Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Select Water Solutions Inc (WTTR, Financial) achieved record high quarterly revenue and gross profit in its Water Infrastructure segment during the third quarter of 2024.
- The company reported a 26% increase in net income compared to the second quarter, driven by reduced SG&A expenses and operational improvements.
- Select Water Solutions Inc (WTTR) successfully entered into multiple new long-term contracts, expanding its footprint in the Permian Basin and Bakken.
- The company completed a strategic disposal acquisition in the Northern Delaware Basin, enhancing its capacity in a key growth area.
- Select Water Solutions Inc (WTTR) increased its quarterly dividend by 17% to $0.07 per share, demonstrating a commitment to returning capital to shareholders.
Negative Points
- The company anticipates a seasonal activity slowdown in the fourth quarter, impacting its Water Services segment.
- Operational downtime in the Northern Delaware Basin is expected to cause a short-term financial impact in the fourth quarter.
- The Chemical Technologies segment experienced decreased activity with legacy pressure pumping customers, leading to a sequential revenue decline.
- Select Water Solutions Inc (WTTR) expects a 10% to 15% sequential decline in Water Infrastructure revenue in the fourth quarter due to planned operational downtime.
- The company faces challenges from commodity prices and industry activity, affecting its Water Services and Chemical Technologies segments.
Q & A Highlights
Q: John, you've exceeded the 50% margin goal for the Water Infrastructure segment this year. How do you see the margin trajectory over the next few quarters?
A: John Schmitz, CEO: The infrastructure piece is intact, and we continue to see good movement in adding assets. Margins vary based on activities like recycling or disposal, but we expect to maintain margins within the 50% to 60% range.
Q: With the contracts announced recently, how does the revenue run rate for Water Infrastructure look by late next year?
A: Christopher George, CFO: The $150 million growth capital investment will drive revenue and profitability growth. We expect a return framework similar to previous years, with margins in the mid-to-high 50s.
Q: How much of the fourth quarter EBITDA decline is due to the downtime of two facilities in Delaware?
A: John Schmitz, CEO: Over half of the revenue decline in Q4 is due to asset-specific downtime. Seasonal impacts will affect the Water Services segment, but the infrastructure segment remains stable.
Q: Can you discuss the new product wins in Chemical Technologies with E&P customers?
A: Michael Skarke, COO: We've focused on targeting E&P operators directly, taking market share through our products. Most wins are in the Permian Basin, where we see the most strength.
Q: What are the expected outcomes for the New Mexico recycling plant transition to an integrated system?
A: John Schmitz, CEO: The integration will connect facilities, increasing utilization and allowing water movement across regions. This enhances recycling and minimizes disposal, supporting customer needs efficiently.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
