HOUSTON, Nov. 3, 2020 /PRNewswire/ -- Select Energy
Services, Inc. (NYSE: WTTR) ("Select" or "the Company"), a leading
provider of water management and chemical solutions to the U.S.
unconventional oil and gas industry, today announced results for
the quarter ended September 30,
2020.
Holli Ladhani, President and CEO,
stated, "While the third quarter was not without its challenges,
based on recent discussions with our customers, I believe we've
already seen the market bottom of the current downturn. We continue
to closely monitor the global crude oil demand outlook, and though
current market conditions remain challenging, we are experiencing
significant ongoing positive trends, with activity levels having
increased steadily over the course of the third quarter. We
generally expect these positive trends to continue, and anticipate
further activity improvements in 2021.
"Our revenue growth during the third quarter was driven by
strong recoveries in our Oilfield Chemicals segment and our Bakken
infrastructure, two businesses with high operating leverage,
resulting in strong incremental gross margins quarter over quarter.
And while we were unable to get back to breakeven EBITDA for the
third quarter, we remain on an encouraging trajectory, reaching
positive Adjusted EBITDA levels in September on a normalized basis.
We remain optimistic about the future and are moving into the
fourth quarter with steady momentum.
"We delivered our eleventh consecutive quarter of positive free
cash flow, with meaningful contribution from working capital in
addition to the team's disciplined restraint around capital
expenditures. This resulted in cash flow from operations less
capital expenditures, net of asset sales, of $19 million during the third quarter, for a total
of $117 million through the first
nine months of 2020. With $185
million of cash and cash equivalents at quarter end and no
bank debt, we remain very well-positioned to navigate this
downturn, and to capitalize on opportunities created by the current
market dislocation and future recovery.
"Looking ahead, we are confident that we will identify
opportunities to deliver clear shareholder value and enhance our
market position, while protecting our strong balance sheet. At the
same time, we are prepared to remain disciplined and patient to
ensure we deliver value," concluded Ladhani.
Consolidated Financial Information
Revenue for the third quarter of 2020 was $101.2 million as compared to $92.2 million in the second quarter of 2020 and
$329.0 million in the third quarter
of 2019. Net loss for the third quarter of 2020 was $36.3 million as compared to a net loss of
$53.0 million in the second quarter
of 2020 and net income of $7.2
million in the third quarter of 2019.
Gross loss was $16.9 million in
the third quarter of 2020 as compared to a gross loss of
$23.7 million in the second quarter
of 2020 and gross profit of $41.0
million in the third quarter of 2019. Total gross margin for
Select was (16.7%) in the third quarter of 2020 as compared to
(25.7%) in the second quarter of 2020 and 12.5% in the third
quarter of 2019. Gross margin before depreciation and amortization
("D&A") for the third quarter of 2020 was 6.9% as compared to
1.9% for the second quarter of 2020 and 21.1% for the third quarter
of 2019.
SG&A during the third quarter of 2020 was $16.0 million as compared to $17.7 million during the second quarter of 2020
and $27.3 million during the third
quarter of 2019. SG&A during the third quarter of 2020 was
impacted by non-ordinary course bad debt reserve accruals of
$1.1 million and $0.5 million of other non-recurring costs
primarily related to the settlement of legacy legal claims relating
to previously acquired businesses.
Adjusted EBITDA was ($4.7) million
in the third quarter of 2020 as compared to ($8.3) million in the second quarter of 2020 and
$48.9 million in the third quarter of
2019. Please refer to the end of this release for
reconciliations of gross profit before D&A (non-GAAP measure)
to gross profit (loss) and of Adjusted EBITDA (non-GAAP measure) to
net income (loss).
Select's consolidated Adjusted EBITDA during the quarter of 2020
includes $6.4 million of
non-recurring or non-cash adjustments, including $1.6 million of other non-recurring charges
primarily related to legacy sales tax audits of previously acquired
businesses, $1.4 million of losses on
asset sales, $0.7 million in lease
abandonment costs, and $0.5 million
in transaction costs. Non-cash compensation expense accounted for
an additional $2.2 million
adjustment.
Business Segment Information
The Water Services segment generated revenues of $54.5 million in the third quarter of 2020, as
compared to $55.8 million in the
second quarter of 2020 and $196.8
million in the third quarter of 2019. Gross margin
before D&A for Water Services was 3.0% in the third quarter of
2020 as compared to 3.2% in the second quarter of 2020 and 21.9% in
the third quarter of 2019. While revenues and margins improved off
of monthly lows in the second quarter, quarterly revenues modestly
declined sequentially while margins held relatively flat. Pricing
pressures remain a challenge in this segment and the improving
revenue trajectory in the third quarter was not able to fully make
up for the strength of April revenues that began the second
quarter.
The Water Infrastructure segment generated revenues of
$16.2 million in the third quarter of
2020 as compared to $15.3 million in
the second quarter of 2020 and $64.0
million in the third quarter of 2019. Gross margin before
D&A for Water Infrastructure was 20.7% in the third quarter of
2020 as compared to 9.3% in the second quarter of 2020 and 26.9% in
the third quarter of 2019. Sequential revenue increases were
largely driven by increased volumes on the Bakken Pipelines, and
gross margins were significantly improved due to the increased
revenue weighting from the segment's higher margin businesses
including the Bakken Pipelines and disposal systems.
The Oilfield Chemicals segment generated revenues of
$30.6 million in the third quarter of
2020, as compared to $21.1 million in
the second quarter of 2020 and $67.9
million in the third quarter of 2019. Gross margin
before D&A for Oilfield Chemicals was 6.6% in the third quarter
of 2020 as compared to (6.8%) in the second quarter of 2020 and
15.6% in the third quarter of 2019. Revenues and gross
margins improved significantly driven by improving demand for both
the segment's completions chemicals and water treatment
solutions.
Cash Flow and Balance Sheet
Cash flow from operations for the third quarter of 2020 was
$17.1 million as compared to
$56.0 million in the second quarter
of 2020 and $67.5 million in the
third quarter of 2019. Cash flow from operations during the
third quarter of 2020 included a $26.0
million contribution from net working capital changes.
Capital expenditures for the third quarter of 2020 were
$2.6 million, which combined with
ordinary course asset sales during the quarter of $4.8 million, resulted in a $2.2 million positive cash inflow from investing
activities during the third quarter of 2020. Cash flow from
operations less capital expenditures, net of asset sales, was
$19.3 million during the third
quarter of 2020. For the third quarter of 2020, the Company had
84,794,286 weighted average Class A shares outstanding and
16,221,101 weighted average Class B shares outstanding.
Total liquidity was $233.4 million
as of September 30, 2020, as compared
to $274.0 million as of December 31, 2019. The Company had no
borrowings outstanding under its revolving credit facility as of
September 30, 2020 and December 31, 2019. As of September 30, 2020, and December 31, 2019, the borrowing base under the
revolving credit facility was $63.6 million and $214.6 million, respectively. The borrowing
capacity under the revolving credit facility was reduced by
outstanding letters of credit of $15.6
million and $19.9 million
as of September 30, 2020 and December
31, 2019, respectively. As of September 30, 2020, the Company had approximately
$48.0 million of available borrowing
capacity under its revolving credit facility, after giving effect
to the $15.6 million of outstanding
letters of credit. The significant reduction in the borrowing base
since December 31, 2019 was driven
primarily by the meaningful reductions in accounts receivables
during the nine months ended September 30,
2020, which represent the primary collateral for the
borrowing base, due to largely successful collections efforts
combined with significantly reduced revenue levels. Total cash and
cash equivalents were $185.4 million
as of September 30, 2020 as compared
to $79.3 million as of December 31, 2019.
Conference Call
Select has scheduled a conference call on Wednesday, November 4, 2020 at 10:00 a.m. Eastern time / 9:00 a.m. Central time. Please dial
201-389-0872 and ask for the Select Energy Services call at least
10 minutes prior to the start time of the call, or listen to the
call live over the Internet by logging on to the website at the
address
http://investors.selectenergyservices.com/events-and-presentations.
A telephonic replay of the conference call will be available
through November 18, 2020 and may be
accessed by calling 201-612-7415 using passcode 13711684#. A
webcast archive will also be available at the link above shortly
after the call and will be accessible for approximately 90
days.
About Select Energy Services, Inc.
Select Energy Services, Inc. ("Select") is a leading provider of
comprehensive water management and chemical solutions to the
unconventional oil and gas industry in the United States.
Select provides for the sourcing and transfer of water, both by
permanent pipeline and temporary hose, prior to its use in the
drilling and completion activities associated with hydraulic
fracturing, as well as complementary water-related services that
support oil and gas well completion and production activities,
including containment, monitoring, treatment and recycling,
flowback, hauling, gathering and disposal. Select, under its
Rockwater Energy Solutions brand, develops and manufactures a full
suite of specialty chemicals used in the well completion process
and production chemicals used to enhance performance over the
producing life of a well. Select currently provides services
to exploration and production companies and oilfield service
companies operating in all the major shale and producing basins in
the United States. For more information, please visit
Select's website, http://www.selectenergy.com.
Cautionary Statement Regarding Forward-Looking
Statements
All statements in this communication other than statements of
historical facts are forward-looking statements which contain our
current expectations about our future results. We have attempted to
identify any forward-looking statements by using words such as
"believe," "expect," "will," "estimate" and other similar
expressions. Although we believe that the expectations reflected,
and the assumptions or bases underlying our forward-looking
statements are reasonable, we can give no assurance that such
expectations will prove to be correct. Such statements are not
guarantees of future performance or events and are subject to known
and unknown risks and uncertainties that could cause our actual
results, events or financial positions to differ materially from
those included within or implied by such forward-looking
statements. Factors that could materially impact such
forward-looking statements include, but are not limited to: the
severity and duration of world health events, including the
COVID-19 pandemic, related economic repercussions and the resulting
severe disruption in the oil and gas industry and negative impact
on demand for oil and gas, which is negatively impacting our
business; actions by the members of OPEC+ with respect to oil
production levels and announcements of potential changes in such
levels, including the ability of the OPEC+ countries to agree on
and comply with supply limitations; operational challenges relating
to the COVID-19 pandemic and efforts to mitigate the spread of the
virus, including logistical challenges, protecting the health and
well-being of our employees, remote work arrangements, performance
of contracts and supply chain disruptions; the level of capital
spending and access to capital markets by oil and gas companies,
including significant recent reductions and potential additional
reductions in capital expenditures by oil and gas producers in
response to commodity prices and dramatically reduced demand;
trends and volatility in oil and gas prices, and our ability to
manage through such volatility; and other factors discussed or
referenced in the "Risk Factors" section of our Annual Report on
Form 10-K for the year ended December 31,
2019, our subsequently filed Quarterly Reports on Form 10-Q
and those set forth from time to time in our other filings with the
SEC. Investors should not place undue reliance on our
forward-looking statements. Any forward-looking statement speaks
only as of the date on which such statement is made, and we
undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events, changed circumstances or otherwise, unless required
by law.
WTTR-ER
Contacts:
|
Select Energy
Services
|
|
Chris George - VP,
Investor Relations & Treasurer
|
|
(713)
296-1073
|
|
IR@selectenergyservices.com
|
|
|
|
Dennard Lascar
Investor Relations
|
|
Ken Dennard / Lisa
Elliott
|
|
713-529-6600
|
|
WTTR@dennardlascar.com
|
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share data)
|
|
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
$
|
54,516
|
|
$
|
196,782
|
|
$
|
259,834
|
|
$
|
619,388
|
Water
Infrastructure
|
|
|
16,165
|
|
|
63,953
|
|
|
89,227
|
|
|
169,279
|
Oilfield
Chemicals
|
|
|
30,561
|
|
|
67,932
|
|
|
122,705
|
|
|
197,762
|
Other
|
|
|
—
|
|
|
301
|
|
|
—
|
|
|
29,072
|
Total
revenue
|
|
|
101,242
|
|
|
328,968
|
|
|
471,766
|
|
|
1,015,501
|
Costs of
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
|
52,861
|
|
|
153,741
|
|
|
235,989
|
|
|
472,013
|
Water
Infrastructure
|
|
|
12,816
|
|
|
46,748
|
|
|
74,500
|
|
|
126,634
|
Oilfield
Chemicals
|
|
|
28,558
|
|
|
57,357
|
|
|
110,996
|
|
|
170,935
|
Other
|
|
|
30
|
|
|
1,865
|
|
|
37
|
|
|
30,365
|
Depreciation and
amortization
|
|
|
23,877
|
|
|
28,263
|
|
|
75,567
|
|
|
88,624
|
Total costs of
revenue
|
|
|
118,142
|
|
|
287,974
|
|
|
497,089
|
|
|
888,571
|
Gross (loss)
profit
|
|
|
(16,900)
|
|
|
40,994
|
|
|
(25,323)
|
|
|
126,930
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
15,955
|
|
|
27,280
|
|
|
58,902
|
|
|
86,953
|
Depreciation and
amortization
|
|
|
685
|
|
|
952
|
|
|
2,204
|
|
|
2,858
|
Impairment of goodwill
and trademark
|
|
|
—
|
|
|
—
|
|
|
276,016
|
|
|
4,396
|
Impairment and
abandonment of property and equipment
|
|
|
—
|
|
|
49
|
|
|
7,910
|
|
|
942
|
Lease abandonment
costs
|
|
|
672
|
|
|
238
|
|
|
2,493
|
|
|
1,494
|
Total operating
expenses
|
|
|
17,312
|
|
|
28,519
|
|
|
347,525
|
|
|
96,643
|
(Loss) income from
operations
|
|
|
(34,212)
|
|
|
12,475
|
|
|
(372,848)
|
|
|
30,287
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sales
of property and equipment and divestitures, net
|
|
|
891
|
|
|
(2,033)
|
|
|
(1,727)
|
|
|
(8,233)
|
Interest expense,
net
|
|
|
(789)
|
|
|
(438)
|
|
|
(1,633)
|
|
|
(2,370)
|
Foreign currency gain
(loss), net
|
|
|
13
|
|
|
(59)
|
|
|
(6)
|
|
|
268
|
Other expense,
net
|
|
|
(2,364)
|
|
|
(272)
|
|
|
(4,805)
|
|
|
(62)
|
(Loss) income before
income tax benefit (expense)
|
|
|
(36,461)
|
|
|
9,673
|
|
|
(381,019)
|
|
|
19,890
|
Income tax benefit
(expense)
|
|
|
201
|
|
|
(2,501)
|
|
|
495
|
|
|
(3,250)
|
Net (loss)
income
|
|
|
(36,260)
|
|
|
7,172
|
|
|
(380,524)
|
|
|
16,640
|
Less: net loss
(income) attributable to noncontrolling interests
|
|
|
5,719
|
|
|
(1,793)
|
|
|
59,823
|
|
|
(3,926)
|
Net (loss) income
attributable to Select Energy Services, Inc.
|
|
$
|
(30,541)
|
|
$
|
5,379
|
|
$
|
(320,701)
|
|
$
|
12,714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Basic
|
|
$
|
(0.36)
|
|
$
|
0.07
|
|
$
|
(3.76)
|
|
$
|
0.16
|
Class
B—Basic
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Diluted
|
|
$
|
(0.36)
|
|
$
|
0.07
|
|
$
|
(3.76)
|
|
$
|
0.16
|
Class
B—Diluted
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
December 31,
2019
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
185,438
|
|
$
|
79,268
|
Accounts receivable
trade, net of allowance for credit losses of $9,731 and
$5,773, respectively
|
|
|
92,148
|
|
|
267,628
|
Accounts receivable,
related parties
|
|
|
595
|
|
|
4,677
|
Inventories
|
|
|
34,366
|
|
|
37,542
|
Prepaid expenses and
other current assets
|
|
|
19,815
|
|
|
26,486
|
Total current
assets
|
|
|
332,362
|
|
|
415,601
|
Property and
equipment
|
|
|
907,980
|
|
|
1,015,379
|
Accumulated
depreciation
|
|
|
(538,380)
|
|
|
(562,986)
|
Property and
equipment held-for-sale, net
|
|
|
—
|
|
|
885
|
Total property and
equipment, net
|
|
|
369,600
|
|
|
453,278
|
Right-of-use assets,
net
|
|
|
57,402
|
|
|
70,635
|
Goodwill
|
|
|
—
|
|
|
266,934
|
Other intangible
assets, net
|
|
|
118,801
|
|
|
136,952
|
Other assets,
net
|
|
|
2,468
|
|
|
4,220
|
Total
assets
|
|
$
|
880,633
|
|
$
|
1,347,620
|
Liabilities and
Equity
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
11,037
|
|
$
|
35,686
|
Accrued accounts
payable
|
|
|
13,058
|
|
|
47,547
|
Accounts payable and
accrued expenses, related parties
|
|
|
300
|
|
|
2,789
|
Accrued salaries and
benefits
|
|
|
14,811
|
|
|
20,079
|
Accrued
insurance
|
|
|
10,227
|
|
|
8,843
|
Sales tax
payable
|
|
|
678
|
|
|
2,119
|
Accrued expenses and
other current liabilities
|
|
|
13,296
|
|
|
15,375
|
Current operating
lease liabilities
|
|
|
14,611
|
|
|
19,315
|
Current portion of
finance lease obligations
|
|
|
304
|
|
|
128
|
Total current
liabilities
|
|
|
78,322
|
|
|
151,881
|
Long-term operating
lease liabilities
|
|
|
64,217
|
|
|
72,143
|
Other long-term
liabilities
|
|
|
12,698
|
|
|
10,784
|
Total
liabilities
|
|
|
155,237
|
|
|
234,808
|
|
|
|
|
|
|
|
Class A common
stock, $0.01 par value; 350,000,000 shares authorized and
86,824,127 shares issued and
outstanding as of September 30, 2020; 350,000,000 shares
authorized and 87,893,525 shares issued and
outstanding as of December 31, 2019
|
|
|
868
|
|
|
879
|
Class A-2 common
stock, $0.01 par value; 40,000,000 shares authorized; no shares
issued or outstanding
as of September 30, 2020 and
December 31, 2019
|
|
|
—
|
|
|
—
|
Class B common
stock, $0.01 par value; 150,000,000 shares authorized and
16,221,101 shares issued and
outstanding as of September 30, 2020 and
December 31, 2019
|
|
|
162
|
|
|
162
|
Preferred stock,
$0.01 par value; 50,000,000 shares authorized; no shares issued and
outstanding as of
September 30, 2020 and December 31, 2019
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
904,832
|
|
|
914,699
|
Accumulated (deficit)
retained earnings
|
|
|
(299,264)
|
|
|
21,437
|
Total stockholders'
equity
|
|
|
609,598
|
|
|
937,177
|
Noncontrolling
interests
|
|
|
115,798
|
|
|
175,635
|
Total
equity
|
|
|
725,396
|
|
|
1,112,812
|
Total liabilities
and equity
|
|
$
|
880,633
|
|
$
|
1,347,620
|
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
|
|
|
|
Nine months ended
September 30,
|
|
|
2020
|
|
2019
|
Cash flows from
operating activities
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(380,524)
|
|
$
|
16,640
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
77,771
|
|
|
91,482
|
Net loss on disposal
of property and equipment
|
|
|
1,316
|
|
|
4,971
|
Bad debt
expense
|
|
|
6,108
|
|
|
1,764
|
Amortization of debt
issuance costs
|
|
|
516
|
|
|
516
|
Inventory
write-downs
|
|
|
787
|
|
|
228
|
Equity-based
compensation
|
|
|
4,058
|
|
|
11,874
|
Impairment of goodwill
and trademark
|
|
|
276,016
|
|
|
4,396
|
Impairment and
abandonment of property and equipment
|
|
|
7,910
|
|
|
942
|
Loss on
divestitures
|
|
|
411
|
|
|
3,262
|
Other operating items,
net
|
|
|
158
|
|
|
259
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
171,700
|
|
|
14,835
|
Prepaid expenses and
other assets
|
|
|
11,761
|
|
|
9,774
|
Accounts payable and
accrued liabilities
|
|
|
(58,160)
|
|
|
(18,727)
|
Net cash provided by
operating activities
|
|
|
119,828
|
|
|
142,216
|
Cash flows from
investing activities
|
|
|
|
|
|
|
Working capital
settlement
|
|
|
—
|
|
|
691
|
Proceeds received from
divestitures
|
|
|
197
|
|
|
24,927
|
Purchase of property
and equipment
|
|
|
(19,100)
|
|
|
(86,374)
|
Acquisitions, net of
cash received
|
|
|
—
|
|
|
(10,400)
|
Proceeds received from
sales of property and equipment
|
|
|
15,854
|
|
|
13,958
|
Net cash used in
investing activities
|
|
|
(3,049)
|
|
|
(57,198)
|
Cash flows from
financing activities
|
|
|
|
|
|
|
Borrowings from
revolving line of credit
|
|
|
—
|
|
|
5,000
|
Payments on long-term
debt
|
|
|
—
|
|
|
(50,000)
|
Payments of finance
lease obligations
|
|
|
(189)
|
|
|
(743)
|
Proceeds from share
issuance
|
|
|
59
|
|
|
110
|
Contributions from
(distributions to) noncontrolling interests
|
|
|
383
|
|
|
(349)
|
Repurchase of common
stock
|
|
|
(10,876)
|
|
|
(13,401)
|
Net cash used in
financing activities
|
|
|
(10,623)
|
|
|
(59,383)
|
Effect of exchange
rate changes on cash
|
|
|
14
|
|
|
127
|
Net increase in cash
and cash equivalents
|
|
|
106,170
|
|
|
25,762
|
Cash and cash
equivalents, beginning of period
|
|
|
79,268
|
|
|
17,237
|
Cash and cash
equivalents, end of period
|
|
$
|
185,438
|
|
$
|
42,999
|
Comparison of Non-GAAP Financial
Measures
EBITDA, Adjusted EBITDA, gross profit before depreciation and
amortization (D&A) and gross margin before D&A are not
financial measures presented in accordance with GAAP. We define
EBITDA as net income, plus interest expense, taxes and depreciation
& amortization. We define Adjusted EBITDA as EBITDA
plus/(minus) loss/(income) from discontinued operations, plus any
impairment charges or asset write-offs pursuant to accounting
principles generally accepted in the U.S. ("GAAP"), plus non-cash
losses on the sale of assets or subsidiaries, non-recurring
compensation expense, non-cash compensation expense, and
non-recurring or unusual expenses or charges, including severance
expenses, transaction costs, or facilities-related exit and
disposal-related expenditures and plus/(minus) foreign currency
losses/(gains). We define gross profit before D&A as revenue
less cost of revenue, excluding cost of sales D&A expense. We
define gross margin before D&A as gross profit before D&A
divided by revenue. EBITDA, Adjusted EBITDA, gross profit before
D&A and gross margin before D&A are supplemental non-GAAP
financial measures that we believe provide useful information to
external users of our financial statements, such as industry
analysts, investors, lenders and rating agencies because it allows
them to compare our operating performance on a consistent basis
across periods by removing the effects of our capital structure
(such as varying levels of interest expense), asset base (such as
depreciation and amortization) and non-recurring items outside the
control of our management team. We present EBITDA, Adjusted EBITDA,
gross profit before D&A and gross margin before D&A because
we believe they provide useful information regarding the factors
and trends affecting our business in addition to measures
calculated under GAAP.
Net income is the GAAP measure most directly comparable to
EBITDA and Adjusted EBITDA. Gross profit (loss) is the GAAP measure
most directly comparable to gross profit before D&A. Our
non-GAAP financial measures should not be considered as
alternatives to the most directly comparable GAAP financial
measure. Each of these non-GAAP financial measures has important
limitations as an analytical tool due to exclusion of some but not
all items that affect the most directly comparable GAAP financial
measures. You should not consider EBITDA, Adjusted EBITDA or gross
profit before D&A in isolation or as substitutes for an
analysis of our results as reported under GAAP. Because EBITDA,
Adjusted EBITDA and gross profit before D&A may be defined
differently by other companies in our industry, our definitions of
these non-GAAP financial measures may not be comparable to
similarly titled measures of other companies, thereby diminishing
their utility. For further discussion, please see "Item 6. Selected
Financial Data" in our Annual Report on Form 10-K for the year
ended December 31, 2019.
The following table presents a reconciliation of EBITDA and
Adjusted EBITDA to our net income (loss), which is the most
directly comparable GAAP measure for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
|
Nine months ended
September 30,
|
|
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
|
|
|
(in
thousands)
|
|
Net (loss)
income
|
|
$
|
(36,260)
|
|
$
|
7,172
|
|
|
|
$
|
(380,524)
|
|
$
|
16,640
|
Interest expense,
net
|
|
|
789
|
|
|
4338
|
|
|
|
|
1,633
|
|
|
2,370
|
Income tax (benefit)
expense
|
|
|
(201)
|
|
|
2,501
|
|
|
|
|
(495)
|
|
|
3,250
|
Depreciation and
amortization
|
|
|
24,562
|
|
|
29,215
|
|
|
|
|
77,771
|
|
|
91,482
|
EBITDA
|
|
|
(11,110)
|
|
|
39,326
|
|
|
|
|
(301,615)
|
|
|
113,742
|
Impairment of goodwill
and trademark
|
|
|
—
|
|
|
—
|
|
|
|
|
276,016
|
|
|
4,396
|
Non-recurring severance
expenses
|
|
|
—
|
|
|
—
|
|
|
|
|
7,168
|
|
|
1,680
|
Impairment and
abandonment of property and
equipment
|
|
|
—
|
|
|
49
|
|
|
|
|
7,910
|
|
|
942
|
Yard closure costs
related to consolidating
operations
|
|
|
—
|
|
|
—
|
|
|
|
|
2,961
|
|
|
—
|
Non-cash loss on sale
of assets or subsidiaries
|
|
|
1,400
|
|
|
3,648
|
|
|
|
|
6,901
|
|
|
16,868
|
Lease abandonment
costs
|
|
|
672
|
|
|
238
|
|
|
|
|
2,493
|
|
|
1,494
|
Non-cash compensation
expenses
|
|
|
2,242
|
|
|
3,566
|
|
|
|
|
4,058
|
|
|
11,874
|
Foreign currency (gain)
loss, net
|
|
|
(13)
|
|
|
59
|
|
|
|
|
6
|
|
|
(268)
|
Non-recurring
transaction costs
|
|
|
527
|
|
|
2,025
|
|
|
|
|
3,150
|
|
|
3,099
|
Other non-recurring
charges
|
|
|
1,622
|
|
|
—
|
|
|
|
|
1,622
|
|
|
75
|
Adjusted
EBITDA
|
|
$
|
(4,660)
|
|
$
|
48,911
|
|
|
|
$
|
10,670
|
|
$
|
153,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents a reconciliation of gross profit
before D&A to total gross profit (loss), which is the most
directly comparable GAAP measure, and a calculation of gross margin
before D&A for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended,
|
|
|
September 30,
2020
|
|
June 30,
2020
|
|
September 30,
2019
|
|
|
(unaudited)
|
|
|
(in
thousands)
|
Gross (loss) profit
by segment
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
$
|
(13,233)
|
|
$
|
(14,088)
|
|
$
|
23,622
|
Water
infrastructure
|
|
|
(3,207)
|
|
|
(5,594)
|
|
|
10,796
|
Oilfield
chemicals
|
|
|
(430)
|
|
|
(4,034)
|
|
|
8,140
|
Other
|
|
|
(30)
|
|
|
(3)
|
|
|
(1,564)
|
As reported gross
(loss) profit
|
|
|
(16,900)
|
|
|
(23,719)
|
|
|
40,994
|
|
|
|
|
|
|
|
|
|
|
Plus depreciation and
amortization
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
14,888
|
|
|
15,881
|
|
|
19,419
|
Water
infrastructure
|
|
|
6,556
|
|
|
7,023
|
|
|
6,409
|
Oilfield
chemicals
|
|
|
2,433
|
|
|
2,604
|
|
|
2,435
|
Other
|
|
|
—
|
|
|
—
|
|
|
—
|
Total depreciation and
amortization
|
|
|
23,877
|
|
|
25,508
|
|
|
28,263
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A
|
|
$
|
6,977
|
|
$
|
1,789
|
|
$
|
69,257
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
before D&A by segment
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
1,655
|
|
|
1,793
|
|
|
43,041
|
Water
infrastructure
|
|
|
3,349
|
|
|
1,429
|
|
|
17,205
|
Oilfield
chemicals
|
|
|
2,003
|
|
|
(1,430)
|
|
|
10,575
|
Other
|
|
|
(30)
|
|
|
(3)
|
|
|
(1,564)
|
Total gross profit
before D&A
|
|
$
|
6,977
|
|
$
|
1,789
|
|
$
|
69,257
|
|
|
|
|
|
|
|
|
|
|
Gross margin before
D&A by segment
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
3.0%
|
|
|
3.2%
|
|
|
21.9%
|
Water
infrastructure
|
|
|
20.7%
|
|
|
9.3%
|
|
|
26.9%
|
Oilfield
chemicals
|
|
|
6.6%
|
|
|
(6.8%)
|
|
|
15.6%
|
Other
|
|
|
n/a
|
|
|
n/a
|
|
|
(519.6%)
|
Total gross margin
before D&A
|
|
|
6.9%
|
|
|
1.9%
|
|
|
21.1%
|
View original
content:http://www.prnewswire.com/news-releases/select-energy-services-reports-third-quarter-2020-financial-results-and-operational-updates-301165978.html
SOURCE Select Energy Services, Inc.