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Select Water Solutions Inc

Select Water Solutions Announces Third Quarter 2024 Financial Results and Operational Updates

Generated revenue of $371 million during the third quarter of 2024, an increase of 2% sequentially compared to the second quarter of 2024

Produced $51.9 million of Operating Cash Flow and $20.4 million of Free Cash Flow during the third quarter of 2024

Increased Net income 26% and improved Adjusted EBITDA 4% sequentially during the third quarter of 2024 relative to the second quarter of 2024

Water Infrastructure segment revenue, gross profit and gross profit before D&A increased sequentially by 20%, 42% and 33%, respectively, in the third quarter of 2024 as compared to the second quarter of 2024

Secured multiple new long-term contracts for pipeline gathering, recycling & disposal infrastructure projects, with anticipated new capital deployment of $37 – $42 million

HOUSTON , Nov. 5, 2024 /PRNewswire/ -- Select Water Solutions, Inc. (NYSE: WTTR) ("Select" or the "Company"), a leading provider of sustainable water and technology solutions to the energy industry, today announced its financial and operating results for the third quarter ended September 30, 2024.

John Schmitz, Select's Chairman of the Board, President and Chief Executive Officer, stated, "During the third quarter Select delivered another quarter of continued margin improvement and profitability, while generating solid free cash flow. Supported by revenue growth and margin improvement in our Water Infrastructure segment, our unique growth story continued as we were able to improve consolidated gross margins and increase net income and adjusted EBITDA during the third quarter despite activity pullbacks in the broader macro environment.

"The third quarter showcased the strength and growth potential in our Water Infrastructure segment, as demonstrated with a significant increase in profitability and another quarter of record performance. More specifically, the Water Infrastructure segment posted 20% sequential revenue improvement and 33% growth in gross profit before D&A, resulting in 56.7% gross margins before D&A in the quarter, an increase of more than five percentage points over the second quarter of 2024.  We have materially surpassed our 50% margin goal for Water Infrastructure well ahead of our 2025 target, underscoring our continued ability to increase asset utilization, integrate acquired assets efficiently and our unique ability to sign, construct, and execute highly profitable Water Infrastructure projects out of our growing backlog alongside the basin's most ambitious and pioneering operators.  Our conviction in the strength and torque of this asset base remains unwavering as represented by the decision to increase our quarterly base dividend by 17% for our upcoming November payment.

"The improvements in the Water Infrastructure segment were a culmination of the acquisitions we have executed year-to-date, further commercialization of our end-to-end water networks, and ongoing cost and operational efficiency initiatives. While we continue to grow our infrastructure footprint through both organic and inorganic capital projects, we also have driven increased utilization and volumes through our existing assets via our targeted sales, business development and network optimization efforts. Our ever-growing footprint enables us to network assets across our infrastructure portfolio, including pipelines, fixed-recycling facilities, and disposal wells, positioning us as an all-encompassing water solutions provider for our customers. Our existing footprint, coupled with the contracts we have executed and the robust pipeline of prospective projects, positions the Water Infrastructure segment for significant ongoing growth in 2025.

"In the third quarter we continued to build on our organic infrastructure successes with additional project wins supported by long-term contracts. Since the beginning of the third quarter, we contracted an additional 25,000 acres under long-term dedication in the Permian Basin and continue to add long-term optionality, with an additional 57,000 acres added under right-of-first-refusal commitments. These new contracts build off our existing infrastructure, in each case connecting new assets with other legacy or recently acquired infrastructure to create a more interconnected network. In addition to our Permian wins, we also executed two strategic produced water pipeline connection agreements in the Bakken in the third quarter, further exemplifying our industry-leading infrastructure footprint spanning all major lower 48 land basins. In the third quarter we also completed an additional transaction for a disposal well in the Permian to further bolster our disposal portfolio in the Northern Delaware to meet the needs of our customers.

"Driven by margin outperformance and the pull-forward of activity in our Water Infrastructure segment, we remain confident in our ability to deliver on the headline goals we set out for 2024, including record setting annual Adjusted EBITDA for the Company and more than 50% of our profitability coming from Water Infrastructure and Chemical Technologies. On the capital side of the business, we expect to come in on the low end of the guidance range of $170 million to $190 million for net capital expenditures as we have increased volumes through our existing network and found ways to increase maintenance capital efficiency and deliver at the low end of our guidance range.

"We do anticipate, however, that the seasonal activity slowdown in the fourth quarter will impact the Water Services segment, offset by recovery in our Chemical Technologies segment with new product wins. Additionally, we will see the impact of certain asset specific activity reductions in each of our water transfer, sourcing and recycling businesses associated with certain of our ongoing capital projects in the Northern Delaware Basin. More specifically, we are planning for downtime during all of Q4 at one of our New Mexico recycling facilities as we transition this facility's operations into an integrated system that we expect to be back online in the first quarter of 2025. We will also be taking offline a large diameter historically freshwater distribution pipeline in the Northern Delaware Basin in order to convert the asset into a treated produced water distribution line. These assets are two of our highest earning assets within the segment year-to-date in 2024, so while these initiatives will result in some short-term financial impact to the Water Infrastructure segment in the fourth quarter, in doing so, we are significantly enhancing the long-term potential of our Northern Delaware Basins infrastructure footprint by creating a fully integrated network, connecting our current northern and southern recycling systems across New Mexico. While we expect Adjusted EBITDA to be down in the fourth quarter at $60 million - $62 million, this should be temporary and we expect first quarter of 2025 to come in at or above third quarter levels, with upward trajectory across the remainder of 2025 providing substantial year-over-year Adjusted EBITDA growth next year, as our ongoing capital projects come online and provide additional revenue and profitability for our Water Infrastructure segment throughout 2025.

"Overall, I am pleased with our financial performance in the third quarter and year-to-date 2024, and I am excited to continue building onto our growing infrastructure platform with additional contract wins expected during the fourth quarter and in 2025. The strength of our overall expected 2024 results, including growing profitability and continued free cash flow generation, combined with our strong project backlog positions the company for steady continued growth looking into 2025 and we remain committed to increasing the profitability of our Water Infrastructure segment to represent more than half of the overall profitability of Select by the end of 2025. Ultimately, we remain committed to delivering industry-leading water and technology solutions with high-margin, long-term contracted infrastructure that is mission critical to our customers and creates significant value for our shareholders," concluded Mr. Schmitz.

Third Quarter 2024 Consolidated Financial Information

Revenue for the third quarter of 2024 was $371.3 million as compared to $365.1 million in the second quarter of 2024 and $389.3 million in the third quarter of 2023. Net income for the third quarter of 2024 was $18.8 million as compared to $14.9 million in the second quarter of 2024 and $15.3 million in the third quarter of 2023.

For the third quarter of 2024, gross profit was $62.4 million, as compared to $60.2 million in the second quarter of 2024 and $56.3 million in the third quarter of 2023. Total gross margin was 16.8% in the third quarter of 2024 as compared to 16.5% in the second quarter of 2024 and 14.5% in the third quarter of 2023. Gross margin before depreciation, amortization and accretion ("D&A") for the third quarter of 2024 was 27.3% as compared to 26.7% for the second quarter of 2024 and 23.4% for the third quarter of 2023.

Selling, General & Administrative expenses ("SG&A") during the third quarter of 2024 was $37.3 million as compared to $39.0 million during the second quarter of 2024 and $39.0 million during the third quarter of 2023. SG&A during the third and second quarters of 2024 and third quarter of 2023 was impacted by non-recurring transaction and rebranding costs of $0.6 million, $2.9 million and $4.7 million, respectively.

Adjusted EBITDA was $72.8 million in the third quarter of 2024 as compared to $69.6 million in the second quarter of 2024 and $63.0 million in the third quarter of 2023. Adjusted EBITDA during the third quarter of 2024 was adjusted for $0.7 million of non-recurring transaction and rebranding costs, $0.4 million of non-cash losses on asset sales, and ($0.3) million in other non-recurring adjustments. Non-cash compensation expense accounted for an additional $5.8 million adjustment during the third quarter of 2024. Please refer to the end of this release for reconciliations of gross profit before D&A (non-GAAP measure) to gross profit and of Adjusted EBITDA (non-GAAP measure) to net income.

Business Segment Information

The Water Services segment generated revenues of $234.0 million in the third quarter of 2024 as compared to $230.0 million in the second quarter of 2024 and $251.9 million in the third quarter of 2023. Gross margin before D&A for Water Services was 20.5% in the third quarter of 2024 as compared to 22.5% in the second quarter of 2024 and 20.5% in the third quarter of 2023. Water Services segment revenues were up approximately 2% sequentially, with strong net gains in Select's Permian water transfer operations. For the fourth quarter of 2024, the Company expects to see segment revenue decline by 10% - 15%, driven by macro activity declines, consolidation initiatives and the affiliated short-term impact of planned downtime at certain water infrastructure assets in the fourth quarter. The Company expects gross margins before D&A to hold steady at 20% - 21% in the fourth quarter of 2024.

The Water Infrastructure segment generated revenues of $82.0 million in the third quarter of 2024 as compared to $68.6 million in the second quarter of 2024 and $58.4 million in the third quarter of 2023. Gross margin before D&A for Water Infrastructure was 56.7% in the third quarter of 2024 as compared to 51.0% in the second quarter of 2024 and 40.1% in the third quarter of 2023. During the third quarter of 2024, the Water Infrastructure segment realized pull-forward of activity expected in the fourth quarter as well as increased utilization of existing assets and the ongoing benefit of the acquisitions year-to-date. The segment achieved increases in recycling volumes during the third quarter, generating revenue growth of approximately 20% relative to the second quarter of 2024. Additionally, gross margins before D&A improved by more than five percentage points sequentially during the third quarter of 2024, driven by Select's recent acquisitions, and strong incremental margins on additional system utilization across the Company's existing networks. The Company anticipates Water Infrastructure revenues decreasing by 10% - 15% during the fourth quarter of 2024. While the segment will see some impacts from seasonal activity factors, disposal and solids management volumes are expected to remain steady and the majority of the activity reduction is driven by the recent pull-forward of some work into the third quarter and the associated impact of taking offline certain recycling and pipeline distribution assets in the Northern Delaware Basin as part of Select's ongoing capital project efforts to expand its gathering, recycling and distribution networks in the Northern Delaware basin. The Company expects gross margins before D&A of 51% – 54% in the fourth quarter of 2024.

The Chemical Technologies segment generated revenues of $55.3 million in the third quarter of 2024 as compared to $66.6 million in the second quarter of 2024 and $79.0 million in the third quarter of 2023.   Gross margin before D&A for Chemical Technologies was 12.4% in the third quarter of 2024 as compared to 16.4 % in the second quarter of 2024 and 20.3% in the third quarter of 2023, as activity impacted demand levels during the quarter, especially with pressure pumping customers. For the fourth quarter of 2024, Select anticipates the segment to see both revenue and margin driven by new product development and customer wins, particularly with the Company's E&P customers. Accordingly, revenues are anticipated to increase mid-single-digit percentages and gross margins before D&A to increase to 14% - 16% in the fourth quarter of 2024.

Cash Flow and Capital Expenditures

Cash flow from operations for the third quarter of 2024 was $51.9 million as compared to $83.1 million in the second quarter of 2024 and $118.2 million in the third quarter of 2023. Cash flow from operations during the third quarter of 2024 was impacted by a $15.4 million use of cash from working capital.

Net capital expenditures for the third quarter of 2024 were $31.5 million, comprised of $35.2 million of capital expenditures partially offset by $3.7 million of cash proceeds from asset sales. Free cash flow during the third quarter of 2024 was $20.4 million. Please refer to the end of this release for a reconciliation of free cash flow (non-GAAP measure) to net cash provided by operating activities.

Cash flow used in investing activities during the third quarter of 2024 also included $8.7 million of outflows for Water Infrastructure related acquisitions.

Cash flows provided by financing activities during the third quarter of 2024 included $17.2 million of net outflows consisting of $10.0 million of payments on Select's sustainability-linked credit facility, $7.0 million of dividends and distributions paid and $0.2 million of tax withholding payments associated with the vesting of shares under the Company's long-term incentive plan.

Balance Sheet and Capital Structure

Total cash and cash equivalents were $10.9 million as of September 30, 2024 as compared to $16.4 million as of June 30, 2024. The Company had $80.0 million of borrowings outstanding under its sustainability-linked credit facility as of September 30, 2024 and $90.0 million outstanding as of June 30, 2024.

As of September 30, 2024 and June 30, 2024, the borrowing base under the sustainability-linked credit facility was $226.8 million and $220.4 million, respectively. The Company had available borrowing capacity under its sustainability-linked credit facility as of September 30, 2024 and June 30, 2024, of approximately $127.8 million and $113.4 million, respectively, after giving effect to $19.0 million of outstanding letters of credit as of September 30, 2024 and $17.0 million as of June 30, 2024 and $80.0 million of outstanding borrowings as of September 30, 2024 and $90.0 million as of June 30, 2024.

Total liquidity was $138.7 million as of September 30, 2024, as compared to $129.8 million as of June 30, 2024. The Company had 102,797,453 weighted average shares of Class A common stock outstanding and 16,221,101 weighted average shares of Class B common stock outstanding during the third quarter of 2024.

Northern Delaware Disposal Acquisition

During the third quarter of 2024, Select completed the acquisition of a disposal well for $4.5 million of cash consideration in the Northern Delaware Basin. The addition of this well bolsters Select's Northern Delaware disposal capacity, adding an anticipated approximately 10,000 barrels per day of disposal capacity in a strategic location with proximity to the Company's organic Water Infrastructure developments.

Business Development Updates

Since the start of the third quarter of 2024, Select has executed four new long-term contracts including two for comprehensive produced water gathering, recycling and disposal in the Permian Basin and two disposal gathering pipeline connection contracts in the Bakken. The combined capital expenditures associated with these four projects is expected to be $37 million – $42 million, with each project anticipated to be online in the first half of 2025.

Northern Delaware System Expansion and Acreage Dedication

During the third quarter of 2024, Select signed a 12-year agreement for the construction and expansion of recycling and pipeline infrastructure for a large public operator in the Permian Basin, extending Select's existing Lea County, New Mexico recycling infrastructure into Eddy County, New Mexico as well. Expanding upon existing agreements with an established customer, the new agreement adds another 5,000 additional dedicated acres with an additional right-of-first-refusal for another 57,000 acres of potential dedication. To support the agreement, Select will construct a new recycling facility, adding up to 120,000 barrels per day of additional throughput capacity and up to two million barrels of additional storage capacity. The new facility will be connected via 20-miles of large diameter produced water gathering pipelines to Select's existing Northern Delaware recycling infrastructure, as well as to two of our recently acquired nearby SWDs and an existing large diameter pipeline that will be converted from fresh water to produced water distribution. We expect construction to be complete and the pipelines and recycling facilities to be operational in the first half of 2025.

Midland Basin Recycling and Disposal Project

During October 2024, Select signed an eight-year agreement for an integrated water gathering, recycling and disposal project in Upton County in the Midland Basin. The project will expand an existing recycling facility by adding 750,000 barrels of additional storage, support a new disposal facility permitted at 20,000 barrels per day and include 4 miles of pipeline buildout to integrate the system. The project is supported by an approximately 20,000 acre dedication for both gathering produced water and purchasing treated produced water and includes a 35 million barrel minimum volume commitment. The project is expected to be completed during the second quarter of 2025.

Bakken Pipeline Connections

During the third quarter of 2024, Select signed one 10-year agreement and one 20-year agreement for the construction of pipelines to Select's existing Bakken disposal infrastructure. As part of the agreements Select will update one of its Bakken disposals to accommodate increased capacity in addition to tying pipe into the disposal facility. Additionally, Select has also secured a one million barrel minimum volume commitment in the initial year of the contract in one of the two connection agreements signed in the quarter.

Conference Call Information

Select has scheduled a conference call on Wednesday, November 6, 2024 at 11:00 a.m. Eastern time / 10:00 a.m. Central time.  Please dial 201-389-0872 and ask for the Select Water Solutions call at least 10 minutes prior to the start time of the call, or listen to the call live over the Internet by logging on to the website at the address https://investors.selectwater.com/events-presentations/current.  A telephonic replay of the conference call will be available through November 20, 2024, and may be accessed by calling 201-612-7415 using passcode 13749690#.  A webcast archive will also be available at the link above shortly after the call and will be accessible for approximately 90 days.   

About Select Water Solutions, Inc.

Select is a leading provider of sustainable water and technology solutions to the energy industry. These solutions are supported by the Company's critical water infrastructure assets, chemical manufacturing and water treatment and recycling capabilities. As a leader in sustainable water and chemical solutions, Select places the utmost importance on safe, environmentally responsible management of water throughout the lifecycle of a well. Additionally, Select believes that responsibly managing water resources throughout its operations to help conserve and protect the environment is paramount to the Company's continued success.  For more information, please visit Select's website, https://www.selectwater.com.

Cautionary Statement Regarding Forward-Looking Statements

All statements in this communication other than statements of historical facts are forward-looking statements which contain our current expectations about our future results. We have attempted to identify any forward-looking statements by using words such as "could," "believe," "anticipate," "expect," "intend," "project," "will," "estimates," "preliminary," "forecast" and other similar expressions. Examples of forward-looking statements include, but are not limited to, the expectations of plans, business strategies, objectives and growth, projected financial results and future financial and operational performance, expected capital expenditures, our share repurchase program and future dividends. Although we believe that the expectations reflected, and the assumptions or bases underlying our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Such statements are not guarantees of future performance or events and are subject to known and unknown risks and uncertainties that could cause our actual results, events or financial positions to differ materially from those included within or implied by such forward-looking statements. These risks and uncertainties include the risks that the benefits contemplated from our recent acquisitions may not be realized, the ability of Select to successfully integrate the acquired businesses' operations, including employees, and realize anticipated synergies and cost savings and the potential impact of the consummation of the acquisitions on relationships, including with employees, suppliers, customers, competitors and creditors. Factors that could materially impact such forward-looking statements include, but are not limited to: the global macroeconomic uncertainty related to the Russia-Ukraine war and related economic sanctions; the conflict in the Israel-Gaza region and related hostilities in the Middle East, including heightened tensions with Iran, Lebanon and Yemen; the ability to source certain raw materials and other critical components or manufactured products globally on a timely basis from economically advantaged sources, including any delays and/or supply chain disruptions due to increased hostilities in the Middle East; actions by the members of the Organization of the Petroleum Exporting Countries ("OPEC") and Russia (together with OPEC and other allied producing countries, "OPEC+") with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations, which may be exacerbated by the recent Middle East conflicts; actions taken by federal or state governments, such as executive orders or new or expanded regulations, that may negatively impact the future production of oil and natural gas in the U.S. or our customers' access to federal and state lands for oil and gas development operations, thereby reducing demand for our services in the affected areas; the severity and duration of world health events, and any resulting impact on commodity prices and supply and demand considerations; the impact of central bank policy actions, such as sustained, elevated  interest rates in response to, among other things, high rates of inflation, and disruptions in the bank and capital markets; the degree to which consolidation among our customers may affect spending on U.S. drilling and completions activity; the level of capital spending and access to capital markets by oil and gas companies, trends and volatility in oil and gas prices, and our ability to manage through such volatility; the impact of current and future laws, rulings and governmental regulations, including those related to hydraulic fracturing, accessing water, disposing of wastewater, transferring produced water, interstate freshwater transfer, chemicals, carbon pricing, pipeline construction, taxation or emissions, leasing, permitting or drilling on federal lands and various other environmental matters; regulatory and related policy actions intended by federal, state and/or local governments to reduce fossil fuel use and associated carbon emissions, or to drive the substitution of renewable forms of energy for oil and gas, may over time reduce demand for oil and gas and therefore the demand for our services, including as a result of the Inflation Reduction Act of 2022, the U.S. Supreme Court's overturning of the Chevron deference doctrine or otherwise; growing demand for electric vehicles that may result in reduced demand for refined products deriving from crude oil such as gasoline and diesel fuel, and therefore the demand for our services; the impact of advances or changes in well-completion technologies or practices that result in reduced demand for our services, either on a volumetric or time basis; changes in global political or economic conditions, generally, including as a result of the fall 2024 presidential election and any resultant political uncertainty, and in the markets we serve, including the rate of inflation and potential economic recession; and other factors discussed or referenced in the "Risk Factors" section of our most recent Annual Report on Form 10-K and those set forth from time to time in our other filings with the SEC. Investors should not place undue reliance on our forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.

WTTR-ER

 

SELECT WATER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)



















Three months ended,


Nine months ended Sept 30,



Sept 30, 2024


June 30, 2024


Sept 30, 2023


2024


2023

Revenue
















Water Services


$

234,019


$

230,008


$

251,870


$

692,334


$

791,145

Water Infrastructure



82,017



68,564



58,375



214,089



169,118

Chemical Technologies



55,313



66,559



79,028



196,605



250,230

Total revenue



371,349



365,131



389,273



1,103,028



1,210,493

Costs of revenue
















Water Services



186,041



178,308



200,361



545,881



626,878

Water Infrastructure



35,503



33,581



34,992



102,776



103,718

Chemical Technologies



48,450



55,641



63,005



165,846



200,017

Depreciation, amortization and accretion



38,906



37,445



34,650



113,243



102,776

Total costs of revenue



308,900



304,975



333,008



927,746



1,033,389

Gross profit



62,449



60,156



56,265



175,282



177,104

Operating expenses
















Selling, general and administrative



37,268



38,981



38,983



120,229



109,147

Depreciation and amortization



661



748



512



2,667



1,846

Impairments and abandonments



—



46



32



91



11,554

Lease abandonment costs



5



17



(12)



411



73

Total operating expenses



37,934



39,792



39,515



123,398



122,620

Income from operations



24,515



20,364



16,750



51,884



54,484

Other income (expense)
















Gain on sales of property and equipment and divestitures, net



1,624



382



23



2,331



1,688

Interest expense, net



(1,906)



(2,026)



(765)



(5,204)



(4,290)

Other



(78)



42



767



(318)



2,482

Income before income tax expense and equity in gains (losses) of
unconsolidated entities



24,155



18,762



16,775



48,693



54,364

Income tax expense



(5,852)



(3,959)



(483)



(11,263)



(1,068)

Equity in gains (losses) of unconsolidated entities



507



96



(978)



154



(1,716)

Net income



18,810



14,899



15,314



37,584



51,580

Less: net income attributable to noncontrolling interests



(3,019)



(2,031)



(968)



(5,300)



(4,772)

Net income attributable to Select Water Solutions, Inc.


$

15,791


$

12,868


$

14,346


$

32,284


$

46,808

















Net income per share attributable to common stockholders:
















Class A—Basic


$

0.16


$

0.13


$

0.14


$

0.32


$

0.46

Class B—Basic


$

—


$

—


$

—


$

—


$

—

















Net income per share attributable to common stockholders:
















Class A—Diluted


$

0.15


$

0.13


$

0.14


$

0.32


$

0.45

Class B—Diluted


$

—


$

—


$

—


$

—


$

—

 

SELECT WATER SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share data)
















Sept 30, 2024


June 30, 2024


March 31, 2024


December 31, 2023

Assets













Current assets













Cash and cash equivalents


$

10,938


$

16,417


$

12,753


$

57,083

Accounts receivable trade, net of allowance for credit losses



298,676



295,115



323,113



322,611

Accounts receivable, related parties



119



98



330



171

Inventories



35,819



37,501



37,636



38,653

Prepaid expenses and other current assets



51,130



35,142



37,886



35,541

Total current assets



396,682



384,273



411,718



454,059

Property and equipment



1,363,666



1,312,239



1,242,133



1,144,989

Accumulated depreciation



(689,978)



(663,284)



(650,952)



(627,408)

Total property and equipment, net



673,688



648,955



591,181



517,581

Right-of-use assets, net



39,714



42,293



42,931



39,504

Goodwill



30,259



36,664



31,202



4,683

Other intangible assets, net



127,930



126,834



127,649



116,189

Deferred tax assets, net



48,879



54,529



60,489



61,617

Other long-term assets, net



29,495



29,572



26,137



24,557

Total assets


$

1,346,647


$

1,323,120


$

1,291,307


$

1,218,190

Liabilities and Equity













Current liabilities













Accounts payable


$

41,435


$

36,746


$

54,389


$

42,582

Accrued accounts payable



66,172



72,493



62,833



66,182

Accounts payable and accrued expenses, related parties



5,891



3,251



4,227



4,086

Accrued salaries and benefits



21,142



24,342



17,692



28,401

Accrued insurance



29,970



17,399



17,227



19,720

Sales tax payable



2,668



2,493



2,973



1,397

Current portion of tax receivable agreements liabilities



469



469



469



469

Accrued expenses and other current liabilities



37,866



38,282



35,800



33,511

Current operating lease liabilities



16,781



16,934



16,241



15,005

Current portion of finance lease obligations



207



199



196



194

Total current liabilities



222,601



212,608



212,047



211,547

Long-term tax receivable agreements liabilities



37,718



37,718



37,718



37,718

Long-term operating lease liabilities



34,792



37,938



39,667



37,799

Long-term debt



80,000



90,000



75,000



—

Other long-term liabilities



52,110



42,726



38,554



38,954

Total liabilities



427,221



420,990



402,986



326,018

Commitments and contingencies













Class A common stock, $0.01 par value



1,028



1,028



1,027



1,022

Class B common stock, $0.01 par value



162



162



162



162

Preferred stock, $0.01 par value



—



—



—



—

Additional paid-in capital



999,812



1,001,123



1,001,967



1,008,095

Accumulated deficit



(204,507)



(220,298)



(233,166)



(236,791)

Total stockholders' equity



796,495



782,015



769,990



772,488

Noncontrolling interests



122,931



120,115



118,331



119,684

Total equity



919,426



902,130



888,321



892,172

Total liabilities and equity


$

1,346,647


$

1,323,120


$

1,291,307


$

1,218,190

 

SELECT WATER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



















Three months ended


Nine months ended



Sept 30, 2024


June 30, 2024


Sept 30, 2023


Sept 30, 2024


Sept 30, 2023

Cash flows from operating activities
















Net income


$

18,810


$

14,899


$

15,314


$

37,584


$

51,580

Adjustments to reconcile net income to net cash provided by operating activities
















Depreciation, amortization and accretion



39,567



38,193



35,162



115,910



104,622

Deferred tax expense (benefit)



5,650



3,792



(54)



10,571



(97)

Gain on disposal of property and equipment and divestitures



(1,624)



(382)



(23)



(2,331)



(1,688)

Equity in (gains) losses of unconsolidated entities



(507)



(96)



978



(154)



1,716

Bad debt expense



(472)



731



1,156



855



3,987

Amortization of debt issuance costs



122



122



122



366



366

Inventory adjustments



(95)



(400)



115



(528)



557

Equity-based compensation



5,799



6,201



5,014



18,359



12,787

Impairments and abandonments



—



46



32



91



11,554

Other operating items, net



(41)



655



2



926



(639)

       Changes in operating assets and liabilities
















       Accounts receivable



(2,415)



31,298



74,081



29,011



70,467

              Prepaid expenses and other assets



(15,536)



1,222



(11,613)



(16,494)



(18,797)

Accounts payable and accrued liabilities



2,618



(13,167)



(2,073)



(27,047)



(34,253)

   Net cash provided by operating activities



51,876



83,114



118,213



167,119



202,162

Cash flows from investing activities
















       Purchase of property and equipment



(35,204)



(49,113)



(35,166)



(118,080)



(102,401)

Purchase of equity-method investments



—



—



—



—



(500)

Acquisitions, net of cash received



(8,650)



(41,477)



—



(158,438)



(13,418)

Proceeds received from sales of property and equipment



3,730



3,379



1,579



12,275



11,380

       Net cash used in investing activities



(40,124)



(87,211)



(33,587)



(264,243)



(104,939)

Cash flows from financing activities
















Borrowings from revolving line of credit



7,500



52,500



—



150,000



105,250

       Payments on revolving line of credit



(17,500)



(37,500)



(65,000)



(70,000)



(121,250)

       Payments of finance lease obligations



(49)



(48)



(45)



(163)



(55)

Dividends and distributions paid



(7,012)



(7,034)



(5,821)



(21,533)



(17,907)

Distributions to noncontrolling interests



—



—



1,000



—



(1,581)

Contributions from noncontrolling interests



—



—



—



—



5,950

Repurchase of common stock



(171)



(156)



(276)



(7,323)



(49,905)

       Net cash (used in) provided by financing activities



(17,232)



7,762



(70,142)



50,981



(79,498)

Effect of exchange rate changes on cash



1



(1)



(3)



(2)



(4)

Net (decrease) increase in cash and cash equivalents



(5,479)



3,664



14,481



(46,145)



17,721

Cash and cash equivalents, beginning of period



16,417



12,753



10,562



57,083



7,322

Cash and cash equivalents, end of period


$

10,938


$

16,417


$

25,043


$

10,938


$

25,043


















 

Comparison of Non-GAAP Financial Measures

EBITDA, Adjusted EBITDA, gross profit before depreciation, amortization and accretion ("D&A"), gross margin before D&A and free cash flow are not financial measures presented in accordance with accounting principles generally accepted in the U.S. ("GAAP"). We define EBITDA as net income (loss), plus interest expense, income taxes and depreciation, amortization and accretion. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment and abandonment charges or asset write-offs pursuant to GAAP, plus non-cash losses on the sale of assets or subsidiaries, non-recurring compensation expense, non-cash compensation expense, and non-recurring or unusual expenses or charges, including severance expenses, transaction costs, or facilities-related exit and disposal-related expenditures, plus/(minus) foreign currency losses/(gains), plus/(minus) losses/(gains) on unconsolidated entities and plus tax receivable agreements expense less bargain purchase gains from business combinations. We define gross profit before D&A as revenue less cost of revenue, excluding cost of sales D&A expense. We define gross margin before D&A as gross profit before D&A divided by revenue. We define free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment, plus proceeds received from sale of property and equipment. EBITDA, Adjusted EBITDA, gross profit before D&A, gross margin before D&A and free cash flow are supplemental non-GAAP financial measures that we believe provide useful information to external users of our financial statements, such as industry analysts, investors, lenders and rating agencies because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation,  amortization and accretion) and non-recurring items outside the control of our management team. We present EBITDA, Adjusted EBITDA, gross profit before D&A, gross margin before D&A and free cash flow because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.

Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. Gross profit and gross margin are the GAAP measures most directly comparable to gross profit before D&A and gross margin before D&A, respectively. Net cash provided by (used in) operating activities is the GAAP measure most directly comparable to free cash flow. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider EBITDA, Adjusted EBITDA, gross profit before D&A, gross margin before D&A or free cash flow in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA, Adjusted EBITDA, gross profit before D&A, gross margin before D&A and free cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

For forward-looking non-GAAP measures, the Company is unable to provide a reconciliation of the forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measure as the information necessary for a quantitative reconciliation, including potential acquisition-related transaction and rebranding costs as well as the purchase price accounting allocation of the recent acquisitions and the resulting impacts to depreciation, amortization and accretion expense, among other items is not available to the Company without unreasonable efforts due to the inherent difficulty and impracticability of predicting certain amounts required by GAAP with a reasonable degree of accuracy at this time.

The following table presents a reconciliation of free cash flow to net cash provided by operating activities, which is the most directly comparable GAAP measure for the periods presented:



Three months ended



Sept 30, 2024


June 30, 2024


Sept 30, 2023






(unaudited) (in thousands)

Net cash provided by operating activities


$

51,876


$

83,114


$

118,213

Purchase of property and equipment



(35,204)



(49,113)



(35,166)

Proceeds received from sale of property and equipment



3,730



3,379



1,579

Free cash flow


$

20,402


$

37,380


$

84,626













The following table presents a reconciliation of EBITDA and Adjusted EBITDA to our net income, which is the most directly comparable GAAP measure for the periods presented:

Three months ended,




Sept 30, 2024


June 30, 2024


Sept 30, 2023




(unaudited) (in thousands)

Net income



$

18,810


$

14,899


$

15,314

Interest expense, net




1,906



2,026



765

Income tax expense




5,852



3,959



483

Depreciation, amortization and accretion




39,567



38,193



35,162

EBITDA




66,135



59,077



51,724

Trademark abandonment and other impairments




—



46



—

Non-cash loss on sale of assets or subsidiaries




368



1,432



583

Non-cash compensation expenses




5,799



6,201



5,014

Non-recurring transaction and rebranding costs




710



2,866



4,669

Non-recurring severance expense




—



—



—

Lease abandonment costs




5



17



(12)

Equity in (gains) losses of unconsolidated entities




(507)



(96)



978

Impairments and Abandonments




—



—



32

Other




240



104



1

Adjusted EBITDA



$

72,750


$

69,647


$

62,989


The following table presents a reconciliation of gross profit before D&A to total gross profit, which is the most directly comparable GAAP measure, and a calculation of gross margin before D&A for the periods presented:

Three months ended,



Sept 30, 2024


June 30, 2024


Sept 30, 2023



(unaudited) (in thousands)

Gross profit by segment










Water services


$

28,482


$

30,688


$

28,689

Water infrastructure



28,957



20,354



14,191

Chemical technologies



5,010



9,114



13,385

As reported gross profit



62,449



60,156



56,265











Plus D&A










Water services



19,496



21,012



22,820

Water infrastructure



17,557



14,629



9,192

Chemical technologies



1,853



1,804



2,638

Total D&A



38,906



37,445



34,650











Gross profit before D&A


$

101,355


$

97,601


$

90,915











Gross profit before D&A by segment










Water services



47,978



51,700



51,509

Water infrastructure



46,514



34,983



23,383

Chemical technologies



6,863



10,918



16,023

Total gross profit before D&A


$

101,355


$

97,601


$

90,915











Gross margin before D&A by segment










Water services



20.5 %



22.5 %



20.5 %

Water infrastructure



56.7 %



51.0 %



40.1 %

Chemical technologies



12.4 %



16.4 %



20.3 %

Total gross margin before D&A



27.3 %



26.7 %



23.4 %

 

Contacts:       
Select Water Solutions
Garrett Williams – VP, Corporate Finance & Investor Relations
(713) 296-1010
IR@selectwater.com

Dennard Lascar Investor Relations
 Ken Dennard / Natalie Hairston
(713) 529-6600
WTTR@dennardlascar.com

Cision View original content:https://www.prnewswire.com/news-releases/select-water-solutions-announces-third-quarter-2024-financial-results-and-operational-updates-302296916.html

SOURCE Select Water Solutions, Inc.