Select Water Solutions(US:WTTR)2025-05-07 16:00Financial Data and Key Metrics Changes - Revenue increased by 7% in Q1 2025, with adjusted EBITDA rising by 14% and consolidated gross margins improving by one percentage point [7][15] - Net income grew by $12 million, while consolidated SG&A expenses decreased by 6% [7][19] - The company expects consolidated adjusted EBITDA to rise to between $68 million and $72 million in Q2 2025 [19] Business Line Data and Key Metrics Changes - Chemical Technologies saw a strong revenue growth of 21%, while Water Services experienced an 8% increase [7][18] - Water Infrastructure maintained a robust gross margin of 54%, despite a sequential revenue decline driven by legacy freshwater pipeline assets [7][16] - The Water Services segment's gross margins improved to 19.45% in Q1 2025, up from 16.4% in the previous quarter [18] Market Data and Key Metrics Changes - The Northern Delaware Basin now has over 1,000,000 acres under dedication or right of first refusal agreements, indicating a strong market position [9] - New Mexico represents 54% of the company's total fixed recycling capacity, showcasing significant growth in this area [12] - The company anticipates continued growth in the Permian Basin and other natural gas basins, despite potential macroeconomic pressures [10][66] Company Strategy and Development Direction - The company is focused on expanding its water infrastructure and enhancing its recycling capabilities, with several large contracts recently secured [8][25] - A strategic partnership for ultra-long-term municipal, industrial, and agricultural water supply in Colorado has been initiated [15] - The company aims to maintain a disciplined approach to leverage while funding capital projects and enhancing liquidity [15][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business despite macroeconomic pressures and potential activity dislocations [10][14] - The company expects continued growth in consolidated adjusted EBITDA of 6% to 12% during Q2 2025, with a focus on water infrastructure [13][19] - Management highlighted the importance of long-term contracts and full life cycle revenues for stability and growth [25] Other Important Information - The company implemented a new ERP system across all operations, which is expected to yield efficiencies over time [24] - Capital expenditures for 2025 are now expected to be between $225 million and $250 million, up from previous estimates [22] - The company is actively pursuing acquisition opportunities to enhance its asset base and operational capabilities [67] Q&A Session Summary Question: Activity levels in the Permian Basin - Management confirmed no pullback in activity levels in the Permian Basin to date, indicating confidence in their asset positioning [28][29] Question: Upcoming catalysts for AV Farms project - Management is engaging stakeholders and has letters of intent with potential customers, indicating strong demand and optimism for future revenue generation [30][32] Question: Role of CNA companies in AB Farms project - Management stated that Select will eventually take over operational roles while collaborating with CNA for commercialization [39][41] Question: Impact of tariffs on water infrastructure contracts - Management indicated that tariffs are not expected to materially impact water infrastructure projects due to domestic supply chains [45] Question: Supply chain resilience in Chemical Technologies - Management highlighted efforts to localize the supply chain, reducing reliance on international sourcing, particularly from China [46] Question: Future growth in water infrastructure - Management expects to maintain a double-digit growth trajectory in water infrastructure, supported by ongoing projects and contracts [52][56]