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01/11 03:35
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call shows strong financial performance with increased revenue and EBITDA, and improved margins. However, the lack of a shareholder return plan and increased interest expenses are concerns. The Q&A reveals management's cautious stance on risks related to tariffs, supply chain, and economic factors, with some ambiguity in responses. The market cap suggests moderate sensitivity to news, and the absence of guidance changes or partnerships keeps the sentiment neutral.
Revenue $64 million, up 7% year-over-year, driven by strong growth in chemical technologies (21%) and water services (8%).
Adjusted EBITDA $64 million, up 14% year-over-year, largely due to stronger margin performance in Water Infrastructure and top-line performance from Water Services and Chemical Technologies.
Gross Margins (Water Infrastructure) 54%, improved by 1 percentage point year-over-year, supported by increased recycling and disposal volumes.
Net Income Increased by $12 million year-over-year, attributed to operational gains and reduced SG&A expenses.
SG&A Expenses $37 million, decreased by 6% year-over-year, representing just under 10% of revenue.
Capital Expenditures (CapEx) $48 million, primarily for Water Infrastructure projects, with an expected increase in total CapEx for 2025 to $225 million - $250 million.
Free Cash Flow Conversion Rate Adjusted to 5% to 15% relative to adjusted EBITDA, reflecting the impact of growth CapEx.
Interest Expense Increased to $4 million - $5 million per quarter due to new borrowings under the sustainability-linked credit facility.
Working Capital Increase $62 million increase due to ERP system rollout, expected to normalize in the coming quarters.
New Product Development: The Chemical Technologies segment saw strong sequential revenue growth of 21% during the first quarter, driven by continued new product development, key customer wins, and ongoing market share gains.
Market Expansion: Select Water Solutions has developed a leading water infrastructure network in the Northern Delaware Basin, with over 1,000,000 acres under dedication or right of first refusal agreements.
New Contracts: The company secured several large contracts, including an 11-year contract for water recycling, storage, disposal, and pipeline projects in the Northern Delaware Basin, adding over 265,000 acres.
Geographic Expansion: The company is expanding its infrastructure in the Central Basin platform with a new recycling facility and additional pipeline interconnections.
Operational Efficiency: Consolidated SG&A was reduced by 6%, and the company achieved a single facility record of 500,000 barrels per day peak recycling rate at one of its facilities.
Cost Management: The company maintained a disciplined approach to leverage and expects to keep SG&A at 10% to 11% of revenue.
Strategic Partnerships: Select Water Solutions formed its first strategic partnership to support ultra long-term municipal, industrial, and agricultural water supply in Colorado.
ERP System Implementation: The company successfully implemented a new ERP system across all operations, which is expected to yield efficiencies over time.
Competitive Pressures: The company anticipates potential activity dislocations caused by recent tariff and global trade announcements, which could impact the oil and gas industry overall.
Regulatory Issues: The company is preparing for potential impacts from lower commodity prices and supply chain dislocations resulting from tariff and trade-related uncertainties.
Supply Chain Challenges: The company expects that lower commodity prices may drive decreases in activity through the second half of the year, particularly affecting completions-oriented parts of the business.
Economic Factors: The overall macroeconomic outlook weighs on the market, and while the company has not seen a material impact yet, oil prices at current levels could lead to decreased activity.
Operational Risks: The company has experienced a decline in revenue from its legacy freshwater pipeline assets, which has been a significant driver of revenue changes.
Financial Risks: The company has increased its interest expense due to incremental borrowings under a new credit facility, which may affect financial performance.
New Contracts: Secured several large contracts for gathering, recycling, distribution, and disposal projects, significantly enhancing contracted acreage and long-term revenue potential.
Infrastructure Expansion: Expanded water infrastructure network in the Northern Delaware Basin, increasing contracted footprint to over 1,000,000 acres.
Long-term Agreements: Signed an 11-year contract for the largest capital project in company history, enhancing water recycling and distribution capabilities.
Sustainability Initiatives: Closed a new five-year sustainability-linked credit facility, providing $300 million in revolver commitments and $250 million in funded term loan commitments.
ERP System Implementation: Successfully implemented a new ERP system across all operations, expected to yield efficiencies over time.
AV Farms Investment: Continued investment in AV farms, acquiring additional senior water rights to support long-term water supply opportunities.
Revenue Growth: Expect consolidated adjusted EBITDA growth of 6% to 12% in Q2 2025.
CapEx Expectations: Adjusted CapEx expectations for 2025 to $225 million to $250 million, up from $170 million to $190 million.
Free Cash Flow: Adjusted free cash flow expectation to a 5% to 15% conversion rate relative to adjusted EBITDA.
Segment Performance: Expect double-digit percentage revenue increase in Water Infrastructure for Q2 2025.
Margins: Expect Water Services gross margins to improve to 20% to 22% in Q2 2025.
Shareholder Return Plan: Select Water Solutions has not announced any share buyback program or dividend program during the Q1 2025 results conference call.
The earnings call summary and Q&A indicate optimism, with strong growth projections for Water Infrastructure and new long-term contracts. Despite some declines in Water Services and Chemical Technologies, the company is focusing on high-margin projects and strategic initiatives. The Q&A highlights potential in lithium extraction and beneficial reuse, with positive sentiment from analysts. The market cap is small, suggesting a more pronounced reaction to positive news, leading to a predicted positive stock price movement of 2% to 8% over the next two weeks.
The earnings call highlights strong financial metrics, including improved gross margins and EBITDA exceeding guidance. The Q&A reveals growth opportunities in new contracts and infrastructure expansion, with optimistic guidance for Water Infrastructure revenues. Despite a decline in Chemical Technologies revenue, margin improvements and a unique market position in Peak business support a positive outlook. The company's strategic initiatives and new contracts suggest potential for future growth, justifying a positive sentiment rating.
The earnings call shows strong financial performance with increased revenue and EBITDA, and improved margins. However, the lack of a shareholder return plan and increased interest expenses are concerns. The Q&A reveals management's cautious stance on risks related to tariffs, supply chain, and economic factors, with some ambiguity in responses. The market cap suggests moderate sensitivity to news, and the absence of guidance changes or partnerships keeps the sentiment neutral.
The earnings call summary reveals strong financial performance, especially in the Water Infrastructure segment, with significant revenue and profit growth. Despite some operational downtime and macroeconomic challenges, the company's strategic focus on infrastructure and long-term contracts is promising. The Q&A section supports positive sentiment, highlighting efficient asset integration and new product wins. Increased dividends and capital return to shareholders further enhance the outlook. Considering the market cap, the stock price is likely to see a positive movement of 2% to 8% over the next two weeks.
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