Select Water Solutions(WTTR) - 2025 Q2 - Quarterly Results

Executive Summary & Strategic Highlights This section provides an overview of Select Water Solutions' Q2 2025 financial and operational performance, along with key strategic initiatives and CEO commentary Q2 2025 Financial & Operational Highlights Select Water Solutions reported improved profitability and cash flow in Q2 2025, with significant sequential increases in net income and adjusted EBITDA. The Water Infrastructure segment showed strong growth in revenue and gross profit, while the company also announced key strategic initiatives | Metric | Q2 2025 | Sequential Change (vs Q1 2025) | | :-------------------------------- | :------ | :------------------------------ | | Operating Cash Flow | $82.6M | Significantly increased | | Free Cash Flow | $10.8M | Significantly increased | | Net Income | | +22.1% | | Adjusted EBITDA | | +13.4% | | Water Infrastructure Revenue | | +12% | | Water Infrastructure Gross Profit | | +17% | - Announced an asset swap transaction with OMNI Environmental Solutions, acquiring infrastructure assets in the Bakken and divesting certain trucking operations[1][6][26] - Initiated the evaluation of strategic alternatives for Peak Rentals, its power solutions, equipment rentals, and wellsite infrastructure business[1][7] - Secured multiple new long-term contracted Water Infrastructure projects in the Permian, backed by nearly 60,000 newly dedicated leasehold acres and 385,000 acres under right-of-first refusal[1][9] CEO's Strategic Commentary CEO John Schmitz highlighted the company's improved profitability and cash flow, driven by strategic advancements in Water Infrastructure. He emphasized the growth in recycling and disposal volumes, the rationalization of the Water Services segment through the OMNI transaction and Peak Rentals evaluation, and the focus on expanding the core Water Infrastructure platform, particularly in the Northern Delaware Basin - Improved profitability and cash flow in Q2 2025, with net income up 22% and adjusted EBITDA up 13% sequentially, despite modestly reduced consolidated revenue[2] - Water Infrastructure segment saw increased recycling and disposal volumes, leading to sequential revenue and gross profit increases of approximately 12% and 17%, respectively, with gross margins before D&A reaching 55%[4] - The OMNI transaction is expected to meaningfully reduce Water Services revenues short-term but improve consolidated margins and reduce operational risk over time, with plans to upgrade acquired assets in H2 2025 for 2026 growth[6] - Evaluating capital structure options for Peak Rentals to accelerate growth and optimize the Water Services portfolio, while preserving economic exposure to Peak's future growth[7][8] - New 12-year contract in Northern Delaware Basin adds 42,000 dedicated acres and 235,000 right-of-first-refusal acres, including customer conveyance of existing disposal infrastructure[9] Consolidated Financial Performance This section details Select Water Solutions' overall financial results for Q2 2025, including revenue, net income, gross profit, and adjusted EBITDA Revenue and Net Income Consolidated revenue for Q2 2025 slightly decreased sequentially and year-over-year, while net income increased sequentially but decreased compared to Q2 2024 | Metric | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | | :---------- | :----------- | :----------- | :----------- | | Revenue | 364.2 | 374.4 | 365.1 | | Net Income | 11.7 | 9.6 | 14.9 | Gross Profit and Margins Gross profit and gross margin before D&A improved sequentially in Q2 2025, indicating better operational efficiency despite a slight dip in total gross profit compared to Q2 2024 | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :------------------------- | :----------- | :----------- | :----------- | | Gross Profit | $57.8M | $55.8M | $60.2M | | Total Gross Margin | 15.9% | 14.9% | 16.5% | | Gross Profit before D&A | $98.8M | $94.4M | $97.6M | | Gross Margin before D&A | 27.1% | 25.2% | 26.7% | SG&A and Adjusted EBITDA SG&A expenses remained relatively stable with non-recurring transaction costs impacting both Q1 and Q2 2025. Adjusted EBITDA saw a strong sequential increase in Q2 2025 | Metric | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | | :-------------- | :----------- | :----------- | :----------- | | SG&A | 38.9 | 37.4 | 39.0 | | Adjusted EBITDA | 72.6 | 64.0 | 69.6 | - SG&A in Q2 2025 included $1.7 million in non-recurring transaction costs, following $1.2 million in Q1 2025[15] - Adjusted EBITDA in Q2 2025 was adjusted for $2.0 million of non-recurring transaction costs, $1.5 million of impairments and abandonments, and $1.1 million in other adjustments[16] Business Segment Performance This section analyzes the individual performance of Select Water Solutions' Water Infrastructure, Water Services, and Chemical Technologies segments Water Infrastructure Segment The Water Infrastructure segment demonstrated strong sequential revenue growth and improved gross margins before D&A, driven by increased recycling and disposal volumes. The company anticipates continued growth for this segment in the coming quarters and into 2026 | Metric | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | | :------------------------- | :----------- | :----------- | :----------- | | Revenue | 80.9 | 72.4 | 68.6 | | Gross Margin before D&A | 55.2% | 53.7% | 51.0% | - Water Infrastructure revenues increased 11.7% sequentially, exceeding company guidance[17] - Anticipates flat-to-down low single-digit sequential revenue in Q3 2025, followed by 10% sequential growth in Q4 2025, and 20% year-over-year growth in 2026[17] Water Services Segment The Water Services segment experienced a sequential revenue decrease due to declining activity levels and reduced freshwater sourcing sales. A significant further decrease is expected in Q3 2025, primarily due to the OMNI transaction divestments | Metric | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | | :------------------------- | :----------- | :----------- | :----------- | | Revenue | 215.7 | 225.6 | 230.0 | | Gross Margin before D&A | 19.6% | 19.5% | 22.5% | - Revenues decreased 4.4% sequentially, less than expected[18] - Expected Q3 2025 segment revenues to decrease by approximately 25% due to the OMNI divestments and decreased macro activity levels[18] Chemical Technologies Segment The Chemical Technologies segment saw a sequential revenue decrease but achieved stronger than anticipated margin performance, leading to net sequential gains in gross profit before D&A. Future revenue is expected to decline slightly due to industry activity levels | Metric | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | | :------------------------- | :----------- | :----------- | :----------- | | Revenue | 67.7 | 76.3 | 66.6 |\ | Gross Margin before D&A | 17.5% | 15.2% | 16.4% | - Revenues sequentially decreased more than expected, but stronger margin performance from new product development led to overall net sequential gains in gross profit before D&A[19] - Anticipates Q3 2025 revenue to decrease low-to-mid single-digit percentages, with gross margin before D&A remaining steady in the 15%–17% range[19] Cash Flow and Capital Structure This section examines Select Water Solutions' cash flow generation, capital expenditures, balance sheet position, and liquidity as of Q2 2025 Cash Flow Activities Select Water Solutions generated substantial operating cash flow and positive free cash flow in Q2 2025, a significant improvement from the previous quarter, primarily driven by a decrease in net working capital | Metric | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | | :----------------------------------- | :----------- | :----------- | :----------- | | Cash flow provided by operations | 82.6 | (5.1) | 83.1 | | Net capital expenditures | 71.7 | | | | Free cash flow | 10.8 | (51.5) | | - Cash flow from operations benefited from a $23.3 million decrease in net working capital, including a $28.3 million inflow from reduced accounts receivable balances[20] - Financing activities included $25.0 million of borrowings from the sustainability-linked credit facility, partially offset by $8.3 million in quarterly dividends[22] Balance Sheet and Liquidity The company significantly increased its cash and cash equivalents and total liquidity in Q2 2025, while also increasing borrowings under its credit facility. The borrowing base and available capacity under the sustainability-linked credit facility also improved | Metric | June 30, 2025 ($M) | March 31, 2025 ($M) | December 31, 2024 ($M) | | :----------------------------------- | :----------------- | :------------------ | :--------------------- | | Cash and cash equivalents | 51.2 | 27.9 | 20.0 | | Borrowings outstanding (Term Loan) | 250.0 | 250.0 | | | Borrowings outstanding (Revolver) | 25.0 | 0.0 | | | Borrowing base | 270.3 | 252.2 | | | Available borrowing capacity | 228.1 | 232.3 | | | Total liquidity | 279.3 | 260.2 | 134.8 | Strategic Updates and Business Development This section outlines Select Water Solutions' recent strategic transactions, asset divestments, and new long-term Water Infrastructure contracts OMNI Environmental Solutions Asset Swap Select completed an asset swap with OMNI Environmental Solutions in July 2025, expanding its Water Infrastructure footprint in the Bakken region by acquiring key solids management assets, while divesting certain trucking and rental operations from its Water Services segment. This transaction is expected to enhance margins and reduce operational risk - Acquired a special waste landfill, processing and treatment plant, disposal facilities, and oil reclamation assets in Williams County, North Dakota, expanding Bakken solids management footprint[27] - Divested certain trucking and equipment rental operations in the Northeast, MidCon, and Bakken regions to OMNI, along with $7.5 million cash, $10.2 million for retained net working capital, and 862,069 Select Class A shares[28] - Anticipates upgrading and expanding acquired landfill and treatment assets in H2 2025, adding high-margin growth potential to Water Infrastructure in 2026[27] Other Trucking Divestments Separate from the OMNI transaction, Select further reduced its trucking footprint by exiting operations in the MidCon and Haynesville regions, aiming to streamline its Water Services segment - Exited remaining trucking operations in the MidCon and Haynesville regions for additional cash consideration, significantly reducing its trucking footprint to Permian, Eagle Ford, and Rockies regions[29] | Metric | Full-Year 2024 | Six-Month YTD June 30, 2025 | | :----------------------------------- | :------------- | :-------------------------- | | Divested Trucking Ops Revenue (% of Trucking BU) | ~37% | ~20% | | Divested Trucking Ops Gross Profit before D&A (% of Trucking BU) | ~20% | ~5% | | Divested Trucking Ops Revenue (% of Water Services) | ~10% | ~5% | | Divested Trucking Ops Gross Profit before D&A (% of Water Services) | ~5% | ~5% | Water Infrastructure Business Development Select secured multiple new long-term contracts for full lifecycle produced water infrastructure projects in the Permian Basin, involving significant capital expenditures and expected to be operational in H1 2026 - Executed multiple new long-term contracts for produced water gathering, recycling, disposal, and distribution infrastructure projects in the Permian Basin[31] - Combined capital expenditures for these new projects are approximately $40 million, with each project anticipated to be online in the first half of 2026[31] Northern Delaware Basin – Eddy County Network Expansion A 12-year agreement was signed for infrastructure expansion in Eddy County, New Mexico, including new recycling facilities, pipelines, and the integration of existing customer disposal facilities, supported by significant dedicated and right-of-first-refusal acreage - 12-year agreement for construction and expansion of gathering, recycling, disposal, and distribution infrastructure in the Northern Delaware Basin, integrating into Select's Eddy County system[32] - Plans include two new recycling facilities (240,000 bpd throughput, 4 million barrels storage) and 21 miles of dual-lined pipelines[32] - Supported by approximately 42,000 dedicated acres and an additional 235,000 acres under right-of-first-refusal, with construction expected to be completed during H1 2026[32] Northern Delaware Basin Infrastructure Expansion and Right-of-First Refusal Execution An 8-year contract was secured to support an existing customer's operational expansion in the Northern Delaware basin, involving the assumption of recycling infrastructure operatorship, pipeline construction, and an extension of an existing agreement, adding substantial dedicated and right-of-first-refusal acreage - 8-year contract to assume operatorship of an existing customer's recycling infrastructure in the Northern Delaware basin and construct three miles of pipeline to connect to Select's Lea County network[33] - Extended the contract term of another existing Lea and Eddy County recycling agreement by five additional years[33] - Supported by approximately 17,000 additional dedicated acres and 150,000 acres under right-of-first-refusal, with the full project expected to be operational by Q1 2026[33] Financial Outlook and Guidance This section presents Select Water Solutions' forward-looking projections for consolidated and segment performance, along with capital expenditure guidance Consolidated and Segment Outlook Select anticipates continued activity softness in H2 2025, particularly in Water Services, but expects resilience and growth from Water Infrastructure. Consolidated Adjusted EBITDA is projected to decline in Q3 before recovering in Q4 - Water Infrastructure revenue is anticipated to be flat-to-modestly down in Q3 2025, then grow 10% sequentially in Q4 2025, setting the stage for 20% year-over-year growth in 2026[10][17] - Consolidated Adjusted EBITDA in Q3 2025 is expected to decline sequentially to an estimated $55 – $60 million, with a tick-up in Q4 driven by Water Infrastructure growth[10] - Water Services segment revenues are expected to decrease by approximately 25% in Q3 2025 due to OMNI divestments and reduced activity levels[18] - Chemical Technologies revenue is anticipated to decrease low-to-mid single-digit percentages in Q3 2025[19] Capital Expenditures Guidance The company maintains its 2025 net capital expenditures guidance, with a bias towards the higher end to support future growth, particularly in Water Infrastructure - Maintains 2025 net capital expenditures guidance of $225 million to $250 million, with a bias to the higher-end due to recent contract awards, positioning for 2026 and beyond[11] Consolidated Financial Statements This section provides the complete unaudited consolidated financial statements, including statements of operations, balance sheets, and cash flows Consolidated Statements of Operations The Consolidated Statements of Operations provide a detailed breakdown of revenues, costs, and expenses across segments, leading to net income for the three and six months ended June 30, 2025, compared to prior periods | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended March 31, 2025 | Three months ended June 30, 2024 | | :-------------------- | :------------------------------- | :-------------------------------- | :------------------------------- | | Total revenue | $364,215 | $374,384 | $365,131 | | Gross profit | $57,753 | $55,770 | $60,156 | | Income from operations| $15,425 | $15,541 | $20,364 | | Net income | $11,671 | $9,560 | $14,899 | | Net income per share (Class A—Basic) | $0.10 | $0.08 | $0.13 | Consolidated Balance Sheets The Consolidated Balance Sheets present the company's financial position as of June 30, 2025, March 31, 2025, and December 31, 2024, detailing assets, liabilities, and equity | Metric (in thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | | :-------------------- | :------------ | :------------- | :---------------- | | Total current assets | $439,425 | $457,850 | $385,498 | | Total assets | $1,546,489 | $1,545,211 | $1,366,282 | | Total current liabilities | $219,057 | $249,885 | $233,375 | | Total liabilities | $623,370 | $628,262 | $450,748 | | Total equity | $923,119 | $916,949 | $915,534 | Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows illustrate the cash generated from or used in operating, investing, and financing activities for the three and six months ended June 30, 2025, and prior periods | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended March 31, 2025 | Three months ended June 30, 2024 | | :-------------------- | :------------------------------- | :-------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $82,586 | $(5,061) | $83,114 | | Net cash used in investing activities | $(74,972) | $(132,522) | $(87,211) | | Net cash provided by financing activities | $15,669 | $145,499 | $7,762 | | Net increase (decrease) in cash and cash equivalents | $23,294 | $7,914 | $3,664 | Non-GAAP Financial Measures & Reconciliations This section defines and reconciles non-GAAP financial measures used by Select Water Solutions to their most directly comparable GAAP counterparts Non-GAAP Definitions and Limitations This section defines non-GAAP financial measures such as EBITDA, Adjusted EBITDA, gross profit before D&A, gross margin before D&A, and free cash flow, explaining their utility for external users while also highlighting their limitations and non-comparability with GAAP measures - EBITDA, Adjusted EBITDA, gross profit before D&A, gross margin before D&A, and free cash flow are non-GAAP measures used to provide useful information to external users by removing effects of capital structure, asset base, and non-recurring items[44] - These non-GAAP measures should not be considered as alternatives to GAAP measures (Net income, Gross profit, Net cash provided by operating activities) and may not be comparable to similarly titled measures of other companies[45] - The company is unable to provide a reconciliation of forward-looking non-GAAP measures to GAAP due to the inherent difficulty in predicting certain GAAP amounts with reasonable accuracy[46] Reconciliations Detailed reconciliations are provided for free cash flow to net cash provided by operating activities, EBITDA and Adjusted EBITDA to net income, and gross profit before D&A to total gross profit, along with gross margin before D&A calculations | Metric (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------- | :------ | :------ | :------ | | Net cash provided by (used in) operating activities | $82,586 | $(5,061) | $83,114 | | Purchase of property and equipment | $(79,406) | $(48,427) | $(49,113) | | Proceeds received from sale of property and equipment | $7,659 | $1,944 | $3,379 | | Free cash flow | $10,839 | $(51,544) | $37,380 | | Metric (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------- | :------ | :------ | :------ | | Net income | $11,671 | $9,560 | $14,899 | | EBITDA | $64,809 | $56,930 | $59,077 | | Adjusted EBITDA | $72,614 | $64,031 | $69,647 | | Metric (in thousands) | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------- | :------ | :------ | :------ | | As reported gross profit | $57,753 | $55,770 | $60,156 | | Total D&A | $41,054 | $38,675 | $37,445 | | Gross profit before D&A | $98,807 | $94,445 | $97,601 | | Total gross margin before D&A | 27.1% | 25.2% | 26.7% | Company Information This section provides general company information, including details for the earnings call, a company overview, and a cautionary statement regarding forward-looking statements Second Quarter Earnings Conference Call Details for the Q2 2025 earnings conference call, including date, time, dial-in information, and webcast access, are provided for investors and interested parties - Conference call scheduled for Wednesday, August 6, 2025, at 11:00 a.m. Eastern time / 10:00 a.m. Central time[34] - Telephonic replay available through August 20, 2025, and webcast archive accessible for approximately 90 days[34] About Select Water Solutions, Inc. Select Water Solutions is a leading provider of sustainable water and chemical solutions to the energy industry, emphasizing safe, environmentally responsible water management and leveraging critical water infrastructure assets and chemical manufacturing capabilities - Select is a leading provider of sustainable water and chemical solutions to the energy industry[35] - Solutions are supported by critical water infrastructure assets, chemical manufacturing, and water treatment and recycling capabilities[35] - Places utmost importance on safe, environmentally responsible management of water throughout the lifecycle of a well[35] Cautionary Statement Regarding Forward-Looking Statements This section advises readers that the communication contains forward-looking statements, which are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from expectations. It lists various factors that could impact these statements and disclaims any obligation to update them - All statements other than historical facts are forward-looking and contain current expectations about future results[36] - Such statements are not guarantees of future performance and are subject to known and unknown risks and uncertainties, including macroeconomic uncertainty, geopolitical conflicts, commodity price volatility, regulatory changes, and technological advancements[36] - Investors should not place undue reliance on forward-looking statements, and the company undertakes no obligation to publicly update or revise them unless required by law[36]