Select Water Solutions (WTTR) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $371.3 million, up 2% sequentially but down 4.6% year-over-year, with net income of $18.8 million, up 26% sequentially and 22.8% year-over-year, driven by record Water Infrastructure profitability and lower SG&A.

• Water Infrastructure revenue grew 40.5% year-over-year and 20% sequentially, with gross margin before D&A surpassing 56%, offsetting declines in Water Services and Chemical Technologies.

• Multiple new long-term contracts and pipeline agreements expanded the footprint, especially in the Permian and Bakken, supporting future growth and capital deployment.

• Six strategic acquisitions totaling $148.1 million and several asset acquisitions enhanced water infrastructure capabilities, including a disposal well in the Northern Delaware Basin adding 10,000 barrels/day capacity.

• Quarterly base dividend increased by 17% to $0.07 per share, with total 2024 capital return to shareholders expected at ~$40 million.

Financial highlights

• Q3 2024 net income: $18.8 million; adjusted EBITDA: $72.8 million, exceeding guidance.

• Water Infrastructure segment revenue: $82 million (+20% sequentially, +40.5% year-over-year); gross profit before D&A: $47 million (+33% sequentially); gross margin before D&A: 56.7%.

• Gross margin for Q3 2024: 16.8% (up from 14.5% prior year); net income margin: 5.1%.

• SG&A reduced by more than 4% ($1.7 million) from Q2; Q3 SG&A was $37.3 million, including $0.6 million in non-recurring costs.

• Ended Q3 with $80 million in borrowings, $52 million operating cash flow, $20 million free cash flow, and $35 million CapEx.

Outlook and guidance

• Q4 2024 adjusted EBITDA expected at $60–$62 million due to seasonal slowdown and planned downtime, with recovery expected in 2025.

• Water Infrastructure and Water Services revenues expected to decline 10–15% sequentially in Q4 due to downtime at key facilities, with margins projected at 51–54%.

• Full-year recycling and disposal volumes projected to grow over 30% year-over-year.

• Water Infrastructure and Chemical Technologies expected to contribute over 50% of profitability by end of 2025.

• Free cash flow conversion expected at 25% of adjusted EBITDA for 2024; maintenance CapEx-only view yields 80%+ free cash flow.