Select Water Solutions (WTTR) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue was $365.1 million, nearly flat sequentially but down 9.8% year-over-year, with net income of $14.9 million, a 34% decrease from the prior year quarter but more than tripling sequentially.

• Water Infrastructure segment achieved record performance, with revenue up 8% sequentially and 24% year-over-year to $68.6 million, and gross margin before D&A reaching 51%.

• Adjusted EBITDA for Q2 2024 was $69.6 million, nearly flat year-over-year but up 17% sequentially.

• Strategic acquisitions and organic growth expanded infrastructure capacity and market presence, particularly in the Northern Delaware Basin and Permian, with six business combinations and three asset acquisitions in H1 2024.

• Gross margin improved to 16.5% in Q2 2024 from 15.1% in Q2 2023, driven by higher-margin infrastructure and recycling operations.

Financial highlights

• Q2 2024 net income was $14.9 million, adjusted EBITDA reached $69.6 million, and revenue was $365.1 million.

• Operating cash flow was $83.1 million, exceeding adjusted EBITDA, and free cash flow reached $37.4 million.

• SG&A expenses reduced by 11% sequentially, supporting margin expansion, with $39.0 million in Q2 including $2.9 million in non-recurring costs.

• Ended Q2 with $90 million in outstanding borrowings and $16.4 million in cash, after $41 million in acquisitions and $49 million in CapEx.

• Free cash flow for H1 2024 was $40.9 million, up from $26.5 million in H1 2023.

Outlook and guidance

• Q3 2024 consolidated adjusted EBITDA expected between $66 million and $70 million, with Water Infrastructure gross margins projected to remain above 50%.

• Full-year 2024 net CapEx expected at $170 million-$190 million, up due to new contract wins and project expansions.

• Free cash flow conversion target for 2024 updated to 25%-35% of adjusted EBITDA.

• Management expects continued focus on water infrastructure investments and ongoing integration of recent acquisitions to drive future growth.

• Sufficient liquidity and compliance with debt covenants anticipated over the next twelve months.