Select Water Solutions(WTTR)2022-02-23 19:33Financial Data and Key Metrics Changes - Total revenues for 2021 were $765 million, with adjusted EBITDA of $50 million, showing growth in revenue, margins, and adjusted EBITDA every quarter throughout the year [10] - In Q4, revenues increased by 25% quarter-over-quarter to $255 million, and adjusted EBITDA grew by over 70% to $26.4 million, compared to $15.1 million in Q3 [25][19] - The company reported a net income of $11.1 million in Q4, a significant improvement from a net loss of $14.2 million in Q3 [25] Business Line Data and Key Metrics Changes - The Chemicals segment saw a revenue increase of 22% quarter-over-quarter, with improved margins despite no direct benefits from recent acquisitions [26] - Water Services segment revenues grew by 25% in Q4, maintaining gross margins between 15% and 16% [32] - Water Infrastructure revenue increased by 27% to $47 million in Q4, driven by increased activity and contributions from newly acquired assets [35] Market Data and Key Metrics Changes - The company noted a strong commodity price backdrop with oil prices around $90 and natural gas prices exceeding $4, contributing to revenue growth [16] - North America onshore E&P budgets are expected to rise by 25% to 35% year-over-year in 2022, indicating a positive outlook for the industry [17] Company Strategy and Development Direction - The company is focused on improving its base business, advancing technology, and pursuing strategic M&A, having closed several acquisitions in 2021 that added nearly $300 million in run-rate revenues [12] - The company aims to create revenue synergies and capture cost savings through increased efficiency and pricing gains across its business [14] - Future investments will focus on technology, sustainability, and diversification initiatives, particularly in water recycling and chemical solutions [15] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2022, anticipating strong growth driven by recent acquisitions, technology investments, and a favorable macro environment [22] - The company expects to continue growing its business, improving pricing, and generating free cash flow in 2022 [20] - Management acknowledged ongoing cost pressures due to inflation but remains confident in their ability to push pricing and expand margins [47] Other Important Information - The company recycled 25 million barrels of produced water in 2021 and expects to increase these volumes in 2022 [28] - Free cash flow in Q4 was negative $6.4 million, with cash on hand decreasing by about $22 million during the quarter [38] Q&A Session Summary Question: How are pricing negotiations going in the inflationary environment? - Management reported success in pushing pricing for both Chemicals and Water Solutions, while also addressing cost pressures from labor and raw materials [47] Question: What is the outlook for M&A opportunities? - Management remains open to M&A opportunities that add strategic assets and geographic footprint, emphasizing the need for attractive valuations [49][50] Question: What is the expected performance of Water Infrastructure in the Bakken? - Management noted that Q2 is typically a slower season in the Bakken but expects opportunities to build a broader network with new assets from Nuverra [54] Question: What are the expected incrementals for the base business? - Historical incrementals of 30% are considered reasonable, with expectations of strong pricing gains despite cost inflation [56] Question: What is the focus for recycling technology investments? - The company is focused on building out existing infrastructure and servicing current customers, with opportunities for standalone systems in key regions [63]