SEI Q3 2026 earnings call transcript, November 5, 2026

I'm sorry to interrupt. We could not hear you. Could you please go ahead? Come again. Can I try again? We're having maybe a problem with microphone. Can you hear me now? Yes. Yes. Thank you. Okay. Alex, I sounded very eloquent, so I'll try again. This was not really a competitive process. We were contracting with a customer that we have worked with before who know our capabilities and how we have performed. So this is just really, we decided that this was the best opportunity for us geographically. Diverse, the use of the equipment, the returns. So that is how we approach this project. But with respect to the market, there's certainly lots of competitions with respect to the actual capacity. And so as we alluded to in the prepared remarks, in the quarter, we were able to go out and opportunistically pick up some more capacity where we are evaluating. Additional opportunities as well. But I think the amount of demand growth with respect to the actual application and the end use that our customers are seeing is growing at a tremendous rate. And infrastructure continues to be behind from a development standpoint. So we've got obviously an incredible track record operating multiple large. scale power clusters for large scale compute. And so that's recognized by multiple of the large, large consumers of this compute. So that backdrop is leading to lots of customers being interested in our capacity. So, yes, it.

It was competitive from that perspective, and we are continuing to work with those same customers and looking for creative ways to solve their power problems and challenges as well. Got it. Understood. And then moving to balance sheets, you guys raised $1.25 billion last month. Part of that, you found the… M&As, the capacity increase announced yesterday, and also the BOP capex for contract D. But after you account for those uses, how much more dry powder would you say you still have available to funds for their capacity expansions? Yeah, so as we look at the balance sheet going forward… As we said in the prepared remarks, we are fully funded for everything that we've announced. And with that, you're going to continue to see a strengthening credit profile as well. So the balance sheet's in great shape. You know, the revolving credit facility that we increased, we expect that to be largely undrawn. So that's going to be a significant source of liquidity for anything opportunistic. Then as you've seen the company over the last several… … years, we've accessed capital markets in a variety of ways. So I think depending on the opportunity that presents itself, we think that we've got fairly good access to a number of markets, a number of ways to structure future transactions either on balance sheet with partners or through joint ventures. And again, look at what we've done in the past.

Got it. Very clear.

Thank you so much.

It allows us to. You know, each one of our large customers has obviously giant balance sheets and operate multiple sets of assets, providing data center around the country. And as of right now, we have very little power working in Texas and have planned small. But most of our power is outside outside of Texas. You know, I think the anticipation. Some of it might have gone to Texas over a period of time, and it still might go to Texas as this all unfolds. And I think the nature of the political rebuke of data centers and how that's gotten washed in the rug is trying to do the right thing for the communities and do the right thing for the public. Demand for AI is not going away. And the location and choice of location will be where it makes sense to put these kind of complexes. And I think there's been a broad brush look at what it is and not really digging into the details. Our business is contractual. It's very solid as we look at maybe page five of the investment. The range of movement is that very last bar on the right, which is on top of everything else, is either going to be half that size or five times that size by the time we get there. And so I think this team is capable of navigating our way through the challenges that the public clearly thinks. are important and ensuring that the public gets the AI that they want and need. At the same time, do it in a way that's very community positive.

Yeah, with respect to education, I think there's certainly on our business model, but it's also the impact of this kind of scaled infrastructure in these communities, working in smaller communities that haven't seen material investment. of any kind for many decades is having tremendously positive impacts with respect to increasing local tax revenues and what that means for infrastructure build out for schools, for teachers. We've seen it done well in many areas, and we think that's going to be the model that gets replicated. The jobs that are being created. We talked about the growth in our employee headcount. There's tremendous positive pieces to this infrastructure build out that has been under-emphasized, and we think we're part of that education and that solution, and so we'll continue to support that narrative going forward from here. And then finally, when we look at our infrastructure, it will all... ...ultimately represent an option to add megawatts onto the grid, which will be very supportive to ultimately lowering power prices as more supply is made available. Thanks a lot, Kyle. I follow up questions on the services component of your business. It just continues to surprise this quarter once again had a... Big step up. As we go forward, obviously, that was also part of your higher guide for early next year. Can you talk about two components of that service I'm curious about? A, how much of that business is third-party related? Was that the reason for the step up this past quarter? How much of that will be third-party?

Going forward. And secondarily, what's the recurring nature of this business? Like how much of that is sort of, say, connected to the megawatts that you're powering? I'm just curious about those two components as service becomes a bigger and bigger part of the mix the next few years. Yeah, I'll let them address the exact percentages of what's internal versus external. But in general, the construction side of this is going to be a little lumpy, and we know that. That's why we value that business the way we did. Some of it's internal, which we don't see in earnings. It actually gets collapsed and capitalized into some of our projects. So there's a little bit of that. That will move around a bit. You know, our expectations for that business going forward are maybe there's a little bit of a bulge in the system as our capital comes up. But we believe that the maintenance side and the turbine equipment side, that has a long tailwind in it. And I think when we look at the amount of equipment that's been ordered and the nature of the businesses that have ordered it, they're not. Geared up at this point to take care of all of this stuff. And so all of this rotating equipment and all the generation capacity that's out there is going to need care and maintenance over a period of time. And that's a significant dollar amount for the long term servicing and maintaining of that. And so we see that as a pretty long tailwind. And frankly, because so much equipment's been put to work.

Over the last year or two, we're going to see that really accelerate for three to five years from now when that stuff comes due for some of its major overhauls. I don't know if you have exact percentages or what's internal and external.

Hey, good morning, team.

The GISA team always is very helpful in helping us identify... what equipment is good. In terms of the equipment we purchased, some of this was new equipment and some of this was refurbished equipment.

And then in prior calls, there was like an emphasis of, you know, looking at different types of gensets or different type of fuel sources. Maybe pairing stuff with batteries. Just wanted to maybe hear an update there. I'm sure it's still on the docket or still evaluating it or, but is that going to be more kind of led by what the customer wants? Just, just curious to hear an update there. Yeah. I mean, from a generation stack, and I think we did mention it, we just didn't get specific or name reciprocating engines or nuclear. power or wind power, but we, we, we believe that various forms of generation are going to fit for the customer and fit for the specific location. There's, there's areas where altitude and, and weather make a different kind of engine preferred over the other. So, yeah, we continue to engineer design and evaluate the right setup for the customer at all times. Appreciate the caller.

which is obviously critical. And with respect to the percentage of their total, it's pretty small. And I think the other thing to add to that, Kyle, it's a great point, is the fact that this generation, and we keep saying it, but maybe people are not hearing it, this generation, you know, is very flexible. As Bill said, it can. And also, these contracts are not site-specific. Obviously, with the one contract, we now are at a particular site, but there's very flexible and, you know, diverse geographic locations where this equipment could go, which really is very favorable for the customer.

Thank you for the clarity.

grid if you will that's a power pod that can go multi-directional with its power i think is an evolution that we see coming and we see it cost competitive at times i mean the power power prices are not the same all day long every day they move quite a bit and so that that volatility and pricing structure was what will provide the ability for these to be peakers if you will back into the grid at the same time it will have you know demand that will be peaking on the negative when prices are really low so I think this becomes a stabilizing factor to how the overall grid works over the long haul right now that's helpful and then and then maybe going back to the the 400 megawatt power service agreement and obviously the power service side is a clear growth avenue for you all.

Hey can you help us understand how you leverage some of your acquisitions maybe specifically GISA as far as being able to secure this service agreement you know and clearly it's a new moat for you guys so maybe just a little bit more color and what we could expect maybe additional power service contracts as you as you move. into the future here. Yeah I mean the GISA team has a long track record of operating and providing O&M agreements to power generation all over the world and so obviously highly synergistic with what we're doing you know the complement of their just inherent knowledge of the power generation world and then our you know specific. knowledge with respect to operating these bespoke grids for AI compute is they just really are complementary to each other so you know we as the historical Solaris operate a 24-7 all about reliability and uptime kind of equipment and so that all links up together quite well and yeah we find ourselves. you know in the arena as I like to say and those being in the arena those of us that are there these opportunities are coming to us in many regards and we continue to operate at a high degree of reliability with you know addressing issues as they come up and you know. obtaining clear root cause analysis and and demonstrating to the customers that we we are aligned in terms of their objectives and so the those kind of synergies are certainly playing out as we establish ourselves here in this space.

Great appreciate the color guys I'll turn it back.

And I think, you know, as we alluded to, the community benefits, there are places where this is happening and what we are seeing is an expansion in those geographies. So if you had one geographic location where you're building and you were. Contemplating another project somewhere else, if that new location has challenges, your most attractive opportunity to redeploy those ships is probably where you're already operating. And so we've been a part of that in our projects where people are seeing, hey, this is working here. Let's just put more here and keep going. So there's an expansion of dedicting sites, but we know that our customers have not been focused on just a few sites. They have departments that are working on multiple locations, multiple sites throughout the country. So I think, you know, there have been a lot of contingency planning, and I think this can happen very quickly. No, it's all great color. And then I want to come back to the third-party service ramp. It's been super impressive. A previous presentation back in September showed that rough contribution from services and how it's growing in 4Q and even more into 1Q. How should we think about that? Think about the service EBITDA contribution going forward beyond 1Q. Obviously, longer-term, it should rise. But do you think in 2027, the pace that you're on and what you're forecasting to achieve in 1Q, is that sustainable? Is that a sustainable run rate for 27? Can you build?

upon that run rate beyond 1Q? Just curious about some color on this run rate since it's been so impressive the last few quarters and obviously going to continue here for the next few quarters. Yeah, I think the opportunity is that, yes, we've got the track record. We have the case. capabilities, and so could it expand beyond where we are today? Certainly. I think where we sit from a sort of forecasting standpoint is we don't have the same degree of visibility that we have in our long-term contracts in the services side of things quite yet. We're working towards a pair. A paradigm whereby we'd be able to have greater visibility. But at this point, sort of the sort of look forward to Q1 is sort of as far as we would probably feel comfortable guiding to the specific results at that point in time. But I think as we look at the opportunity set, we're continuing to build momentum, we're adding resources to all of our services capabilities from a capital perspective, from a human capital perspective as well. And so I think that option exists. And we will sort of spoon feed those updates as we move along. And, you know, as has been our nature from a guidance perspective, there's a level of conservatism that we don't want to overreach and make commitments that we, you know, have to stretch to fulfill. So we're very focused on doing that, Scott. But I think the guidance around it will come over time.

I appreciate it. I'll turn back. Thank you.

Excellent.

Thanks, Rob.

Thank you all for joining us today. This quarter's progress showed once again that our strategy is working, our team is executing, and the company is growing rapidly. Our customers keep choosing to grow with us. At the same time, we keep integrating more of the power value chain. The combination is producing durable results. We have over 3.5 gigawatts under long-term contracts and a clear path to significant free cash flow. over the next decade. Solaris has never been in a better position. We have a growing contracted backlog and are built for the next decade of power demand. We remain extremely excited about what lies ahead despite getting our message out to the shareholder base. A sincere thank you all to 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.