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 8% sequential and 24% year-over-year revenue growth, and gross margin before D&A surpassing 51%.

• Strategic acquisitions and organic growth expanded infrastructure capacity and market reach, including six business combinations and multiple new long-term contracts in the Permian and Northeast.

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

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

Financial highlights

• Q2 2024 net income: $14.9 million, down from $22.6 million in Q2 2023, but up $11 million sequentially.

• Q2 2024 revenue: $365.1 million, down 9.8% year-over-year.

• Operating cash flow was $83 million, surpassing adjusted EBITDA for the third time in four quarters.

• SG&A decreased by $5 million (11%) from Q1; working capital fell below 11% of revenue.

• Ended Q2 with $90 million in outstanding borrowings and $16.4 million in cash, with $113.4 million available borrowing capacity.

Outlook and guidance

• Q3 consolidated adjusted EBITDA expected between $66 million and $70 million, steady with Q2.

• Water Infrastructure segment projected to maintain 50%-52% gross margins in Q3, with mid- to high single-digit revenue growth.

• Full-year 2024 net CapEx expected at $170 million-$190 million, up due to growth projects.

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

• Ongoing integration of recent acquisitions is expected to drive operational efficiency and future growth.