Select Water Solutions(WTTR) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 12% revenue increase quarter-on-quarter, reaching $161 million in Q2 2021 [16] - Gross margins for Water Services improved from 3% to around 8%, with expectations for further upside in Q3 [17] - SG&A expenses decreased from $19.9 million to $15.9 million, primarily due to the absence of a one-off severance payment [19] Business Line Data and Key Metrics Changes - Oilfield Chemicals revenue grew by 23%, while Water Services revenue increased by 19% [8] - Water Infrastructure experienced a 12% decline due to seasonal factors, but a strong rebound is expected in Q3 [16][18] - The Complete Energy Services acquisition is projected to add over $100 million in annualized revenue and $10 million to $12 million in annualized EBITDA for 2021 [14] Market Data and Key Metrics Changes - The company anticipates a strong activity backdrop with stable commodity prices, which supports revenue and EBITDA growth in the latter half of the year [22] - The company is seeing increased reuse of produced water and development of recycling projects, which are positive long-term drivers for the Oilfield Chemicals segment [19] Company Strategy and Development Direction - The company is focused on strengthening its market position in sustainable full lifecycle water and chemical solutions, with key strategic priorities including improving the base business, advancing technology and ESG initiatives, and executing strategic M&A [7] - The acquisition of UltRecovery and a supply agreement with Emission Rx are part of the company's strategy to enhance its portfolio of sustainable technologies [10] - The company plans to maintain a disciplined approach to capital investment while targeting growth opportunities through both organic development and M&A [21] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth prospects for the base business, supported by a solid commodity price backdrop and positive customer discussions around pricing improvements [8] - The company expects to see margin uplift in the base business during Q3, driven by pricing adjustments and reduced labor pressures [17] - Management highlighted the importance of technology in providing cost-effective solutions and emphasized ongoing efforts to develop recycling networks in various basins [20][22] Other Important Information - The company finished Q2 2021 with $143 million in cash and no debt, maintaining a strong balance sheet [19] - The company expects to continue deploying a balanced mix of cash and equity into accretive opportunities [20] Q&A Session Summary Question: Anticipated gain in average realized pricing from Q2 to Q3 for Water Services - Management indicated that a lot of the pricing increase has been implemented, with notable adjustments occurring in June and continuing into July and August [26] Question: Current workforce size relative to required utilization for Q3 - Management stated that they are largely at the required workforce size, having secured necessary personnel recently [27] Question: Seasonal impact in the Bakken compared to pre-2020 norms - Management noted that the seasonal impact was severe in Q2 2021, more so than in previous years, but expects improvement going forward [28] Question: Organic top line growth in Q3 from the base business - Management projected high single to low double-digit organic growth, excluding the Complete acquisition [31] Question: Opportunities for building more recycling versus other comparable deals - Management confirmed that there are other potential acquisitions similar to Complete, focusing on infrastructure and long-term contracts [34]