Generated revenue of $405 million during the second quarter of 2023,
up 20% year-over-year as compared to the second quarter of
2022
On a year-over-year basis, net income
increased 55% to $22.6 million and
Adjusted EBITDA improved 47% to $69.8
million during the second quarter of 2023
Delivered $102.0 million of operating cash flows, supported
by significant working capital reductions
Returned $44.6
million to shareholders through quarterly cash dividends and
share repurchases, repurchasing approximately 5% of outstanding
Class A shares during the second quarter of 2023
During the second quarter, Select
realigned its reportable segments to better reflect how its
businesses are managed and provide enhanced visibility into each
business' financial performance
HOUSTON, Aug. 2, 2023
/PRNewswire/ -- Select Water Solutions, Inc. (NYSE: WTTR)
("Select" or the "Company"), a leading provider of sustainable
water and chemical solutions, today announced its financial and
operating results for the quarter ended June
30, 2023.
John Schmitz, Chairman of
the Board, President and CEO, stated, "The second quarter saw solid
margin improvement resulting from our continued focus on
operational integration and improved efficiency across the
business. This focus, along with resilience in our
production-weighted infrastructure and specialty chemistry
businesses, led to 4% sequential growth in our gross profit before
D&A during the second quarter despite a modestly declining U.S.
onshore activity environment. Furthermore, we increased net income
by 65% sequentially to $23 million
while Adjusted EBITDA increased to $70
million, up 4% from the first quarter of 2023.
"The second quarter also provided strong cash flows,
buoyed by a significant reduction in our working capital, including
a $62 million reduction in accounts
receivable. This puts us well on our way to meeting our previously
announced target of a $75 million
reduction in accounts receivable by year end, giving us the
conviction to increase this target to $100
million by year end. This cash flow allowed us to return
additional capital to shareholders while also reducing our debt.
During the second quarter, we decreased our debt outstanding by
$10.5 million, have reduced it
further since quarter end and expect to be in a net cash position
again by year end. Returning capital to shareholders remains a
critical component of our capital allocation strategy, and to
supplement our existing quarterly base dividend program, we
completed $39 million of share
repurchases during the second quarter, comprising approximately 5%
of our outstanding Class A shares.
"Additionally, during the second quarter, we decided to
reallocate our legacy water sourcing and certain temporary water
logistics operations from our Water Infrastructure segment into our
Water Services segment. We remain steadfast in our vision to be the
recognized leader and trusted partner in sustainable water
management solutions, and we believe our continued dedication to
achieving operational excellence across the entire organization
will further enhance that vision. While Select was originally built
as a completions-oriented service business, we have expanded and
diversified into something much greater, and we continue to see the
recognition of this value-added proposition across our customer
base. These changes will allow us to better manage our operations
and more efficiently deploy capital across the
organization.
"This segment realignment will provide improved clarity
around the near-term operational and margin performance of the
Water Services segment as well as its long-term value creation
opportunities. Similarly, this change will enable us to better
capture operational synergies and efficiencies between our water
sourcing business and our completions-oriented water transfer
business. For the Water Infrastructure segment, following this
change the segment's revenues will now be derived from sustainable
recycling, pipeline, or disposal revenues substantially all of
which are either under long-term contracts or are
production-related in nature, generating higher gross margins and
adding more stability to the segment's operations than ever
before.
"This realignment will also allow our Water Infrastructure
segment leadership to dedicate their efforts full time to our
highest priority business development opportunities – brownfield
gathering infrastructure and disposal projects and greenfield
recycling projects backed by long-term contracts. Our net capital
expenditure forecast adjusts slightly to $90 to $130 million
tightening modestly within our original 2023 guidance, with the
range driven by execution timing of growth projects focused
specifically on this opportunity set. Our recent organic recycling
infrastructure projects have delivered strong performance over the
last few quarters, and we expect to see these benefits continue in
the third quarter. Even with recent commodity price and activity
volatility, we continue to experience increased demand for new
infrastructure development opportunities across all basins as water
infrastructure constraints remain a challenge for our customers.
Heading into the second half of the year, we have a very strong
backlog remaining for both greenfield and brownfield projects,
particularly around full lifecycle water recycling solutions, and
we expect multiple additional capital projects will come under
contract throughout 2023. This backlog of accretive capital
projects positions the Water Infrastructure segment to see
continued steady financial growth during 2023, 2024 and beyond.
Ultimately, Select remains uniquely positioned in the competitive
landscape to advance the integration of water and chemical
technology solutions with high-margin, long-term contracted
infrastructure.
"To put the evolution of our business into perspective, if
you look back at Select's previous peak performance in 2018, Water
Infrastructure and Chemical Technologies, recast in accordance with
the segment realignment, accounted for approximately 15% of our
consolidated gross profit before D&A. For the first half of
2023, those two segments now account for approximately 40% of our
consolidated gross profit before D&A. I fully expect that more
than 50% of the profitability of the Company during 2024 will come
from these two segments, comprised of sustainable water treatment
and recycling solutions, contracted pipelines, production-levered
water disposal infrastructure and specialty chemistry
manufacturing. These two segments will remain our core focus areas
for growth capital allocation and the opportunity set remains
robust.
"Finally, we are confident in our ability to continue to
improve the operational performance of the business and we reaffirm
our robust free cash flow outlook for the year. We will remain
steadfastly focused on improving our operating margins, growing our
free cash flow and executing on the meaningful opportunities that
lie ahead to continue developing our sustainable water
infrastructure and specialty chemistry solutions. I look forward to
building upon our strong first half results, while significantly
expanding our free cash flow generation during the remainder of
2023. This will provide ample opportunities for incremental growth,
while also allowing us to advance our support of committed capital
returns for our shareholders," concluded Schmitz.
During the quarter ended June 30,
2023, Select realigned its reportable segments to better
reflect its strategy, how its businesses are managed and provide
greater visibility into each business' financial performance. As a
result of these changes, Select's legacy water sourcing and certain
temporary water logistics service offerings which were previously
reported in the Water Infrastructure segment are now included in
the Water Services segment. Additionally, the Company's Oilfield
Chemicals segment has been renamed Chemical Technologies. For more
information regarding these changes, see below under "Changes in
Segment Reporting."
The financial information for the second quarter of 2023
in this press release is presented under the realigned segment
structure, and the historical financial information for prior
periods has been recast to conform to the realigned segment
structure. The changes in segment reporting have no impact on the
Company's historical consolidated financial position, results of
operations or cash flows.
Additional recast historical segment information that
conforms to the new reporting structure is available as
supplemental financial information in a presentation posted to the
"Investors" section of the Company's website at
www.investors.selectwater.com. Alternatively, please refer to the
Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission ("SEC") concurrent with this
release.
Second Quarter 2023 Consolidated Financial
Information
Revenue for the second quarter of 2023 was $404.6 million as compared to $416.6 million in the first quarter of 2023 and
$335.9 million in the second quarter
of 2022. Net income for the second quarter of 2023 was $22.6 million as compared to $13.7 million in the first quarter of 2023 and
$14.6 million in the second quarter
of 2022.
For the second quarter of 2023, gross profit was
$61.2 million, as compared to
$59.7 million in the first quarter of
2023 and $35.7 million in the second
quarter of 2022. Total gross margin was 15.1% in the second quarter
of 2023 as compared to 14.3% in the first quarter of 2023 and 10.6%
in the second quarter of 2022. Gross margin before depreciation and
amortization ("D&A") for the second quarter of 2023 was 23.8%
as compared to 22.2% for the first quarter of 2023 and 19.3% for
the second quarter of 2022.
Selling, General & Administrative expenses
("SG&A") during the second quarter of 2023 was $34.3 million as compared to $35.8 million during the first quarter of 2023
and $26.7 million during the second
quarter of 2022. SG&A during the second and first quarters of
2023 and the second quarter of 2022 was impacted by non-recurring
transaction costs of $2.0 million,
$2.9 million and $0.6 million, respectively.
Adjusted EBITDA was $69.8
million in the second quarter of 2023 as compared to
$67.2 million in the first quarter of
2023 and $47.7 million in the second
quarter of 2022. Adjusted EBITDA during the second quarter of 2023
was adjusted for $2.0 million of
non-recurring transaction costs, $1.4
million of non-cash losses on asset sales, and $0.7 million in other non-recurring adjustments.
Non-cash compensation expense accounted for an additional
$4.8 million adjustment during the
second quarter of 2023. 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 $264.6 million in the
second quarter of 2023 as compared to $274.7
million in the first quarter of 2023 and $230.5 million in the second quarter of
2022. Gross margin before D&A for Water Services was
21.9% in the second quarter of 2023 as compared to 19.9% in the
first quarter of 2023 and 18.6% in the second quarter of 2022.
Water Services segment revenues decreased 3.7% sequentially,
resulting from modest declines in completions activity combined
with the consolidation and elimination of certain non-core and
underperforming operations. In contrast to the modest revenue
declines, gross profit before D&A improved by 6.0% and gross
margins before D&A improved by 200 basis points, as the
continued integration and operational improvement efforts generate
efficiency across the business. For the third quarter of 2023, the
Company expects to see low- to mid-single digit percentage revenue
declines, driven by a combination of current activity levels as
well as additional operational integration. The Company expects
gross margins before D&A to see up to 100 basis points of
margin improvement, as we continue to capture additional
efficiencies through ongoing integration efforts, consolidating
yards in areas with remaining overlap and also reallocating assets
from certain non-core facilities.
The Water Infrastructure segment generated
revenues of $55.3 million in the
second quarter of 2023 as compared to $55.5
million in the first quarter of 2023 and $25.8 million in the second quarter of 2022.
Gross margin before D&A for Water Infrastructure was 37.8% in
the second quarter of 2023 as compared to 38.1% in the first
quarter of 2023 and 40.6% in the second quarter of 2022.
Water Infrastructure revenues and gross margins held steady during
the second quarter, as increased water recycling volumes offset
modestly lower pipeline distribution volumes. The Company
anticipates Water Infrastructure revenues increasing by mid-single
digit percentages during the third quarter of 2023, with gross
margins before D&A improving 200-400 basis points, supported by
the accretive margin contributions of recent organic projects and
increased produced water recycling.
The Chemical Technologies segment generated
revenues of $84.8 million in the
second quarter of 2023 as compared to $86.4
million in the first quarter of 2023 and $79.6 million in the second quarter of
2022. Gross margin before D&A for Chemical Technologies
was 20.6% in the second quarter of 2023 as compared to 19.4% in the
first quarter of 2023 and 14.6% in the second quarter of 2022.
While revenues declined modestly during the second quarter, the
decline was less than the decline in overall completions activity
and gross profit before D&A improved by 4%. Select continues to
see strong demand for its higher margin, proprietary chemical
technologies resulting in an improved product mix which resulted in
gross margin before D&A improving by more than a full
percentage point during the second quarter. For the third quarter
of 2023, the Company anticipates relatively steady revenues and
margins for the Chemical Technologies segment as the segment seeks
to replicate its all-time high-water mark quarterly gross
margins.
Cash Flow and Capital Expenditures
Cash flow from operations for the second quarter of 2023
was $102.0 million as compared to
($18.0) million in the first quarter
of 2023 and $11.1 million in the
second quarter of 2022. Cash flow from operations during the second
quarter of 2023 significantly benefited from a $35.8 million decrease in net working capital,
including $61.3 million of inflows
from reduced accounts receivable balances, as substantial progress
was made in reducing the billing backlog resulting from the ongoing
systems integration efforts of recent acquisitions.
Net capital expenditures for the second quarter of 2023
were $36.3 million, comprised of
$39.4 million of capital expenditures
partially offset by $3.1 million of
cash proceeds from asset sales, including the divestment of
underutilized equipment and real estate from recently acquired
businesses. Cash flow from operations less net capital expenditures
was $65.7 million during the second
quarter of 2023.
Cash flow used in investing activities during the second
quarter of 2023 also included $4.0
million of outflows for the acquisition of a small water
containment asset base. Cash flows from financing activities during
the second quarter of 2023 included $56.7
million of net outflows consisting of $38.7 million of share repurchases, including
$38.4 million of open market share
repurchases and $0.3 million of tax
withholding repurchases, $10.5
million of net repayments on our sustainability-linked
credit facility, $5.9 million of
quarterly dividends paid, and $1.6
million of cash distributed to noncontrolling
interests.
Balance Sheet and Capital Structure
Total cash and cash equivalents were $10.6 million as of June
30, 2023, as compared to $6.0
million as of March 31, 2023.
The Company had $65.0 million and
$75.5 million of borrowings
outstanding under its sustainability-linked credit facility as of
June 30, 2023 and March 31, 2023, respectively.
As of June 30, 2023 and
March 31, 2023, the borrowing base
under the sustainability-linked credit facility was $269.7 million and $257.3
million, respectively. The Company had available borrowing
capacity under its sustainability-linked credit facility as of
June 30, 2023 and March 31, 2023, of approximately $182.1 million and $159.2
million, respectively, after giving effect to $22.6 million of outstanding letters of credit as
of both June 30, 2023 and
March 31, 2023.
Total liquidity was $192.7
million as of June 30, 2023,
as compared to $165.2 million as of
March 31, 2023. The Company had
101,106,729 weighted average shares of Class A common stock
and 16,221,101 weighted average shares of Class B common stock
outstanding during the second quarter of 2023.
Changes to Segment Reporting
The Company has three reportable segments: Water Services,
Water Infrastructure and Chemical Technologies. Effective
June 1, 2023, the Company began to
strategically manage certain water sourcing and temporary water
logistics operations, previously included in our Water
Infrastructure segment, as part of our Water Services segment.
These changes were driven by several factors, including that our
legacy fresh and brackish water sourcing business works more
closely with our temporary water transfer operations that are
within Water Services, the continued transition of completions
water demand from fresh and brackish water to recycled water, as
well as the diversifying demand for these water logistics services
beyond the immediate vicinity of our existing pipeline
infrastructure. Due to this ongoing evolution, the Company
concluded that the Water Services segment management is best suited
to manage these operations. Due to the expertise of such
management, it is anticipated that more efficient sharing and
utilization of resources will yield potential synergies over
time.
Following these changes, the Water Infrastructure segment
will be specifically dedicated to the Company's strategic efforts
and near-term growth priorities around increasing
production-weighted and long-term contracted revenues around fixed
pipelines and recycling and disposal facilities.
Concurrently, the Company has also renamed its Oilfield
Chemicals segment as Chemical Technologies. This change was based
on a number of factors including the continued success of Select's
chemicals business in delivering customized, specialty chemical
products developed through proprietary research and development
efforts, the deemphasis of certain traditional commoditized
chemistry products within the oil and gas industry, and the
continued investments in time and resources to develop, manufacture
and sell specialty chemical products for non-oilfield
industrial-related applications. This segment name change is a
naming convention-only modification and did not impact any current
or prior year numbers. Overall, we believe these segment changes
better align the business with the current and future state of the
Company's operations and capital allocation and strategic
objectives.
Following these changes, Select will continue to operate
multiple service lines, aggregated into three reportable segments,
Water Services, Water Infrastructure and Chemical
Technologies.
The Water Services reportable segment will consist
of:
- Water Sourcing (previously reported in Water
Infrastructure);
- Water Transfer (including certain water logistics
operations previously reported in Water
Infrastructure);
- Water Containment;
- Water Monitoring;
- Flowback & Well Testing;
- Fluids Hauling; and
- Accommodations and Rentals.
The Water Infrastructure reportable segment will consist
of:
- Water Recycling & Reuse;
- Gathering & Distribution Pipelines; and
- Fluid Disposal.
The Chemical Technologies reportable segment's service
lines remain unchanged, consisting of:
- Chemical Manufacturing;
- Completion Chemicals; and
- Water Treatment.
The changes in segment reporting have no impact on the
Company's historical consolidated financial position, results of
operations or cash flows; however, prior periods have been recast
to include the water sourcing and water logistics operations within
the Water Services segment and remove the results of those
operations from the Water Infrastructure segment.
Additional recast historical segment information that
conforms to the new reporting structure is available as
supplemental financial information in a presentation posted to the
"Investors" section of the Company's website at
www.investors.selectwater.com. Alternatively, please refer to the
Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission ("SEC") concurrent with this
release.
Second Quarter Earnings Conference Call
Select has scheduled a conference call on Thursday, August 3, 2023 at 11:00 a.m. Eastern time / 10:00 a.m. Central time. Please dial
201-389-0872 and ask for the Select Energy Services 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 August 17, 2023 and may be
accessed by calling 201-612-7415 using passcode 13740154#. 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
chemical 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," "estimate" and other similar expressions.
Examples of forward-looking statements include, but are not limited
to, the expectations of plans, business strategies, objectives and
growth and anticipated financial and operational performance.
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; central bank policy actions and
disruptions in the bank and capital markets, including, bank
failures and associated liquidity risks and other factors; actions
by the members of 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; the severity and duration of world health events; 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; 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.
Contacts:
|
Select Water Solutions, Inc.
|
|
Chris George – Senior
Vice President, Corporate
|
|
Development, Investor
Relations & Sustainability
|
|
(713)
296-1073
|
|
IR@selectwater.com
|
|
|
|
Dennard Lascar Investor Relations
|
|
Ken Dennard / Natalie
Hairston
|
|
(713)
529-6600
|
|
WTTR@dennardlascar.com
|
WTTR-ER
SELECT WATER
SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited)
(in thousands, except share and per share
data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
$
|
264,597
|
|
$
|
230,502
|
|
$
|
539,275
|
|
$
|
429,122
|
Water
Infrastructure
|
|
|
55,277
|
|
|
25,778
|
|
|
110,743
|
|
|
49,318
|
Chemical
Technologies
|
|
|
84,754
|
|
|
79,623
|
|
|
171,202
|
|
|
152,232
|
Total
revenue
|
|
|
404,628
|
|
|
335,903
|
|
|
821,220
|
|
|
630,672
|
Costs of
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
|
206,576
|
|
|
187,675
|
|
|
426,517
|
|
|
353,391
|
Water
Infrastructure
|
|
|
34,392
|
|
|
15,324
|
|
|
68,726
|
|
|
31,032
|
Chemical
Technologies
|
|
|
67,303
|
|
|
67,988
|
|
|
137,012
|
|
|
130,151
|
Other
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
Depreciation and
amortization
|
|
|
35,183
|
|
|
29,253
|
|
|
68,126
|
|
|
55,753
|
Total costs of
revenue
|
|
|
343,454
|
|
|
300,241
|
|
|
700,381
|
|
|
570,328
|
Gross
profit
|
|
|
61,174
|
|
|
35,662
|
|
|
120,839
|
|
|
60,344
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
34,335
|
|
|
26,695
|
|
|
70,164
|
|
|
55,010
|
Depreciation and
amortization
|
|
|
739
|
|
|
526
|
|
|
1,334
|
|
|
1,093
|
Impairments and
abandonments
|
|
|
356
|
|
|
—
|
|
|
11,522
|
|
|
—
|
Lease abandonment
costs
|
|
|
9
|
|
|
162
|
|
|
85
|
|
|
253
|
Total operating
expenses
|
|
|
35,439
|
|
|
27,383
|
|
|
83,105
|
|
|
56,356
|
Income from
operations
|
|
|
25,735
|
|
|
8,279
|
|
|
37,734
|
|
|
3,988
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sales
of property and equipment and divestitures, net
|
|
|
(1,246)
|
|
|
731
|
|
|
1,665
|
|
|
2,384
|
Interest expense,
net
|
|
|
(2,042)
|
|
|
(494)
|
|
|
(3,525)
|
|
|
(1,214)
|
Foreign currency gain
(loss), net
|
|
|
1
|
|
|
(6)
|
|
|
(3)
|
|
|
(3)
|
Bargain purchase
gain
|
|
|
—
|
|
|
5,607
|
|
|
—
|
|
|
17,041
|
Other
|
|
|
872
|
|
|
875
|
|
|
1,718
|
|
|
1,124
|
Income before income
tax expense
|
|
|
23,320
|
|
|
14,992
|
|
|
37,589
|
|
|
23,320
|
Income tax
expense
|
|
|
(387)
|
|
|
(182)
|
|
|
(585)
|
|
|
(396)
|
Equity in losses of
unconsolidated entities
|
|
|
(372)
|
|
|
(229)
|
|
|
(738)
|
|
|
(358)
|
Net income
|
|
|
22,561
|
|
|
14,581
|
|
|
36,266
|
|
|
22,566
|
Less: net income
attributable to noncontrolling interests
|
|
|
(2,446)
|
|
|
(2,078)
|
|
|
(3,804)
|
|
|
(3,261)
|
Net income attributable
to Select Water Solutions, Inc.
|
|
$
|
20,115
|
|
$
|
12,503
|
|
$
|
32,462
|
|
$
|
19,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Basic
|
|
$
|
0.20
|
|
$
|
0.13
|
|
$
|
0.31
|
|
$
|
0.21
|
Class
B—Basic
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Diluted
|
|
$
|
0.20
|
|
$
|
0.13
|
|
$
|
0.31
|
|
$
|
0.20
|
Class
B—Diluted
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
SELECT WATER
SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except share
data)
|
|
|
|
June 30, 2023
|
|
|
March 31, 2023
|
|
December 31, 2022
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
10,562
|
|
$
|
6,028
|
|
$
|
7,322
|
Accounts receivable
trade, net of allowance for credit losses
|
|
|
430,765
|
|
|
492,613
|
|
|
429,983
|
Accounts receivable,
related parties
|
|
|
290
|
|
|
607
|
|
|
5,087
|
Inventories
|
|
|
42,893
|
|
|
40,846
|
|
|
41,164
|
Prepaid expenses and
other current assets
|
|
|
36,483
|
|
|
39,774
|
|
|
34,380
|
Total current
assets
|
|
|
520,993
|
|
|
579,868
|
|
|
517,936
|
Property and
equipment
|
|
|
1,120,626
|
|
|
1,112,899
|
|
|
1,084,005
|
Accumulated
depreciation
|
|
|
(609,392)
|
|
|
(597,861)
|
|
|
(584,451)
|
Total property and
equipment, net
|
|
|
511,234
|
|
|
515,038
|
|
|
499,554
|
Right-of-use assets,
net
|
|
|
41,923
|
|
|
44,562
|
|
|
47,662
|
Goodwill
|
|
|
4,683
|
|
|
—
|
|
|
—
|
Other intangible
assets, net
|
|
|
125,514
|
|
|
125,799
|
|
|
138,800
|
Other long-term assets,
net
|
|
|
22,745
|
|
|
19,985
|
|
|
18,901
|
Total assets
|
|
$
|
1,227,092
|
|
$
|
1,285,252
|
|
$
|
1,222,853
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
47,387
|
|
$
|
77,585
|
|
$
|
61,539
|
Accrued accounts
payable
|
|
|
75,872
|
|
|
75,625
|
|
|
67,462
|
Accounts payable and
accrued expenses, related parties
|
|
|
3,057
|
|
|
4,469
|
|
|
3,305
|
Accrued salaries and
benefits
|
|
|
24,613
|
|
|
15,431
|
|
|
28,686
|
Accrued
insurance
|
|
|
17,714
|
|
|
23,503
|
|
|
26,180
|
Sales tax
payable
|
|
|
3,655
|
|
|
4,036
|
|
|
3,056
|
Accrued expenses and
other current liabilities
|
|
|
19,301
|
|
|
19,783
|
|
|
23,292
|
Current operating
lease liabilities
|
|
|
16,162
|
|
|
16,898
|
|
|
17,751
|
Current portion of
finance lease obligations
|
|
|
15
|
|
|
19
|
|
|
19
|
Total current
liabilities
|
|
|
207,776
|
|
|
237,349
|
|
|
231,290
|
Long-term operating
lease liabilities
|
|
|
40,712
|
|
|
43,372
|
|
|
46,388
|
Long-term
debt
|
|
|
65,000
|
|
|
75,500
|
|
|
16,000
|
Other long-term
liabilities
|
|
|
49,651
|
|
|
45,696
|
|
|
45,447
|
Total
liabilities
|
|
|
363,139
|
|
|
401,917
|
|
|
339,125
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
Class A common
stock, $0.01 par value
|
|
|
1,038
|
|
|
1,090
|
|
|
1,094
|
Class A-2 common
stock, $0.01 par value
|
|
|
—
|
|
|
—
|
|
|
—
|
Class B common
stock, $0.01 par value
|
|
|
162
|
|
|
162
|
|
|
162
|
Preferred stock, $0.01
par value;
|
|
|
—
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
1,023,370
|
|
|
1,063,149
|
|
|
1,075,915
|
Accumulated
deficit
|
|
|
(278,732)
|
|
|
(298,847)
|
|
|
(311,194)
|
Total stockholders'
equity
|
|
|
745,838
|
|
|
765,554
|
|
|
765,977
|
Noncontrolling
interests
|
|
|
118,115
|
|
|
117,781
|
|
|
117,751
|
Total
equity
|
|
|
863,953
|
|
|
883,335
|
|
|
883,728
|
Total liabilities and equity
|
|
$
|
1,227,092
|
|
$
|
1,285,252
|
|
$
|
1,222,853
|
SELECT WATER
SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited)
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Six months ended
|
|
|
June 30, 2023
|
|
March 31, 2023
|
|
June 30, 2022
|
|
June 30, 2023
|
|
June 30, 2022
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
22,561
|
|
$
|
13,705
|
|
$
|
14,581
|
|
$
|
36,266
|
|
$
|
22,566
|
Adjustments to
reconcile net income to net cash provided by (used in) operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
35,922
|
|
|
33,538
|
|
|
29,779
|
|
|
69,460
|
|
|
56,846
|
Loss (gain) on
disposal of property and equipment and divestitures
|
|
|
1,246
|
|
|
(2,911)
|
|
|
(731)
|
|
|
(1,665)
|
|
|
(2,384)
|
Equity in losses of
unconsolidated entities
|
|
|
372
|
|
|
366
|
|
|
229
|
|
|
738
|
|
|
358
|
Bad debt
expense
|
|
|
856
|
|
|
1,975
|
|
|
692
|
|
|
2,831
|
|
|
1,263
|
Amortization of debt
issuance costs
|
|
|
122
|
|
|
122
|
|
|
123
|
|
|
244
|
|
|
417
|
Inventory
adjustments
|
|
|
367
|
|
|
75
|
|
|
189
|
|
|
442
|
|
|
189
|
Equity-based
compensation
|
|
|
4,809
|
|
|
2,964
|
|
|
3,944
|
|
|
7,773
|
|
|
7,219
|
Impairment and
abandonments
|
|
|
356
|
|
|
11,166
|
|
|
—
|
|
|
11,522
|
|
|
—
|
Bargain purchase
gain
|
|
|
—
|
|
|
—
|
|
|
(5,607)
|
|
|
—
|
|
|
(17,041)
|
Unrealized loss on
short-term investment
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
Other operating items,
net
|
|
|
(462)
|
|
|
(442)
|
|
|
(577)
|
|
|
(904)
|
|
|
(478)
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
61,308
|
|
|
(64,922)
|
|
|
(43,031)
|
|
|
(3,614)
|
|
|
(89,653)
|
Prepaid expenses and
other assets
|
|
|
(1,753)
|
|
|
(5,431)
|
|
|
1,066
|
|
|
(7,184)
|
|
|
5,620
|
Accounts payable and
accrued liabilities
|
|
|
(23,739)
|
|
|
(8,221)
|
|
|
10,425
|
|
|
(31,960)
|
|
|
7,570
|
Net cash provided by
(used in) operating activities
|
|
|
101,965
|
|
|
(18,016)
|
|
|
11,082
|
|
|
83,949
|
|
|
(7,468)
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(39,350)
|
|
|
(27,885)
|
|
|
(15,513)
|
|
|
(67,235)
|
|
|
(30,976)
|
Purchase of equity
method investments
|
|
|
(500)
|
|
|
—
|
|
|
(800)
|
|
|
(500)
|
|
|
(4,267)
|
Collection of note
receivable
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
184
|
Distribution from cost
method investment
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
—
|
|
|
60
|
Acquisitions, net of
cash and restricted cash received
|
|
|
(4,000)
|
|
|
(9,418)
|
|
|
(1,084)
|
|
|
(13,418)
|
|
|
5,857
|
Proceeds received from
sales of property and equipment
|
|
|
3,077
|
|
|
6,724
|
|
|
5,560
|
|
|
9,801
|
|
|
17,683
|
Other
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(429)
|
Net cash used in
investing activities
|
|
|
(40,773)
|
|
|
(30,579)
|
|
|
(11,797)
|
|
|
(71,352)
|
|
|
(11,888)
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from
revolving line of credit
|
|
|
28,500
|
|
|
76,750
|
|
|
10,000
|
|
|
105,250
|
|
|
30,000
|
Payments on revolving
line of credit
|
|
|
(39,000)
|
|
|
(17,250)
|
|
|
(10,000)
|
|
|
(56,250)
|
|
|
(30,000)
|
Payments on long-term
debt
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,780)
|
Payments of finance
lease obligations
|
|
|
(5)
|
|
|
(5)
|
|
|
(42)
|
|
|
(10)
|
|
|
(103)
|
Payment of debt
issuance costs
|
|
|
—
|
|
|
—
|
|
|
(113)
|
|
|
—
|
|
|
(2,144)
|
Dividends
paid
|
|
|
(5,880)
|
|
|
(6,206)
|
|
|
—
|
|
|
(12,086)
|
|
|
—
|
Proceeds from share
issuance
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
25
|
Contributions from
noncontrolling interests
|
|
|
—
|
|
|
4,950
|
|
|
—
|
|
|
4,950
|
|
|
—
|
Distributions to
noncontrolling interests
|
|
|
(1,581)
|
|
|
—
|
|
|
—
|
|
|
(1,581)
|
|
|
—
|
Repurchase of common
stock
|
|
|
(38,694)
|
|
|
(10,935)
|
|
|
(787)
|
|
|
(49,629)
|
|
|
(19,695)
|
Net cash (used in)
provided by financing activities
|
|
|
(56,660)
|
|
|
47,304
|
|
|
(929)
|
|
|
(9,356)
|
|
|
(40,697)
|
Effect of exchange rate
changes on cash
|
|
|
2
|
|
|
(3)
|
|
|
(13)
|
|
|
(1)
|
|
|
(6)
|
Net increase (decrease)
in cash, cash equivalents and restricted cash
|
|
|
4,534
|
|
|
(1,294)
|
|
|
(1,657)
|
|
|
3,240
|
|
|
(60,059)
|
Cash, cash equivalents
and restricted cash, beginning of period
|
|
|
6,028
|
|
|
7,322
|
|
|
27,399
|
|
|
7,322
|
|
|
85,801
|
Cash, cash equivalents
and restricted cash, end of period
|
|
$
|
10,562
|
|
$
|
6,028
|
|
$
|
25,742
|
|
$
|
10,562
|
|
$
|
25,742
|
Comparison of Non-GAAP Financial
Measures
EBITDA, Adjusted EBITDA, gross profit before depreciation
and amortization (D&A) and gross margin before D&A 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 and amortization. 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) and plus/(minus)
losses/(gains) on unconsolidated entities 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. EBITDA, Adjusted EBITDA,
gross profit before D&A and gross margin before D&A 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 and amortization) and
non-recurring items outside the control of our management team. We
present EBITDA, Adjusted EBITDA, gross profit before D&A and
gross margin before D&A 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 is the GAAP measure most
directly comparable to gross profit before D&A. 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 or gross profit before
D&A in isolation or as substitutes for an analysis of our
results as reported under GAAP. Because EBITDA, Adjusted EBITDA and
gross profit before D&A 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.
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,
|
|
|
|
|
June 30, 2023
|
|
March 31, 2023
|
|
June 30, 2022
|
|
|
|
|
(unaudited)
|
|
|
|
|
(in thousands)
|
|
Net income
|
|
|
$
|
22,651
|
|
$
|
13,705
|
|
$
|
14,581
|
|
Interest expense,
net
|
|
|
|
2,042
|
|
|
1,483
|
|
|
494
|
|
Income tax
expense
|
|
|
|
387
|
|
|
198
|
|
|
182
|
|
Depreciation and
amortization
|
|
|
|
35,922
|
|
|
33,538
|
|
|
29,779
|
|
EBITDA
|
|
|
|
60,912
|
|
|
48,924
|
|
|
45,036
|
|
Trademark
abandonment
|
|
|
|
—
|
|
|
11,106
|
|
|
—
|
|
Other impairments and
abandonments
|
|
|
|
356
|
|
|
60
|
|
|
—
|
|
Bargain purchase
gain
|
|
|
|
—
|
|
|
—
|
|
|
(5,607)
|
|
Non-cash loss on sale
of assets or subsidiaries
|
|
|
|
1,426
|
|
|
823
|
|
|
1,013
|
|
Non-cash compensation
expenses
|
|
|
|
4,809
|
|
|
2,964
|
|
|
3,944
|
|
Non-recurring
transaction costs
|
|
|
|
1,963
|
|
|
2,881
|
|
|
2,879
|
|
Lease abandonment
costs
|
|
|
|
9
|
|
|
76
|
|
|
162
|
|
Equity in losses of
unconsolidated entities
|
|
|
|
372
|
|
|
366
|
|
|
229
|
|
Foreign currency loss
(gain), net
|
|
|
|
(1)
|
|
|
4
|
|
|
6
|
|
Adjusted
EBITDA
|
|
|
$
|
69,846
|
|
$
|
67,204
|
|
$
|
47,662
|
|
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,
|
|
|
|
June 30, 2023
|
|
March 31, 2023
|
|
June 30, 2022
|
|
|
|
(unaudited)
|
|
|
|
(in thousands)
|
|
Gross profit by
segment
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
$
|
34,881
|
|
$
|
32,137
|
|
$
|
23,582
|
|
Water
Infrastructure
|
|
|
11,512
|
|
|
12,872
|
|
|
2,892
|
|
Chemical
Technologies
|
|
|
14,782
|
|
|
14,656
|
|
|
9,188
|
|
Other
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
As reported gross
profit
|
|
|
61,175
|
|
|
59,665
|
|
|
35,661
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus depreciation and
amortization
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
|
23,140
|
|
|
22,600
|
|
|
19,245
|
|
Water
Infrastructure
|
|
|
9,373
|
|
|
8,260
|
|
|
7,562
|
|
Chemical
Technologies
|
|
|
2,669
|
|
|
2,083
|
|
|
2,447
|
|
Other
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total depreciation and
amortization
|
|
|
35,182
|
|
|
32,943
|
|
|
29,254
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A
|
|
$
|
96,357
|
|
$
|
92,608
|
|
$
|
64,915
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A by segment
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
|
58,021
|
|
|
54,737
|
|
|
42,827
|
|
Water
Infrastructure
|
|
|
20,885
|
|
|
21,132
|
|
|
10,454
|
|
Chemical
Technologies
|
|
|
17,451
|
|
|
16,739
|
|
|
11,635
|
|
Other
|
|
|
—
|
|
|
—
|
|
|
(1)
|
|
Total gross profit
before D&A
|
|
$
|
96,357
|
|
$
|
92,608
|
|
$
|
64,915
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin before
D&A by segment
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
|
21.9 %
|
|
|
19.9 %
|
|
|
18.6 %
|
|
Water
Infrastructure
|
|
|
37.8 %
|
|
|
38.1 %
|
|
|
40.6 %
|
|
Chemical
Technologies
|
|
|
20.6 %
|
|
|
19.4 %
|
|
|
14.6 %
|
|
Other
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
|
Total gross margin
before D&A
|
|
|
23.8 %
|
|
|
22.2 %
|
|
|
19.3 %
|
|
View original
content:https://www.prnewswire.com/news-releases/select-water-solutions-announces-second-quarter-2023-financial-results-and-operational-updates-301891967.html
SOURCE Select Water Solutions