Select Water Solutions(US:WTTR)2023-02-22 20:41Financial Data and Key Metrics Changes - In 2022, the company achieved revenue growth of 81%, reaching approximately $1.4 billion, and adjusted EBITDA growth of 290%, totaling $195 million [6][7] - The fourth quarter revenue was $382 million, a sequential increase of 2% or $6.6 million, impacted by winter weather and certain non-ordinary expenses [26][27] - Net income for the fourth quarter decreased to $7.6 million from $24.7 million, while adjusted EBITDA fell to $52.2 million from $62.8 million [26] Business Line Data and Key Metrics Changes - Record revenues were achieved in both Water Infrastructure and Chemicals segments, with Water Services benefiting from consolidation and technology initiatives [6][7] - The Water Infrastructure segment is expected to see significant revenue growth of 20% to 25% in Q1, driven by recent acquisitions and investments [28] - The Chemicals segment continues to experience strong organic revenue expansion, maintaining near record-high revenue levels [29] Market Data and Key Metrics Changes - The company operates primarily in the Permian Basin, with a breakdown of approximately 80% oil-directed and 20% natural gas-oriented activity [51] - The company has seen increased conversations around pipeline solutions and recycling due to lower natural gas prices, indicating a shift towards more efficient operations [54] Company Strategy and Development Direction - The company is focused on building and bolstering its core water and chemicals business, advancing technology, and executing strategic M&A [9][12] - A corporate rebranding initiative is planned to change the name to Select Water Solutions, Inc., aligning with the company's vision as a water-first company [13][15] - The company aims to enhance operational efficiency and increase free cash flow through the integration of various systems and streamlining operations [24][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about meaningful revenue, EBITDA, and net income growth in 2023, supported by recent acquisitions and infrastructure investments [16][24] - The company anticipates a significant uplift in free cash flow, projecting it to be roughly two-thirds of adjusted EBITDA for 2023 [24][30] - Management highlighted the importance of responsible energy production and sustainable solutions as part of the energy transition [11][12] Other Important Information - The company initiated its first-ever quarterly dividend in Q4 2022 and aims to build a solid track record of returning capital to shareholders [8] - The company completed numerous strategic acquisitions and divested non-core assets to focus on its vision [12][17] Q&A Session Summary Question: Revenue and profitability potential post-integration of acquisitions - Management indicated that the Water Infrastructure Group will see significant growth due to capital expenditures focused on infrastructure and recycling projects [34][35] Question: Integration of collection processing systems and Microsoft 365 migration - The target for completing the migration remains the same, with expectations for benefits to materialize over time [44][45] Question: Expected gross margin for Water Services - Management confirmed expectations for Water Services to achieve gross margins in the low 20s for Q2 through Q4 [49] Question: Split between oil-directed and natural gas-oriented activity - The company reported a 50% focus on the Permian Basin, with an overall breakdown of 80% oil to 20% gas [51] Question: Diversification opportunities from rebranding - Management discussed leveraging existing technology and chemistry capabilities to expand into other industries beyond oil and gas [60][62]