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

Filing Information This is a Quarterly Report on Form 10-Q for the period ended June 30, 2025 - This is a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2] - The registrant, SELECT WATER SOLUTIONS, INC., is a large accelerated filer and not an emerging growth company or a shell company[2][3] | Title of each class | Trading Symbol | Name of each exchange on which registered | | :------------------ | :------------- | :---------------------------------------- | | Class A common stock, par value $0.01 per share | WTTR | New York Stock Exchange | Table of Contents Cautionary Note Regarding Forward-Looking Statements The report includes forward-looking statements based on current expectations and assumptions, subject to various risks and uncertainties - The report includes forward-looking statements based on current expectations and assumptions, which are subject to various risks and uncertainties[7] - Important factors that could cause actual results to differ materially include global economic distress, actions by OPEC+, changing trade policies, and volatility in oil and gas prices[8][9] - The company undertakes no obligation to update or revise any forward-looking statements after the date they are made[10] PART I—FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents unaudited consolidated financial statements, including balance sheets, statements of operations, comprehensive income, changes in equity, and cash flows, with detailed notes for periods ended June 30, 2025, and December 31, 2024 Consolidated Balance Sheets | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $1,546,489 | $1,366,282 | $180,207 | 13.2% | | Total Liabilities | $623,370 | $450,748 | $172,622 | 38.3% | | Total Equity | $923,119 | $915,534 | $7,585 | 0.8% | | Cash and cash equivalents | $51,186 | $19,978 | $31,208 | 156.2% | | Accounts receivable trade, net | $309,211 | $281,569 | $27,642 | 9.8% | | Total current assets | $439,425 | $385,498 | $53,927 | 14.0% | | Total property and equipment, net | $800,407 | $725,654 | $74,753 | 10.3% | | Investments in unconsolidated entities | $83,272 | $11,347 | $71,925 | 633.9% | | Total current liabilities | $219,057 | $233,375 | $(14,318) | (6.1)% | | Long-term debt, net | $270,837 | $85,000 | $185,837 | 218.6% | Consolidated Statements of Operations | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | % Change | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------- | :------- | | Total revenue | $364,215 | $365,131 | $(916) | (0.3)% | | Gross profit | $57,753 | $60,156 | $(2,403) | (4.0)% | | Income from operations | $15,425 | $20,364 | $(4,939) | (24.3)% | | Net income attributable to Select Water Solutions, Inc. | $10,647 | $12,868 | $(2,221) | (17.3)% | | Class A—Basic EPS | $0.10 | $0.13 | $(0.03) | (23.1)% | | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | % Change | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------- | :------- | | Total revenue | $738,599 | $731,679 | $6,920 | 0.9% | | Gross profit | $113,523 | $112,833 | $690 | 0.6% | | Income from operations | $30,966 | $27,369 | $3,597 | 13.1% | | Net income attributable to Select Water Solutions, Inc. | $18,886 | $16,493 | $2,393 | 14.5% | | Class A—Basic EPS | $0.19 | $0.17 | $0.02 | 11.8% | Consolidated Statements of Comprehensive Income | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | YoY Change | % Change | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------- | :------- | | Comprehensive income attributable to Select Water Solutions, Inc. | $10,647 | $12,868 | $(2,221) | (17.3)% | | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | % Change | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------- | :------- | | Comprehensive income attributable to Select Water Solutions, Inc. | $18,886 | $16,493 | $2,393 | 14.5% | Consolidated Statements of Changes in Equity | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Balance as of December 31, 2024/2023 | $915,534 | $892,172 | | Equity-based compensation | $6,679 | $12,560 | | Issuance of restricted shares | $1,158 | $1,262 | | Repurchase of common stock | $(6,145) | $(7,031) | | Dividends and distribution declared | $(16,765) | $(14,279) | | Net income | $21,231 | $18,774 | | Balance as of June 30, 2025/2024 | $923,119 | $902,130 | Consolidated Statements of Cash Flows | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | YoY Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------- | :------- | | Net cash provided by operating activities | $77,525 | $115,243 | $(37,718) | (32.7)% | | Net cash used in investing activities | $(207,494) | $(224,119) | $16,625 | 7.4% | | Net cash provided by financing activities | $161,168 | $68,213 | $92,955 | 136.3% | | Net increase (decrease) in cash and cash equivalents | $31,208 | $(40,666) | $71,874 | NM | | Cash and cash equivalents, end of period | $51,186 | $16,417 | $34,769 | 211.8% | Notes to Consolidated Financial Statements NOTE 1—BUSINESS AND BASIS OF PRESENTATION Select Water Solutions, Inc. provides sustainable water-management solutions to the U.S. energy industry, with a new partnership, AV Farms, LP, formed in February 2025, to consolidate Colorado water holdings - Company changed its name to Select Water Solutions, Inc. on May 8, 2023, to reflect a strategic focus on water-management solutions[26] - Entered into a new partnership arrangement, AV Farms, LP, on February 14, 2025, to consolidate water holdings in Colorado for agricultural, municipal, and industrial stakeholders[34][35] | Investment | Type of Investment | Attained Accounting Method | As of June 30, 2025 (in thousands) | As of December 31, 2024 (in thousands) | | :-------------------------------- | :----------------- | :------------------------- | :--------------------------------- | :----------------------------------- | | Water Infrastructure | 39% minority interest | Equity-method | $71,276 | — | | Water Services | 20% minority interest | Equity-method | $4,100 | $4,017 | | Water Services | 38% minority interest | Equity-method | $5,046 | $4,388 | | Water Services | 47% minority interest | Equity-method | $2,850 | $2,942 | | Total investment in unconsolidated entities | | | $83,272 | $11,347 | NOTE 2—SIGNIFICANT ACCOUNTING POLICIES Financial statements rely on management estimates; allowance for credit losses increased to $5.1 million as of June 30, 2025, and ARO increased to $64.2 million | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Allowance for credit losses | $5,059 | $4,543 | | Asset Retirement Obligations (ARO) | $64,238 | $63,230 | - Defined Contribution Plan match expense was $1.3 million for the Current Quarter and $3.2 million for the Current Period[49] - Paid $14.1 million in dividends for Class A common stock and $2.3 million in distributions to noncontrolling interests during the Current Period[51] NOTE 3—ACQUISITIONS In 2025, the company completed four asset acquisitions for $14.6 million and acquired wastewater treatment facilities for $1.7 million, enhancing water infrastructure | Acquisition Type | Acquisition Date | Cash Consideration (in thousands) | Total Consideration (in thousands) | Segment | | :------------------------------------ | :--------------- | :------------------------------ | :------------------------------- | :------------------ | | Four Smaller Asset Acquisitions | Multiple 2025 Dates | $14,580 | $14,580 | Water Infrastructure | | One Smaller Asset Acquisition | April 1, 2025 | $1,725 | $1,725 | Water Services | | Eight Smaller Asset Acquisitions | Multiple 2024 Dates | $14,591 | $14,622 | Water Infrastructure | | Six Business Combinations (2024) | Multiple 2024 Dates | $148,113 | $148,113 | Water Infrastructure | NOTE 4—REVENUE Revenue is primarily from water services and chemical technologies, with Water Infrastructure including longer-term contracts; Permian Basin was the largest contributor at $187.3 million for Q2 2025 - Most Water Services and Chemical Technologies customer agreements are short-term (less than one year), while Water Infrastructure includes both short-term and long-term agreements[64] - Water Infrastructure segment includes contracts with acreage dedications, AMIs, wellbore dedications, and minimum volume commitments (MVCs), which are typically longer-term[66] | Geographic Region (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Permian Basin | $187,293 | $180,656 | $367,136 | $349,079 | | Rockies | $39,041 | $52,903 | $88,626 | $109,586 | | Marcellus/Utica | $44,466 | $33,512 | $87,021 | $70,847 | | Eagle Ford | $36,019 | $37,259 | $78,713 | $86,500 | | Bakken | $25,389 | $19,755 | $48,053 | $34,890 | | Mid-Continent | $23,162 | $19,362 | $47,746 | $38,843 | | Haynesville/E. Texas | $12,688 | $24,057 | $27,948 | $47,406 | | Total | $364,215 | $365,131 | $738,599 | $731,679 | NOTE 5—INVENTORIES Inventories increased to $41.7 million as of June 30, 2025, with raw materials up and finished goods down; inventory reserve was $4.9 million | Inventory Component (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :--------------------------------- | :------------ | :---------------- | :----- | :------- | | Raw materials | $33,907 | $24,884 | $9,023 | 36.3% | | Finished goods | $7,773 | $13,563 | $(5,790) | (42.7)% | | Total Inventories | $41,680 | $38,447 | $3,233 | 8.4% | - The company's inventory reserve for excess and obsolete items was $4.9 million as of June 30, 2025, up from $4.8 million at December 31, 2024[73] NOTE 6—PROPERTY AND EQUIPMENT Net property and equipment increased to $800.4 million as of June 30, 2025, driven by infrastructure growth; depreciation expense rose to $43.0 million for Q2 2025 | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------------ | :------------ | :---------------- | :----- | :------- | | Total property and equipment, net | $800,407 | $725,654 | $74,753 | 10.3% | | Gathering and disposal infrastructure | $342,640 | $309,854 | $32,786 | 10.6% | | Pipelines | $156,086 | $103,425 | $52,661 | 50.9% | | Recycling facilities | $147,251 | $115,227 | $32,024 | 27.8% | | Expense (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Depreciation, amortization and accretion | $42,972 | $38,193 | $82,572 | $76,343 | - Impairments and abandonments were $1.5 million for the Current Quarter and $2.6 million for the Current Period, including software development costs and property/equipment abandonments[75][76] NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill remained stable at $18.2 million as of June 30, 2025, while net intangible assets decreased to $115.0 million due to amortization of definite-lived assets | Asset (in thousands) | June 30, 2025 (Net Value) | December 31, 2024 (Net Value) | Change | % Change | | :------------------------------------ | :-------------------------- | :---------------------------- | :----- | :------- | | Goodwill | $18,215 | $18,215 | $0 | 0.0% | | Other intangible assets, net | $114,959 | $123,715 | $(8,756) | (7.1)% | | Customer relationships (definite-lived) | $103,350 | $111,068 | $(7,718) | (6.9)% | | Patents and other intellectual property (definite-lived) | $4,982 | $5,751 | $(769) | (13.4)% | | Water rights (definite-lived) | $1,346 | $1,615 | $(269) | (16.7)% | | Water rights (indefinite-lived) | $5,281 | $5,281 | $0 | 0.0% | - Annual amortization of intangible assets is projected to be $8.8 million for the remainder of 2025, $17.4 million in 2026, and $16.9 million in 2027[79] NOTE 8—DEBT On January 24, 2025, a new $550.0 million Sustainability-Linked Credit Facility was established, with $275.0 million outstanding and $228.1 million available as of June 30, 2025 - Entered into a new $550.0 million Sustainability-Linked Credit Facility on January 24, 2025, consisting of a $300.0 million Revolving Credit Facility and a $250.0 million Term Loan Facility[80] | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :--------------------------- | :------------------------------- | | Long-term debt, net | $270,837 | $85,000 | | Outstanding borrowings | $275,000 | $85,000 | | Available borrowing capacity | $228,100 | $199,800 (Prior Facility) | | Borrowing Base (Revolving Credit Facility) | $270,300 | $218,800 (Prior Facility) | | Interest rate (Revolving Credit Facility) | 5.91% | N/A | | Interest rate (Term Loan) | 7.42% | N/A | - Incurred $7.9 million in debt issuance costs for the new Sustainability-Linked Credit Facility during the Current Period[109] NOTE 9—COMMITMENTS AND CONTINGENCIES The company is involved in ordinary course legal proceedings, not expecting a material adverse effect, and is self-insured for various liabilities - No currently pending lawsuits or claims are expected to have a material adverse effect on the company's financial position, results of operations, or cash flows[111] - The company is self-insured up to certain retention limits for workers' compensation, general liability, vehicle liability, and health insurance[112] NOTE 10—EQUITY-BASED COMPENSATION The 2024 Equity Incentive Plan reserved 8.5 million Class A shares; compensation expense for restricted stock was $6.4 million for the Current Period, with $19.7 million unrecognized - The 2024 Equity Incentive Plan was approved, reserving 8,487,004 shares of Class A common stock, with 8,148,829 shares available for future awards as of June 30, 2025[114] | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Restricted Stock Awards Compensation Expense | $3,400 | $2,900 | $6,400 | $6,600 | | PSUs Compensation Expense | $(200) (credit) | $3,300 | $300 | $5,900 | - As of June 30, 2025, $19.7 million of unrecognized compensation expense existed for restricted stock awards and $8.7 million for unvested PSUs, both with a weighted-average remaining life of 1.9 years[118][128] - Repurchased 576,430 shares of Class A common stock during the Current Period, primarily for cashless exercise of options and tax withholding requirements[131] NOTE 11—FAIR VALUE MEASUREMENT The company uses a three-level valuation hierarchy for fair value measurements, with current financial instruments and debt approximating fair value - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (quoted prices for similar assets/liabilities in non-active markets or observable inputs), and Level 3 (unobservable and significant inputs)[134][135][136] - Carrying values of current financial instruments (cash, accounts receivable, accounts payable) and debt approximate their fair value due to short-term nature or variable market rates[138] NOTE 12—RELATED-PARTY TRANSACTIONS The company engages in related-party transactions, with purchases totaling $15.4 million for the Current Period; TRA liability was $38.4 million as of June 30, 2025 | Transaction Type (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Sales to related parties | < $100 | $200 | $200 | $400 | | Purchases from related-party vendors | $10,000 | $5,400 | $15,400 | $10,000 | - The liability for Tax Receivable Agreements (TRAs) was $38.4 million as of June 30, 2025, and $38.5 million as of December 31, 2024, reflecting 85% of anticipated net cash savings[149] NOTE 13—INCOME TAXES Total income tax expense for Q2 2025 was $4.5 million with an effective tax rate of 27.6%, differing from the 21% U.S. federal rate | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total income tax expense | $4,521 | $3,959 | $7,415 | $5,411 | | Effective Tax Rate | 27.6% | 21.1% | 25.8% | 22.1% | NOTE 14—NONCONTROLLING INTERESTS Total noncontrolling interests were $123.8 million as of June 30, 2025, primarily from Class B common stock holders, with a $2.9 million cash contribution received | Noncontrolling Interest Type (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Attributable to joint ventures | $(410) | $(1,570) | | Attributable to Class B common stock holders | $124,249 | $123,584 | | Total noncontrolling interests | $123,839 | $122,014 | - Received a $2.9 million cash contribution from a noncontrolling interest for business development during the Current Period[154] NOTE 15—INCOME PER SHARE Basic Class A EPS was $0.10 for the Current Quarter and $0.19 for the Current Period; diluted Class A EPS was $0.10 and $0.18, respectively | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Class A—Basic EPS | $0.10 | $0.13 | $0.19 | $0.17 | | Class A—Diluted EPS | $0.10 | $0.13 | $0.18 | $0.16 | NOTE 16—SEGMENT INFORMATION The company operates three segments: Water Infrastructure, Water Services, and Chemical Technologies, with Water Infrastructure revenue growing 17.9% to $80.9 million in Q2 2025 - The company operates three reportable segments: Water Infrastructure, Water Services, and Chemical Technologies, with performance assessed primarily by segment EBITDA[158][159][160][161][162] | Segment (in thousands) | 3 Months Ended June 30, 2025 Revenue | 3 Months Ended June 30, 2024 Revenue | YoY Change | % Change | | :--------------------- | :----------------------------------- | :----------------------------------- | :--------- | :------- | | Water Infrastructure | $80,855 | $68,564 | $12,291 | 17.9% | | Water Services | $215,660 | $230,008 | $(14,348) | (6.2)% | | Chemical Technologies | $67,700 | $66,559 | $1,141 | 1.7% | | Total Revenue | $364,215 | $365,131 | $(916) | (0.3)% | | Segment (in thousands) | 6 Months Ended June 30, 2025 Revenue | 6 Months Ended June 30, 2024 Revenue | YoY Change | % Change | | :--------------------- | :----------------------------------- | :----------------------------------- | :--------- | :------- | | Water Infrastructure | $153,246 | $132,072 | $21,174 | 16.0% | | Water Services | $441,308 | $458,315 | $(17,007) | (3.7)% | | Chemical Technologies | $144,045 | $141,292 | $2,753 | 1.9% | | Total Revenue | $738,599 | $731,679 | $6,920 | 0.9% | | Segment EBITDA (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Water Infrastructure | $40,650 | $28,889 | $70,976 | $52,340 | | Water Services | $38,039 | $46,755 | $75,392 | $86,145 | | Chemical Technologies | $7,754 | $5,584 | $15,504 | $13,283 | | Total EBITDA | $64,809 | $59,077 | $121,739 | $103,826 | NOTE 17—SUBSEQUENT EVENTS On July 1, 2025, the company acquired Omni Environmental Solutions' Bakken assets for $17.7 million cash and 862,069 Class A shares, while divesting certain hauling operations - Acquired Omni Environmental Solutions' assets in the Bakken region on July 1, 2025, for $17.7 million cash and 862,069 shares of Class A common stock, expanding Water Infrastructure capabilities[167][168] - Divested rental and oil hauling operations in the Bakken, Northeast fluids hauling, Midcon fluids hauling, and one Midcon SWD as part of the Omni transaction[167] - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is expected to reduce future tax liability and defer payments under Tax Receivable Agreements[170] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section compares financial results for the three and six months ended June 30, 2025, and 2024, analyzing revenue, costs, gross profit, operating expenses, and net income Overview Select Water Solutions, Inc. is a leading U.S. provider of sustainable water and chemical solutions to the energy industry - The company is a leading provider of sustainable water and chemical solutions to the U.S. energy industry, focusing on safe and environmentally responsible water management[173] Sustainability Select's corporate strategy emphasizes environmental consciousness, health and safety, human capital, and community outreach, integrated into its sustainability-linked credit facility - Select's corporate strategy focuses on stakeholders, including people, customers, environment, and communities, with four priorities: Environmental Consciousness, Health and Safety, Human Capital Management, and Community Outreach[174] - The company's sustainability commitment is exemplified by its sustainability-linked credit facility, which incorporates targets for growing produced water recycling volumes and maintaining market-leading employee safety performance[174] - The company is significantly increasing its focus on recycling and reuse of produced water and assessing other industrial water sources to meet industry demand and reduce freshwater usage[176] Recent Developments The company acquired Omni Environmental Solutions' Bakken assets, divested lower-margin hauling operations, completed $14.6 million in asset acquisitions, and invested $72.1 million in AV Farms - Acquired Omni Environmental Solutions' assets in the Bakken region on July 1, 2025, including a solids waste landfill, processing facility, SWD, and oil storage tank farm, enhancing the Water Infrastructure segment[179][182] - Divested lower-margin fluids hauling operations in the Haynesville and Midcon regions, while retaining higher-margin operations in Permian, Rockies, and Eagle Ford[179] - In the first six months of 2025, completed four asset acquisitions totaling $14.6 million for water infrastructure and acquired wastewater treatment facilities for $1.7 million[181] - Made a $72.1 million equity method investment in AV Farms to consolidate water holdings and storage in Colorado[181] - Prioritizing investments in Water Infrastructure projects for predictable revenue, higher gross margins, and stronger customer partnerships through integrated solutions[184] Market Trends and Outlook Geopolitical conflicts, energy price volatility, and changing trade policies create uncertainty; WTI crude oil prices decreased in Q2 2025, while Henry Hub natural gas prices increased - Global geopolitical conflicts (Russia-Ukraine war, Middle East instability) and economic uncertainty (inflation, high interest rates) are decreasing demand for oil and natural gas or contributing to price volatility[8][185][186][187] | Commodity Price | Current Quarter (Q2 2025) | Prior Quarter (Q1 2025) | Change | | :-------------------- | :------------------------ | :---------------------- | :----- | | WTI crude oil (average spot price) | $64.57 | $81.81 | $(17.24) | | Henry Hub natural gas (average spot price) | $3.19 | $2.07 | $1.12 | - Industry consolidation, especially in the Permian Basin, can initially slow activity but ultimately increase demand for longer-term integrated full water lifecycle solutions[191][196] - The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, includes provisions to expand onshore oil and gas leasing and drilling on federal land[192] - Increased reuse of produced water drives demand for additional chemical treatment solutions and advanced "on-the-fly" solutions for water and chemical blending at well sites[197] Our Segments The company operates three segments: Water Infrastructure (fixed assets), Water Services (water sourcing, transfer, hauling), and Chemical Technologies (chemical applications and water treatment solutions) - Water Infrastructure segment includes fixed assets such as water distribution pipelines, recycling facilities, produced water gathering pipelines, saltwater disposal wells (SWDs), and solids management facilities[200] - Water Services segment provides water sourcing, transfer, fluids hauling, water monitoring, water containment, water network automation, accommodations and rentals, and flowback and well testing businesses[200] - Chemical Technologies segment offers technical solutions, products, and expertise for chemical applications in hydraulic fracturing, stimulation, cementing, and well completions, including tailored water treatment solutions for produced water recycling[200] How We Generate Revenue Most revenue is generated from water-management services (Water Services and Water Infrastructure), with Water Infrastructure utilizing long-term contracts and Chemical Technologies based on chemical quantities - Most revenue is generated from water-management services in Water Services and Water Infrastructure segments, associated with well completions and produced water management[200][201] - Water Infrastructure segment utilizes long-term contracts with acreage dedications, AMIs, wellbore dedications, and minimum volume commitments (MVCs)[203] - Chemical Technologies revenue is based on the quantity of chemicals provided, typically under short-term contracts[204] Costs of Conducting Our Business Principal business expenses include labor, vehicle and equipment, raw materials, and fuel, with labor costs being the largest component at $124.4 million for Q2 2025 - Principal expenses include labor, vehicle and equipment, raw materials (chemicals, water sourcing), and fuel, with most costs being variable[205] | Cost Category (in millions) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Labor and labor-related costs | $124.4 | $126.7 | $253.8 | $265.0 | | Vehicle and equipment costs | $79.7 | $79.0 | $159.2 | $158.5 | | Raw material costs | $58.8 | $63.2 | $123.9 | $124.9 | | Fuel and freight costs | $18.4 | $21.0 | $40.7 | $45.0 | How We Evaluate Our Operations Operations are evaluated using Revenue, Gross Profit, Gross Margins, EBITDA, Adjusted EBITDA, Cash Flows, and Free Cash Flow, with non-GAAP measures used for performance comparison - Key operational and financial metrics used to assess performance include Revenue, Gross Profit, Gross Margins, EBITDA, Adjusted EBITDA, Cash Flows, and Free Cash Flow[215] - EBITDA and Adjusted EBITDA are non-GAAP measures used to compare operating performance by excluding interest expense, income taxes, depreciation, amortization, accretion, and other non-recurring items[214][256][257] - Free cash flow is defined as net cash from operating activities less purchases of property and equipment, plus proceeds from sales of property and equipment, used to assess liquidity and ability to fund operations, investments, and debt repayment[218] Factors Affecting the Comparability of Our Results of Operations to Our Historical Results of Operations Future results may not be comparable to historical results due to ongoing acquisition activity, with five asset acquisitions completed in the Current Period - Future results of operations may not be comparable to historical results due to continuous evaluation and consummation of acquisitions, especially in water infrastructure and related services[219][220] - Five asset acquisitions were completed during the Current Period, and their pre-transaction results are not included in historical financial statements prior to their respective completion dates[221] Results of Operations This section compares financial results for the three and six months ended June 30, 2025, and 2024, analyzing revenue, costs, gross profit, operating expenses, and net income Current Quarter Compared to the Prior Quarter Total revenue slightly decreased by 0.3% to $364.2 million; Water Infrastructure revenue increased by 17.9%, while Water Services revenue decreased by 6.2% | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenue | $364,215 | $365,131 | $(916) | (0.3)% | | Water Infrastructure Revenue | $80,855 | $68,564 | $12,291 | 17.9% | | Water Services Revenue | $215,660 | $230,008 | $(14,348) | (6.2)% | | Chemical Technologies Revenue | $67,700 | $66,559 | $1,141 | 1.7% | | Gross profit | $57,753 | $60,156 | $(2,403) | (4.0)% | | Net income | $11,671 | $14,899 | $(3,228) | (21.7)% | - Water Infrastructure revenue increase was driven by organic growth in recycling and solids management, supported by capital investments[226] - Water Services revenue decrease was due to a decline in water sourcing (shift to produced water) and reduced margins in certain business lines, partially offset by improved fluids hauling margins[227][231] - Net interest expense increased by 178.6% to $5.6 million due to the new Term Loan Facility and higher amortization of debt issuance costs[238] Current Period Compared to the Prior Period Total revenue increased by 0.9% to $738.6 million; Water Infrastructure revenue grew 16.0%, while Water Services revenue decreased by 3.7% | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :------------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total revenue | $738,599 | $731,679 | $6,920 | 0.9% | | Water Infrastructure Revenue | $153,246 | $132,072 | $21,174 | 16.0% | | Water Services Revenue | $441,308 | $458,315 | $(17,007) | (3.7)% | | Chemical Technologies Revenue | $144,045 | $141,292 | $2,753 | 1.9% | | Gross profit | $113,523 | $112,833 | $690 | 0.6% | | Net income | $21,231 | $18,774 | $2,457 | 13.1% | - Selling, general and administrative expenses decreased by 7.9% to $76.4 million, primarily due to lower incentive/equity-based compensation and transaction costs[251] - Net interest expense increased by 219.0% to $10.5 million due to the new Term Loan Facility, higher amortization of debt issuance costs, and extinguishment costs[254] Comparison of Non-GAAP Financial Measures EBITDA for the Current Quarter increased by $5.7 million to $64.8 million, and Adjusted EBITDA increased to $72.6 million | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | EBITDA | $64,809 | $59,077 | $5,732 | 9.7% | | Adjusted EBITDA | $72,614 | $69,647 | $2,967 | 4.3% | | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | EBITDA | $121,739 | $103,826 | $17,913 | 17.2% | | Adjusted EBITDA | $136,645 | $129,405 | $7,240 | 5.6% | Liquidity and Capital Resources Primary liquidity comes from cash, the Sustainability-Linked Credit Facility, and operations; operating cash flow decreased, while financing cash flow increased due to new debt Overview Primary liquidity sources are cash, the Sustainability-Linked Credit Facility, and operations; cash and cash equivalents were $51.2 million as of June 30, 2025 - Primary liquidity sources are cash on hand, borrowing capacity under the Sustainability-Linked Credit Facility, cash flows from operations, and proceeds from asset sales[263] - Prioritizes sustained positive free cash flow and a strong balance sheet, evaluating acquisitions and investments in this context[264] | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :------------------------------------ | :-------------------------- | :------------------------------ | | Cash and cash equivalents | $51.2 | $19.9 | | Available borrowing capacity (Sustainability-Linked Credit Facility) | $228.1 | N/A (Prior Facility) | | Outstanding indebtedness | $275.0 | $85.0 (Prior Facility) | - Increased quarterly dividend to $0.07 per share/unit for Class A and Class B holders, effective November 15, 2024[269] Cash Flows Net cash from operating activities decreased by 32.7% to $77.5 million; investing activities decreased by 7.4% to $207.5 million; financing activities increased by 136.3% to $161.2 million | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | % Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net cash provided by operating activities | $77,525 | $115,243 | $(37,718) | (32.7)% | | Net cash used in investing activities | $(207,494) | $(224,119) | $16,625 | 7.4% | | Net cash provided by financing activities | $161,168 | $68,213 | $92,955 | 136.3% | - Operating cash flow decrease primarily due to a $39.4 million reduction in converting working capital to cash[274] - Investing cash flow decrease driven by $132.6 million lower acquisition spend, partially offset by a $72.1 million investment in unconsolidated entities and $45.0 million increase in property and equipment purchases[275] - Financing cash flow increase primarily due to a $100.0 million increase in net borrowings and $2.9 million cash from noncontrolling interests[276] Free Cash Flow Free cash flow for the six months ended June 30, 2025, was negative $40.7 million, a significant decrease from positive $40.9 million in the prior period | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | | Free cash flow | $(40,705) | $40,912 | $(81,617) | Sustainability-Linked Credit Facility The new $550.0 million Sustainability-Linked Credit Facility, effective January 24, 2025, includes a $300.0 million Revolving Credit Facility and a $250.0 million Term Loan Facility - The new Sustainability-Linked Credit Facility provides $300.0 million in revolving commitments and $250.0 million in term commitments, with options to increase by $150.0 million and $50.0 million, respectively[280] - Interest rate margins and facility fees are subject to annual adjustments based on performance against sustainability targets for total recordable incident rate and barrels of recycled produced water[85] Contractual Obligations Contractual obligations primarily include the Sustainability-Linked Credit Facility and operating leases, with details in Note 8—Debt and the 2024 Form 10-K - Contractual obligations include the Sustainability-Linked Credit Facility and operating leases[282] Critical Accounting Policies and Estimates No changes to critical accounting policies from those disclosed in the 2024 Form 10-K - No changes to critical accounting policies from the 2024 Form 10-K[283] Recent Accounting Pronouncements Refer to Note 2—Significant Accounting Policies for details on recent accounting pronouncements - Refer to Note 2 for recent accounting pronouncements[284] Off-Balance-Sheet Arrangements As of June 30, 2025, the company had no material off-balance-sheet arrangements, indicating no significant exposure to risks - No material off-balance-sheet arrangements as of June 30, 2025[285] Item 3. Quantitative and Qualitative Disclosures about Market Risk Business performance is highly dependent on U.S. oil and gas drilling and completion activity, influenced by commodity prices and geopolitical factors, with interest rate risk on $275.0 million in variable-rate debt - Business performance is highly dependent on U.S. oil and gas drilling and completion activity, influenced by factors such as oil/gas supply and demand, geopolitical conflicts, commodity prices, and economic conditions[286] - As of June 30, 2025, $275.0 million in outstanding borrowings under the Sustainability-Linked Credit Facility are subject to variable interest rates, with no derivative arrangements to protect against fluctuations[288] Item 4. Controls and Procedures Disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[290] - No material changes in internal control over financial reporting during the quarter ended June 30, 2025[291] PART II—OTHER INFORMATION Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings, not expecting a material adverse effect on its financial position, results of operations, or cash flows - No legal proceedings are currently expected to have a material adverse effect on the company's financial position, results of operations, or cash flows[293] Item 1A. Risk Factors New risk factors include adverse effects on AV Farms investment, ERP system implementation challenges, and impacts from changing U.S. and international trade policies, including tariffs - Investment in AV Farms is subject to risks from lack of sole decision-making authority, reliance on co-investors' financial condition, and potential disputes[295] - Challenges with the recently implemented ERP system could disrupt business operations, negatively affect employee morale, and impact the effectiveness of internal controls over financial reporting[296] - Changes in U.S. and international trade policies, including tariffs (e.g., 51% blended average on Chinese imports), may increase raw material costs, reduce demand for services, and adversely impact business[297][299] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In connection with the Omni acquisition, the company issued 862,069 unregistered Class A common stock shares; 32,143 Class A shares were repurchased in the Current Quarter for employee tax withholding - Issued 862,069 shares of Class A common stock as stock consideration for the Omni acquisition, unregistered under the Securities Act[302] | Period | Total Number of Shares Purchased | Weighted-Average Price Paid Per Share | | :----------------------------- | :------------------------------- | :------------------------------------ | | April 1, 2025 to April 30, 2025 | 281 | $10.59 | | May 1, 2025 to May 31, 2025 | 27,010 | $8.87 | | June 1, 2025 to June 30, 2025 | 4,852 | $8.87 | | Total (Current Quarter) | 32,143 | N/A | - Repurchases were primarily to satisfy employee minimum tax withholding requirements for vested shares under the 2016 Equity Incentive Plan[303] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities - No defaults upon senior securities[305] Item 4. Mine Safety Disclosures Not applicable - Mine Safety Disclosures are not applicable[306] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[307] Item 6. Exhibits This section lists all exhibits filed, furnished, or incorporated by reference, including CEO and CFO certifications and financial statements in Inline XBRL format - Includes certifications of the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[309] - Financial statements for the quarter ended June 30, 2025, are formatted in Inline XBRL (Exhibit 101)[309]