. This results in a significant portion of our customers' costs being hedged for the duration of the contract we can remain economically competitive with the grid offer visibility.
Bill Harlan: Long term power costs and provide built in backup redundancy and reserve margin.
Bill Harlan: We believe time to power delivered cost and surety of supply were the primary drivers behind our customers desire to enter into.
Bill Harlan: The long term partnership with Soliris.
Bill Harlan: For customers that take a similar longer term strategic view to solving power constraints, but do not have the expertise or bandwidth to manage a large co located powerplant soliris is power as a service model provides a solution that is evolving with the market need.
Bill Harlan: Increasing regulatory challenges for Datacenters are also highly supportive of the powers of servicing the notion of bring your own power is real as evidenced by growing recognition from Greg regulators and operators regarding the limited availability of Baseload power or new additional ours loads.
Bill Harlan: By co locating generation off grid and island mode customers can accelerate time to power and benefit from true Uninterruptible power.
Bill Harlan: Discuss how this approach also enhances the resiliency of their operations and May eventually contribute to overall grid resiliency as well.
Speaker Change: Turning to our logistics segment.
Speaker Change: Soliris logistics had a very strong first quarter with system activity up over 25% sequentially as we benefited not only from the seasonal rebound, but also from new customer wins and continued adoption of our top health system. Our best our advanced technology offering continues to position us as the partner of choice our silo systems have the ability.
Speaker Change: To handle increasing sand throughput as completion intensity and in turn efficiencies continue to accelerate.
These increased efficiencies have contributed significantly to the success of our top till system as well, which was effectively sold that during the first quarter during the quarter approximately 75% of our locations work with both our legacy sand silo system and a top health system.
Speaker Change: This natural cross selling as a resulted in a substantial increase in soliris earnings capacity effectively doubling our earnings potential at the individual well site level.
Speaker Change: As we look ahead, we have conviction in the relative stability of activity levels. During the early part of the second quarter, resulting in no changes to our prior second quarter guidance. We are however, beginning to observe some operators respond to the recent commodity price softness by delaying jobs or reducing the number of frac crews are expected in the second half of the year with an oil direct.
Speaker Change: <unk> basis.
Speaker Change: During the first quarter. We also continued to harvest significant free cash flow generation, resulting from the fleet investments made in prior years, our early mover advantage in the complete electrification of our logistics solutions fleet continues to provide a commercial advantage as our fleet is already well positioned for the ongoing electrification trend.
Speaker Change: How's us to redirect cash to reinvest our growing power solution segment.
Speaker Change: We also observed unique synergies between our two segments as we continue to integrate our businesses. We will continue to have hiring needs in the power solutions segment for some time, enabling us to continue to cross trained many of our logistics field technicians to fulfill this visible need was trusted in house expertise.
Speaker Change: Our efforts to integrate our engineering supply chain and manufacturing functions also continue to progress.
Speaker Change: Meaning the air permitting requirements in certain jurisdictions for multi year fixtures requires investment and selective catalytic reduction emissions control systems are scr's, we've collaborated with our customers select the best available control technology and are in advanced stages of planning manufacturing and assembly of some components of the S E ours and our manufacturing facility located in <unk>.
Speaker Change: Texas, bringing some of this manufacturing in house is expected to lower cost and potentially mitigate exposure to tariffs.
Speaker Change: Both of which help improve our returns on capital in House manufacturing also provides us with greater control over product quality and design.
Speaker Change: We're excited about the first quarter results from both business segments as well as the continued momentum and visibility we are seeing in the large power solution segment I am proud of the exceptional team and innovative culture that we continue to build we are focused on maximizing shareholder value through growing the company without sacrificing the strong financial pro.
Speaker Change: While our business.
Speaker Change: With that I will turn it over to Kyle.
Kyle Ramachandran: Thanks, Bill and good morning, everyone. I'll begin this morning by providing additional details on our updated order book associated growth capital spending and our latest thoughts on financing as Ivan mentioned, please refer to our earnings supplement slide deck on our website.
Kyle Ramachandran: Following the upsizing of the commercial contract and joint venture to approximately 900 megawatts are powerfully and limited open capacity to ensure we continue to meet accelerating market demand during the quarter, we secured an incremental 330 megawatts of $16 five megawatt turbines.
Kyle Ramachandran: This order brings our total expected operated fleet to approximately 1700 megawatts pro forma for all deliveries more than 90% of the resulting fleet will consist of 16 and 38 megawatt units, which we think results in a fleet that offers an attractive level of power density, while still allowing us to be responsive to our customers' needs we're scaling.
Kyle Ramachandran: And flexibility.
Kyle Ramachandran: We expect to take deliveries under this latest order over the second half 2026 with full effective deployment of our fleet in the first half of 2027.
Kyle Ramachandran: We are excited to have finalized this joint venture with an existing large scale a high client.
Kyle Ramachandran: The near doubling in power generation capacity to 900 megawatts and the increased tenure to seven years from six years are positive indications and argue both market demand for these solutions combined with the confidence of our customer has and flourish his ability to execute over the long term.
Kyle Ramachandran: The extension and contract tenor brings our average contract tenure to approximately five and a half years on a blended basis compared to approximately four years last quarter and approximately six months when we closed on the MBR transaction eight months ago.
Kyle Ramachandran: The revenue from this contract is also subject to a take or pay provision further solidifying contracted earnings visibility.
Kyle Ramachandran: The partnership has also secured its own financing to support this growth. We recently executed a term sheet and are negotiating definitive documentation for a senior secured term loan facility of up to $550 million to support roughly 80% of the forecasted capex requirements of the JV Soliris.
Kyle Ramachandran: <unk> first quarter capital expenditures included its cash equity investment into the JV, our JV partner will contribute its pro rata share of cash equity in the second quarter of 2025, we expect the JV debt facility to fund the remainder of the Jv's capital needs.
Kyle Ramachandran: The ownership structure of the JV remains unchanged relative to prior disclosure, we will own 51% of the assets and will operate and manage the equipment on behalf of the JV.
Kyle Ramachandran: The net impact to our fleet ownership results in approximately 250 megawatts owned by Soliris out of a total operated fleet of approximately 1700 megawatts.
Kyle Ramachandran: For purposes of financial reporting we will consolidate the results of the full partnership with our customers equity portion of earnings reported as Noncontrolling interest.
Kyle Ramachandran: Including our latest order of 330 megawatts. We believe we will have enough power dense power generation equipment available for future long term contracting with customers for deliveries beginning in the second half of 2026.
Kyle Ramachandran: The pace and trajectory of our ongoing commercial discussions gives us confidence that we will contract the remaining capacity.
Kyle Ramachandran: A full deployment, we see potential for the total company to generate $575 million to $600 million of annual run rate adjusted EBITDA on a consolidated basis.
Kyle Ramachandran: Accounting for the economics of the joint venture structure, we expect annual run rate adjusted EBITDA net to <unk> of approximately $440 million to $465 million. These.
Kyle Ramachandran: These estimates considered the current contract book and assume a three to four year payback on the currently unconstructed equipment on order today.
Kyle Ramachandran: Turning to recap, our first quarter 2025 performance and our guidance expectations for the next two quarters.
Kyle Ramachandran: During the first quarter Soliris generated total revenue of $126 million, which reflected a 31% increase from the prior quarter due to continued activity growth in power solutions as well as growth in logistics.
Kyle Ramachandran: Adjusted EBITDA of 47 million represented a 25% increase from the prior quarter power solutions contributed 55% of our total segment adjusted EBITDA and is on track to contribute more than 80% of our consolidated adjusted EBITDA. After an order fleet is deployed.
Kyle Ramachandran: During the first quarter Soliris power solutions generated revenues from approximately 390 megawatts of capacity for the second quarter of 2025, we expect activity as measured by average megawatts, earning revenue to increase 13% sequentially to 440 megawatts.
Kyle Ramachandran: This increase is being driven by increased power demand from our customers, which we are meeting using selective sourcing of third party turbines.
Kyle Ramachandran: For the third quarter, we expect average megawatts on revenue to increase by 18% to approximately 520 megawatts.
Kyle Ramachandran: In our logistics solutions segment, our guidance for fully utilized systems remains unchanged at approximately 90% to 95 systems in the second quarter. We expect profit per system in Q2 to be in line with Q1 levels for the third quarter. We expect oil directed activity could soften should commodity prices remain at or below.
Kyle Ramachandran: Current levels.
Kyle Ramachandran: We expect approximately $7 million of corporate or unallocated expense in the second quarter, which reflects a more normal run rate.
Kyle Ramachandran: First quarter reflected a cash settlement of stock based performance units granted in 2023, and 2024 as well as higher employer taxes associated with divesting of restricted stock that should not repeat in the remaining quarters of 2025.
Kyle Ramachandran: These items result in adjusted EBITDA between 50, and $55 million in Q2, and adjusted EBITDA between 55 and $60 million. So Q3.
Kyle Ramachandran: For more detail on the guidance and other corporate modeling items, such as interest expense depreciation and amortization tax rate and share count to use for modeling purposes. Please refer to our earnings supplement slide deck.
Kyle Ramachandran: Before we turn the call over to the operator for Q&A I'd like to spend a couple of minutes addressing the potential impact of tariffs on flex.
Kyle Ramachandran: The ultimate tariff impact is still unknown and it's evolving frequently we believe several factors helped mitigate any material impact to our business.
Kyle Ramachandran: Starting with the power solutions business most of our planned growth capital spend is allocated for new turbines are primary turbine vendor already manufacturers in the U S and is a well established flexible supply chain.
Kyle Ramachandran: <unk> for the majority of our current orders as fixed resulting in no material impact from tariffs on our recent 330 megawatt order. We believe the maximum potential tariff impact is limited to 5%. The total cost and then only to the extent tariffs are actually incurred.
Kyle Ramachandran: To the extent that higher capital costs are realized we expect an ability to pass those along to customers and maintain our targeted returns on capital.
Kyle Ramachandran: Bill mentioned, we are planning to manufacturing certain capital items, such as components of the see ours for emissions control in house at our existing manufacturing facility in Central Texas. This.
Kyle Ramachandran: This initiative aims to reduce costs and enhance overall returns, which could further buffer any potential tariff impact.
Kyle Ramachandran: And logistics solutions are large capital program has concluded and we're now in maintenance mode for those assets since we manufacture this equipment ourselves, we can manage repairs and maintenance domestically in our facility or directly in the field. Many of the inputs required to support these systems come with relatively little expense and we already source most of these items within us.
Kyle Ramachandran: We remain excited about the growing opportunities for Soliris, we continue to focus on generating strong returns on invested capital as we build out our power solutions business, while maintaining the strong cash flow generation from our logistics business to further enhance our attractive financial profile.
Kyle Ramachandran: With that we'd be happy to take your questions.
Kyle Ramachandran: Thank you.
Kyle Ramachandran: We will now begin the question and answer session.
Kyle Ramachandran: Last quick question you May Press Star then one on your telephone keypad.
Kyle Ramachandran: If youre using a speakerphone please pick up your handset before pressing dickies.
Kyle Ramachandran: If at any time. Your question has been address and you would like to withdraw your question. Please press Star then two.
Kyle Ramachandran: At this time, we will pause momentarily to assemble our roster.
Operator: The first question comes from Stephen Chin Garro with Stifel. Please go ahead.
Speaker Change: Hi, Thanks, good morning, everybody and thanks for all the detail.
Speaker Change: I think two two for me what I'd start with maybe maybe bill is when we think about the contracted assets that are scheduled to be delivered over over the next several quarters can you just give us a sense for kind of the conversations you're having and how we should sort of think about.
Speaker Change: The end market demand for those assets.
Speaker Change: Yeah, I think the we wouldn't a word if we didn't believe that there is significant demand in those start delivering about a year from now so we have a period of time and the lead time to develop the projects that these go with it. So we're in numerous discussions from no additional oilfield applications to some data center.
Speaker Change: <unk> Bridge I think that the design of the large power generation in combination with a set of smaller generation does the scale up is a pretty unique thing that seems to be happening now where we can marry up with larger larger generation capacity and they need 200 to 300 on their way up while they build out a bit.
Speaker Change: Larger facility and this stays in as permanent or permanent backup.
Speaker Change: As part of the total generation capacity and in the oilfield continues to be short too we see applications in West, Texas, and New Mexico and those are now we're seeing three to six year contracts out there where it looks like we're going to have some permanent need to build midstream facilities and other places with power.
Speaker Change: Great.
Speaker Change: Thank you.
Speaker Change: The follow up I had was.
Speaker Change: When when we do the sort of the simple math on kind of EBITDA per megawatt.
Speaker Change: It was a little lighter than we thought in the quarter, but the guidance suggests it's kind of rising is that just related to timing of asset deliveries and as opposed to kind of pricing could you just kind of give us a sense for that dynamic and how that evolves.
Speaker Change: Yeah, I think Stephen when we look at the dollar per megawatt economics, it roughly in line with where we guided people over the medium to long term, we're obviously ramping the business here. So we have.
Speaker Change: Some some lumpiness if you will as we ramp up the cost into the business too.
Speaker Change: To help support such a large fleet expansion. So we will see that from Episodically from time to time in the first quarter. We did get the full impact of the two year contract that we have in place at the first data center.
Speaker Change: In the fourth quarter of last year, most of that period had that much shorter six month contract, which was at higher rental rates. So I think you know a dollar per megawatt sort of implied returns are starting.
Speaker Change: To smooth out to where we expected call it.
Speaker Change: Three to four years.
Speaker Change: Paybacks and then the the small sort of.
Speaker Change: Yeah sort of acute impact I would say is along the lines of some of the assets that we are re renting so as we've talked about previously we have an ability to put more equipment to work than we have on balance sheet. Today is were waiting on our delivery. So we've gone out and procured some assets that are.
Speaker Change: Ben on the sideline with some parties with smaller fleets and we've been able to put those to work so that that's having a little bit of impact here in the short term.
Speaker Change: But as we look at sort of the fundamental economics of the business very robust we're seeing projects scale up when we see project scale up we're benefiting from scale. There so going from 500 megawatts to 900 megawatts into the second.
Speaker Change: Datacenter fixture is going to be on a net basis positive as we look at returns.
Speaker Change: No great. That's good color. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Moderator: The next question comes from Derrick Whitfield with Texas Capital. Please go ahead.
Derrick Whitfield: Good morning, Don Congrats on the formalization of the JV.
Moderator: Thank you Eric.
Speaker Change: With my first question I wanted to focus on the air permit and thinking about your prepared remarks, and your JV partner's commentary last Friday is it reasonable to assume that your client should be able to attain an air permit within a reasonable amount of time given that the facility is one of the lowest emitting facilities in the country.
Moderator: Yeah, I mean, we're.
Moderator: Our our customers following all the EPA guidelines, we've assisted in providing equipment information in an information around there.
Moderator: Cadillac reformers that we're adding to the to the tail end of this and we we see no reason to believe that it's not in full compliance with the law and they'll get the permits associated with building the facility out.
Speaker Change: Perfect and then maybe just leaning on the SCR side could you speak to the value of this offering to your clients and they can contribute to a higher rate or is it a cost of doing business.
Speaker Change: Is S. E. R is truly a cost of doing business, we're lowering the emissions profile of this equipment and so that's just the additional capital in and a minor amount of operating cost we rent that equipment in the same kind of fixed fee basis.
Speaker Change: Pass through.
Speaker Change: Some of the operating costs.
Speaker Change: Terrific. Thanks for your time and restocking.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: The next question comes from Derek Budweiser from Piper Sandler. Please go ahead.
Derek Budweiser: Hey, good morning, guys I'm, just kind of a nuanced question just looking at the deck the break up the portfolio. The power it looks like there's about 1.1 gigawatts contracted the datacenters the JV that 900 megawatts.
Speaker Change: It's about 200 megawatt difference is that with the first data center complex just trying to think about will that eventually get into the JV or will those megawatts are eventually have to find a new home just maybe some thoughts around that.
Speaker Change: Yes that that additional capacity is sitting at the first data center that we have with the client. It is not intended to go into the JV at this stage and I think those those units have now been running six to nine months and will continue throughout the term of the contract. So the notion of dropping them into the JV will likely create some complexity. So I don't see.
Speaker Change: But that those will come out but the client is has filed a long term type of five air permits for that location as well to keep the the units that we have embedded in this guidance there.
Speaker Change: In effect in perpetuity.
Speaker Change: Got it Okay. That's helpful. And then just on the supply chain your comments around it getting tighter you're able to get the 16 and a half the back half of 2026, you know how how are you able to get those where you're able to switch place in line with somebody else and then maybe what's the tightest part is it a 38 megawatts. If you ordered a new one today how long are those lead times currently.
Speaker Change: Yeah with respect to the larger units are our understanding is those are effectively sold out and we've been the the largest order.
Speaker Change: With the OEM there and at this point, it's a newish product for them. So.
Speaker Change: Theyre, taking a somewhat conservative position as far as additional orders there and so what we were able to secure where additional capacity in the 16 five megawatt units.
Speaker Change: I can be candid with you that it was quite difficult to secure and that there there were a lot of back and forth and our willingness to move quickly and boldly as we've continued to do throughout this process to secure that capacity.
Speaker Change: It was it was a a <unk> exercise in a bold move and a relationship where we've done exactly what we told them we were going to do and we were able to reach a mutual agreement that works for both parties and that but it continues to be a very tight supply chain with respect to generation capacity.
Speaker Change: Great I appreciate all the color I'll turn it back.
Speaker Change: Thank you. The next question comes from Thomas most heat with Janney Montgomery Scott. Please go ahead.
Speaker Change: Good morning, Thanks for the time came couple.
Speaker Change: A couple for me first on the kind of contracted versus quote unquote spot mix of assets I'm curious what you think is the ideal mix and then specifically with regards to spot opportunities how should we think about those EBITDA margins being in line with.
Speaker Change: On the P&L now for power or is there a reason to why it's above or below that number.
Speaker Change: Got a few follow ups from what I think hey, I think spot as a is it a different way spot targeted spot equipment and what's on contracted today that may go into a medium or longer term contracts, so spot market opportunities, where we would put something to work and most of what we've done it's been six months or greater so spot is.
Speaker Change: Is it different terminal a lot of different industry six months is medium term in some industries in and and spot. So we're seeing some of that work I think the fleet will be 5% to 10% kind of available for emergency situations in place, where there is additional outsized margins, especially on the smaller units as we're addressing these larger loans.
Speaker Change: The the larger the 65 megawatts and a 38 megawatt units, we see those going on on medium to long term contracts and most of that will be used that way you have recently, we've had inbounds with respect to emergency response activity in <unk>.
Speaker Change: Our ability to meet that demand today, we don't have that capacity, but as bill alluded to at some point as the fleet matures, that's probably capacity that sits in the fleet that we're able to meet that market demand.
Speaker Change: Oh, Oh, Paul and then also kind of a longer term question, but.
Speaker Change: Curious if you are having conversations with customers or if you can kind of quantify your ambition for owning larger stationary turbines for some of these.
Speaker Change: Almost.
Speaker Change: Yeah, five to 10 year contracts, yes, thats, something thats being discussed or too early.
Speaker Change: You know, we've we've evaluated a lot of options and talk to you know many many providers and folks that operate prime units.
Speaker Change: And six thousands and.
Speaker Change: The like from five megawatts to 500 megawatt equipment and so we're we're in the mix discussing what the ideal you know as we mentioned in the prepared remarks with the ideal power supply it looks like for some of these large loads and it will end up being a combination of multiple things. It may even be nuclear and a few years. So I think as you look at how.
Speaker Change: Well the our supply develops for these large loads and how those large loads are going to be permanent and what that looks like I think the small medium sized turbines that we provide are going to be a part of that mix in the long.
Speaker Change: Okay and last one for me and appreciate the third question here just on the batteries that youre using for managing voltage I'm curious if you're seeing any degradation that you can provide color around.
Speaker Change: And maybe even just a timeline on when.
Speaker Change: Batteries would need to be replaced or just kind of any color about what youre seeing operationally with those batteries.
Speaker Change: Yeah, we're not actually operating the batteries are customer is running at I was cut off.
Speaker Change: Alright, thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: The next question comes from Jeff <unk> with D. P. H. Please go ahead.
Good morning, Bill and team. Thank you for taking my question I just had one I was curious if you could talk about how the success with your current client is influencing negotiations for future data center contracts with potentially new customers.
Speaker Change: And how those conversations are ongoing thank you.
Speaker Change: Well I think the you know the conversations with other providers recognize that what we've done and continue to do for our current customers then.
Speaker Change: <unk> high level of service extremely rapid response building out and operating a reliable power plant very very quickly and I think that.
Speaker Change: That's part of our reputation from the oilfield side of this business to to this power side of the business and I think that's one of the things that we will keep up which is creative addition of manufacturing additional IP as we build out. These these facilities and how that works and how we provide a service that is second to none on rapidly deploying power.
Speaker Change: For the long term.
Speaker Change: Awesome. Thank you very much for the color I'll hand, the call back to the operator.
Speaker Change: Thank you. The next question comes from Don Crist with.
Speaker Change: Johnson Rice. Please go ahead.
Good morning, guys hope, you're all doing well.
Speaker Change: I wanted to ask you about the discussions with the customers outside of your current data set of customer how big would those.
Speaker Change: Jobs, B and what I'm driving at is could you have two or three total customers and soak up all the capacity that you're that you have on order today or or those jobs kind of smaller 50 megawatt kind of jobs are they bigger.
Speaker Change: Well, if you're focused on the datacenter customer market, they're all going to be larger facilities, they're scaling into this so it's a matter of how you scale in from 50 to 500 or 50 to a gigawatt and in that Asia, which they need to build their hauls and load there but their chips.
Speaker Change: As we we design those with them I think the other part of the business, where we're seeing other industrial loads in midstream.
Speaker Change: Energy businesses those tend to be in the now and the tender under 75 megawatt size.
Speaker Change: Okay.
Speaker Change: And one on the oilfield if I can.
Speaker Change: No.
Speaker Change: <unk> outlined a little bit of weakness that youre seeing in the third quarter.
Speaker Change: Is that kind of dependent on oil price has fallen from here or in a 61 or so dollar.
Speaker Change: Oil price do you see that demand falling as we move through the back half of the year.
Speaker Change: Yeah, I think that what we've seen out of the oil companies, so far and conversations with customers at this price level, you will see some incremental oil frac fleets dropped in certain markets. So I think at $61, you're going to see a bit of a slowdown in the end.
Speaker Change: <unk> market over the course of the next quarter or two.
Speaker Change: Some of it is people will just become faster and faster Don and some of it is just it's literally just pulling a little bit of gas off the pedal.
Speaker Change: So theres just a rate of speed that.
Speaker Change: There is some conservatism.
Speaker Change: Likely to happen.
Speaker Change: Okay I appreciate the color I'll turn it back thanks.
Speaker Change: Thank you.
Bobby Brooks: The next question comes from Bobby Brooks.
Bobby Brooks: Northland capital market. Please go ahead.
Bobby Brooks: Hey, good morning, guys. Thank you for taking my questions. So.
Bobby Brooks: I wanted to double click on being able to secure the additional 330 megawatt order of $16 five five megawatt units by I think what you termed it as by moving quickly and bold.
Do you think I was just curious do you think this is a repeatable process and maybe said differently is is how do you think of securing more megawatts that could be used over the next two call. It two years.
Bobby Brooks: Yeah, I think you're pushing the tail end of that two year timeframe now in terms of availability and it's about getting getting in line, making sure that we can line up the customers for the equipment and be ready to make some of those decisions.
Bobby Brooks: But it is you know it's it's it's it's now out beyond the period that we're doing we're looking at 'twenty seven 'twenty and I think you can listen to some of the other larger Oems in terms of what they're what they're saying in their supply chains and delivery outlooks look like but most of it is.
Bobby Brooks: Then and beyond.
Speaker Change: Got it and then so was I just wanted to confirm that the you know the.
Speaker Change: The 330 that you did this but you just announce that was actual spare capacity that your OEM partner had or was that somebody dropping out of the queue when you're stepping in there.
Speaker Change: No. It was one thing capacity it wasn't it wasn't a function of somebody dropping in order.
Speaker Change: But I think there were others in line if you will such that we needed to move at a pace.
Speaker Change: With which we did.
Speaker Change: Okay that makes sense. Thank you and then so the increase in the megawatts in the contract tenor with the JV, It's great news, but at the same time my sense was you wanted to get some more customer diversification diversification with that open capacity so with that in mind I just wanted to hear how you guys gained comfort ability and increasing the megawatts.
Speaker Change: This JV and then how are you thinking about deploying that I think it's 380 megawatts of open capacity now.
Speaker Change: Well I think in terms of upsizing the JV I mean, they have proven to be a very good customer we have a a strong contract with increased tenor and associated with that and and believe you know very creditworthy and this is what part of what they do and we believe we're helping make them successful by delivering them power.
Speaker Change: When they need it.
Speaker Change: Right right locations and so I think that that said you know if there is a little lack of customer diversity, but at the same time I think we have a great customer.
Speaker Change: And a leader in what they're doing and we're helping provide them grow and they seem to make decisions fairly quickly and seem to be doing well doing the right thing there.
Speaker Change: Working on the diversification yeah. So we we ordered the second order looking at driving some level of diversification in the business outright and we've secured some additional oilfield business in the meantime, it's just not there's needs or an extra turbine or two here or there. It's not the same kind of scale, but we are you know we are diversified we had immediate pretty unique.
Speaker Change: Alonge with a customer that has moved faster than anyone else in the space at a scale that no. One has really reached at this stage. So that's been our challenge, but coming into this year, we had really two distinct goals within the power business, which we're securing extended tenor and diversification in the customer base and clearly from a tenor Stan.
Speaker Change: Point, we significantly changed the outlook into this business going from six month contracts to seven years. So that's a real significant change in the scope and then to the point on diversification. We are working very hard at that we've got a long list of customers that are potential customers that were.
Speaker Change: Working on projects that will require additional capacity. So that's really what drove the need to secure additional capacity.
Speaker Change: Thank you. The next question comes from Shawn Michelle.
Speaker Change: Daniel Energy partners. Please go ahead.
Speaker Change: Good morning, guys Hey.
Speaker Change: Hey, Tyler Bill just is there a big difference in the margin profile between data center power and your other industrial I mean, I know the term in terms of the contracts are probably longer on data center.
Speaker Change: What is the margin profile drastically different.
Speaker Change: No not necessarily on a pricing perspective, I would say that the scale gives us a little bit of operating leverage for the larger jobs that we deliver our maintenance programs and all the all the kind of fixed fixed fixed variable cost. If you will of keeping their filters cleaning and doing all of those kind of things would be a little higher out in the oilfield than they than they are.
Speaker Change: In a more urban environment data center. So there was probably a little net higher margin from scale, but the pricing itself is very similar.
Speaker Change: That's based on tenure.
Speaker Change: Got it.
Speaker Change: Thanks, guys, that's all I got.
Speaker Change: Sure.
Speaker Change: Thank you.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: We have a follow up question from Stephen <unk> with Stifel. Please go ahead.
Stephen: Hi, Thanks, Thanks for taking the follow up.
Speaker Change: I know just stick solution side I had two quick questions. One was you you mentioned in the press release are adding new customers. I was curious if you could if there's any color you could add to that and is it related to E&P consolidation and kind of what is your sort of outlook for the ability to kind of outgrow the <unk>.
Stephen: <unk>.
Speaker Change: We outperformed the market.
Speaker Change: Yeah, I think the new customers have really been driven by our new technology and the desire to go faster and so I think if you. If you begin to look at folks talking about you know Simon.
Speaker Change: Simultaneously Quad Fracs, you know who knows where this ends but effectively continuous pumping.
Speaker Change: And when youre going to attack that market, having the supply chain locked with our equipment and the ability to put the top fill and larger truckloads really makes that more efficient. So I think we're seeing it driven by our.
Speaker Change: Our equipment provider.
Speaker Change: Providing the solution for these larger more efficient fracs.
Speaker Change: Thanks.
Speaker Change: From is that taking share from containers or is it taking share from other other silos.
Speaker Change: More likely containers.
Speaker Change: Those are much smaller and its the handle of the handling function on the wealth side as a lot of those little more complicated.
Speaker Change: Okay I think that's all for me thanks for the details.
Dave: Thanks, Dave.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: The next question is from Bobby Brooks.
Speaker Change: <unk> capital markets. Please go ahead.
Speaker Change: Hey, Thanks for taking the follow up just last question for me.
Speaker Change: Focusing on Capex you know on the Mark on your March deck, you guys had given consolidated Capex was guided toward $265 million. Obviously, you ended up only doing $144 million in the quarter. So I was just curious of what's the driver of that my understanding of the turbine payments are pretty set in stone. So just.
Speaker Change: Curious where kind of the savings came here. Thank you.
Speaker Change: Yes, I wouldn't call it savings I don't think that the.
Speaker Change: The aggregate numbers of change, it's just kind of a function of timing and when we come out guidance, it's really a function of our estimate of when we're going to receive invoices and that does move around from time to time for various reasons with the OEM. So so nothing materially changed there just just a function of timing.
Speaker Change: It sounds like it makes it makes a lot of sense congrats on a great quarter. Thank you guys.
Speaker Change: Thanks.
Speaker Change: Thank you. The next question is from Jeff <unk> from D. P. H. Please go ahead.
Speaker Change: Thanks for the follow up I just wanted to see if you could provide more color on the end markets of industrial opportunities I think everybody is somewhat familiar with the applications for midstream and E&P and oilfield and I'm. Just curious if you could provide a little bit more color on the end markets are for industrial opportunities. Thank you.
Speaker Change: Well I mean, I think as we bring manufacturing back in I think that's one of the countries targeted goals, we're seeing it in and metals manufacturing anything that's of high power usage high load is struggling to figure out how to get those loads approved into the grid. So we're seeing it from export facilities for.
Speaker Change: Natural gas liquids and LNG, all the way across to some metals metals manufacturing bending and some processing, we're seeing it from air processing businesses, where you're trying to make.
Speaker Change: Hydrogen and oxygen in and do that are high load compressors. So there's a.
Speaker Change: A whole host of various other industrial applications that we see are going to need the large large loads of power in a very similar to the Baseload Baseload is critical for those and Theyre looking at what's the right solution for them.
Speaker Change: Thank you very much for the color I'll hand, the call back to the operator. Thank you.
Speaker Change: Thank you.
Bill Harlan: We have reached the end of the question and answer session I'd now like to turn the call back over to Mr. Bill exactly.
Speaker Change: Closing remarks.
Speaker Change: Thank you everyone for joining us today, we're obviously off to a strong start in 2025 as we see our rapid growth through this noisy environment and our entire team is excited about the opportunities for the company I believe we have the right business with the right people and culture that will help us continue to deliver value to our shareholders and our customers.
Speaker Change: Like to thank all of our employees customers and suppliers for their continued partnership and making sure. We're a success. Thank you all and we look forward to sharing our progress with you in a few months.
Speaker Change: Thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Uh huh.
Speaker Change: Yes.
Speaker Change: [music].