Revenue of $375
million generated during the third quarter of 2022, up 12%
sequentially from the second quarter of 2022
Net income of $24.7
million & Adjusted EBITDA of $62.8 million during the third quarter of 2022,
representing sequential increases of 70% and 32%,
respectively
Acquired Breakwater Energy Partners, LLC
("Breakwater"), a leading provider of contracted water recycling
and infrastructure solutions focused in the Permian Basin on
November 1, 2022
Acquired Bakken Shale water gathering
pipeline and disposal assets from Cypress Environmental Services,
LLC ("Cypress") on November 1,
2022
HOUSTON, Nov. 2, 2022
/PRNewswire/ -- Select Energy Services, Inc. (NYSE: WTTR)
("Select" or the "Company"), a leading provider of sustainable
water and chemical solutions to the energy industry, today
announced the acquisitions of Breakwater and certain water
gathering pipeline and disposal assets from Cypress, as well as its
financial and operating results for the quarter ended September 30, 2022.
John Schmitz, Chairman of the
Board, President and CEO, stated, "Our strong third quarter
results, combined with our recent acquisitions, display our ability
to execute on our strategy to improve and bolster the base
business, advance our technology, sustainability and
diversification efforts, and execute on strategic M&A. We
progressed each of these initiatives while also commencing our
previously announced regular quarterly dividend program. Reinforced
by a steady activity backdrop, a challenging labor market and a
tight equipment supply environment, we continue to capture market
share and see pricing improvements across each of our segments.
During the third quarter we achieved 12% sequential revenue growth
and 59% incremental gross margins, resulting in significantly
improved profitability with Net Income and Adjusted EBITDA growing
70% and 32%, respectively, quarter over quarter.
"Our Chemicals segment continues to produce record revenue and
margins, we continue to improve efficiencies and gain market share
in our Water Services segment, and our Water Infrastructure segment
achieved quarterly revenue more than 10% above our previous
pre-pandemic peak level. Overall, I'm very pleased with our
financial and operational execution and believe we are well
positioned to continue to improve the profitability of the business
in the quarters to come.
"In addition to these improvements in the base business, we
identified and completed the acquisition of Breakwater, a core
Permian infrastructure, recycling and logistics business, to
further our growth, consolidation and sustainability strategies,
while our Cypress transaction adds to our infrastructure scale and
development opportunities in the Bakken. With these additions, we
have meaningfully enhanced our Water Infrastructure and Water
Services footprints, and significantly expanded the capacity and
reach of our sustainable recycling solutions. We expect to see
immediately accretive benefits from both acquisitions and believe
we have a meaningful opportunity to invest organically around the
acquired operations and asset footprints as well.
"In Breakwater, we are acquiring one of the market leaders in
advanced water recycling, infrastructure and logistics solutions
focused in the Permian Basin. Importantly, we're also adding
significant operational leadership depth to the organization and
welcoming more than 300 new employees to the Select family. With a
strategic portfolio of highly contracted recycling assets in the
core of the Midland Basin, we believe Breakwater has developed one
of the leading recycling footprints in the U.S. today. This
footprint expands Select's recycling capabilities to nearly 3
million barrels of total daily capacity across fixed and mobile
capabilities, while adding a number of new strategic customer
relationships and strengthening existing relationships with new
recycling opportunities. During the third quarter, we exceeded our
full year 2022 target for produced water recycling volumes
established in our sustainability-linked credit facility, while
this acquisition positions us to quickly meet and meaningfully
exceed our future targets as well. These recycling facilities also
offer significant network flexibility via geographic and
infrastructure interconnectedness, currently allowing for
approximately 10 customers at any given time to deliver produced
water and receive recycled water as demand ebbs and flows with
their own activity needs, while reducing capital outlays and
operating expenses for our customers.
"Through the Cypress acquisition, we've added a portfolio of
strategic wastewater disposal facilities in North Dakota at an attractive value, further
consolidating the Bakken region following our previous Agua Libre
Midstream and Nuverra acquisitions. With more than 60% of the
current volumes being delivered to these assets via contracted
pipelines, we believe there is continued opportunity to expand and
network the assets with our existing infrastructure footprint in
the region.
"Additionally, I'm very confident in the strategic and clear
financial benefits of these acquisitions. On a combined basis, the
acquired operations from Breakwater and Cypress are expected to
generate approximately $110 –
$115 million of revenue and more than
$30 million of Adjusted EBITDA on a
2022 full year basis, with a strong trajectory and room for growth
in 2023.
"Ultimately, I am very pleased with our financial performance,
supported by our recent acquisitions, pricing improvements, organic
growth opportunities and our other strategic investments. I look
forward to building upon our recent positive results, while
meaningfully expanding our free cash flow generation in the
quarters ahead. Supported by these factors, I am proud to have
recently announced our first ever quarterly dividend payment of
$0.05 per share for the third quarter
of 2022. Returning capital to shareholders remains a core component
of our overall capital allocation strategy and this represents an
important commitment for Select," concluded Schmitz.
Consolidated Financial Information
Revenue for the third quarter of 2022 was $375.1 million as compared to $335.9 million in the second quarter of 2022 and
$204.6 million in the third quarter
of 2021. Net income for the third quarter of 2022 was $24.7 million as compared to $14.6 million in the second quarter of 2022 and a
net loss of $14.2 million in the
third quarter of 2021.
For the third quarter of 2022, gross profit was $58.8 million, as compared to $35.7 million in the second quarter of 2022 and
$9.0 million in the third quarter of
2021. Total gross margin was 15.7% in the third quarter of 2022 as
compared to 10.6% in the second quarter of 2022 and 4.4% in the
third quarter of 2021. Gross margin before depreciation and
amortization ("D&A") for the third quarter of 2022 was 22.8% as
compared to 19.3% for the second quarter of 2022 and 15.6% for the
third quarter of 2021.
Selling, general and administrative expense ("SG&A") during
the third quarter of 2022 was $29.8
million as compared to $26.7
million during the second quarter of 2022 and $22.0 million during the third quarter of 2021.
SG&A during the third and second quarters of 2022 and the third
quarter of 2021 was impacted by non-recurring transaction costs of
$0.7 million, $0.6 million and $2.4
million, respectively.
Adjusted EBITDA was $62.8 million
in the third quarter of 2022 as compared to $47.7 million in the second quarter of 2022 and
$15.1 million in the third quarter of
2021. Adjusted EBITDA during the third quarter of 2022 was
impacted by a $3.3 million bargain
purchase gain adjustment, $1.0
million of non-recurring transaction costs, $1.6 million of non-cash losses on asset sales,
$0.1 million in lease abandonment
costs, and $0.2 million in other
adjustments. Non-cash compensation expense accounted for an
additional $3.8 million adjustment
during the third quarter of 2022. Please refer to the end of this
release for reconciliations of gross profit before D&A
(non-GAAP measure) to gross profit and of Adjusted EBITDA (non-GAAP
measure) to net income (loss).
Business Segment Information
The Water Services segment generated revenues of
$221.2 million in the third quarter
of 2022 as compared to $196.0 million
in the second quarter of 2022 and $112.5
million in the third quarter of 2021. Gross margin
before D&A for Water Services was 22.8% in the third quarter of
2022 as compared to 19.4% in the second quarter of 2022 and 15.8%
in the third quarter of 2021. Revenues for this segment improved
12.9% sequentially, supported by continued pricing improvements,
resulting in strong 49% incremental gross margins before D&A.
Looking at the fourth quarter of 2022, the Company expects to see
relatively steady revenue and gross margins before D&A, as
partial quarter contributions from Breakwater partially offset
normal seasonal impacts to the base business.
The Water Infrastructure segment generated
revenues of $74.4 million in the
third quarter of 2022 as compared to $60.3
million in the second quarter of 2022 and $36.8 million in the third quarter of 2021. Gross
margin before D&A for Water Infrastructure was 27.2% in the
third quarter of 2022 as compared to 25.5% in the second quarter of
2022 and 22.5% in the third quarter of 2021. Revenues
improved 23.4% sequentially, with 34% incremental gross margins
before D&A, driven by significantly increased volumes at our
recycling and disposal facilities, which more than offset modest
decreases in our traditional water sourcing activities. For the
fourth quarter of 2022, the Company anticipates low double digit
percentage revenue growth, with gross margins before D&A in the
high-20 percent range, as partial quarter contributions from our
recent acquisitions complement our existing base business.
The Oilfield Chemicals segment generated revenues
of $79.4 million in the third quarter
of 2022 as compared to $79.6 million
in the second quarter of 2022 and $55.4
million in the third quarter of 2021. Gross margin
before D&A for Oilfield Chemicals was 18.8% in the third
quarter of 2022 as compared to 14.6% in the second quarter of 2022
and 10.5% in the third quarter of 2021. While revenues held
relatively flat sequentially, this segment generated significant
margin improvement as the Company expanded its manufacturing focus
on its higher margin, proprietary products to meet customer demand,
while ceasing the manufacturing and distribution of several lower
margin commoditized products. For the fourth quarter of 2022, the
Company anticipates mid-single digit percentage revenue growth and
relatively stable margins for the Oilfield Chemicals segment as the
segment continues to perform well at its recent high water mark
levels.
Cash Flow and Capital Expenditures
Cash flow from operations for the third quarter of 2022 was
$5.4 million as compared to
$11.1 million in the second quarter
of 2022 and ($2.5) million in the
third quarter of 2021. Cash flow from operations during the third
quarter of 2022 was significantly impacted by a $54.2 million use of cash to fund the working
capital needs of the business resulting from growing revenues and
the systems integration efforts of recent acquisitions.
Net capital expenditures for the third quarter of 2022 were
$16.1 million, comprised of
$19.8 million of capital expenditures
partially offset by $3.8 million of
cash proceeds from asset sales, including the divestment of
underutilized equipment and real estate from recently acquired
businesses. Cash flow from operations less net capital expenditures
was ($10.7) million during the third
quarter of 2022.
Cash flow used in investing activities during the third quarter
of 2022 included an incremental $2.5
million investment in ICE Thermal Solutions, LLC, while cash
flow from financing activities accounted for $0.3 million of cash outflows.
Balance Sheet and Capital Structure
Total cash and cash equivalents were $13.2 million as of September 30, 2022 as compared to $25.7 million as of June
30, 2022. The Company had no borrowings outstanding under
its sustainability-linked credit facility as of September 30, 2022 or June
30, 2022 or its prior credit facility as of December 31, 2021.
As of September 30, 2022 and
June 30, 2022, the borrowing base
under the sustainability-linked credit facility was $254.4 million and $216.5 million, respectively. The Company had
available borrowing capacity under its sustainability-linked credit
facility as of September 30, 2022 and
June 30, 2022, of approximately
$231.5 million and $195.6 million, respectively, after giving effect
to $22.9 million and $20.9 million of outstanding letters of credit as
of September 30, 2022 and
June 30, 2022.
Total liquidity was $244.7 million
as of September 30, 2022, as compared
to $221.3 million as of June 30, 2022. The Company had 94,014,963
weighted average shares of Class A common stock outstanding and
16,221,101 weighted average shares of Class B common stock
outstanding during the third quarter of 2022.
Breakwater Acquisition
On November 1, 2022, Select
completed the acquisition of Breakwater Energy Partners, LLC
through a stock-for-stock transaction. In connection with closing,
Select issued a total of approximately 9.2 million shares of Select
Class A common stock and repaid or assumed approximately
$12.6 million of outstanding
indebtedness and other obligations, subject to customary
post-closing adjustments.
Breakwater is a leading provider of water infrastructure,
recycling, transfer and disposal solutions to leading E&P
customers in the Permian Basin, with complementary water logistics
operations in the Eagle Ford Shale. Breakwater operates four
commercial recycling facilities, supported by a portfolio of
long-term contracts, with 0.6 million barrels per day of
operational capacity. Breakwater has an incremental 1.4 million
barrels per day of permitted recycling capacity available for
development across its four currently operating fixed facilities as
well as a fifth facility location yet to be developed.
Additionally, Breakwater currently operates nine active modular
recycling facilities with 1.5 million barrels per day of throughput
capacity. These facilities are supported by 46 miles of gathering
and distribution pipelines, 70,000 barrels per day of wastewater
disposal capacity and 4.7 million barrels of storage capacity, with
an additional 3.7 million barrels of permitted storage capacity
available for development.
BofA Securities, Inc. acted as financial advisor and Vinson
& Elkins acted as legal counsel to Select. Jefferies LLC acted
as exclusive financial advisor and Locke Lord LLP acted as legal
counsel to Breakwater.
Cypress Asset Acquisition
On November 1, 2022, Select
completed the acquisition of a portfolio of water gathering
pipeline and disposal assets in the Bakken Shale from Cypress
Environmental Services, LLC. As consideration for the transaction,
Select issued approximately 950,000 shares of Select Class A common
stock. Cypress's water solutions operations consist of eight
saltwater disposal facilities with daily permitted capacity of
85,000 barrels per day across North
Dakota. The acquired business currently receives more than
60% of its daily volumes via pipelines and is supported by a number
of long-term contracts with key customers in the region.
Conference Call
Select has scheduled a conference call on Thursday, November 3, 2022 at 11:00 a.m. Eastern time / 10:00 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
https://investors.selectenergy.com/events-and-presentations/current.
A telephonic replay of the conference call will be available
through November 17, 2022 and may be
accessed by calling 201-612-7415 using passcode 13733891#. 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 is a leading provider of sustainable water and chemical
solutions to the energy industry. These solutions are supported by
the Company's critical water infrastructure assets, chemical
manufacturing and water treatment and recycling capabilities. As a
leader in sustainable water and chemical solutions, Select places
the utmost importance on safe, environmentally responsible
management of oilfield water throughout the lifecycle of a well.
Additionally, Select believes that responsibly managing water
resources throughout its operations to help conserve and protect
the environment is paramount to the continued success of the
Company. For more information, please visit Select's website,
https://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
"could," "believe," "anticipate," "expect," "intend," "project,"
"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. These risks and
uncertainties include the risks that the benefits contemplated from
our recent acquisitions may not be realized, the ability of Select
to successfully integrate the acquired businesses' operations,
including Breakwater's employees, and realize anticipated synergies
and cost savings and the potential impact of the consummation of
the acquisitions on relationships, including with employees,
suppliers, customers, competitors and creditors. 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, which had a negative impact on our
business; the global macroeconomic uncertainty related to the
Russia-Ukraine war; 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, 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 most recent Annual Report on Form 10-K 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
SELECT ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except share and per share
data)
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
September
30,
2022
|
|
June 30,
2022
|
|
September
30,
2021
|
|
September
30,
2022
|
|
September
30,
2021
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
$
|
221,243
|
|
$
|
195,996
|
|
$
|
112,474
|
|
$
|
580,845
|
|
$
|
253,348
|
Water
Infrastructure
|
|
|
74,396
|
|
|
60,284
|
|
|
36,787
|
|
|
193,234
|
|
|
107,916
|
Oilfield
Chemicals
|
|
|
79,433
|
|
|
79,623
|
|
|
55,372
|
|
|
231,665
|
|
|
148,228
|
Total
revenue
|
|
|
375,072
|
|
|
335,903
|
|
|
204,633
|
|
|
1,005,744
|
|
|
509,492
|
Costs of
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
|
170,845
|
|
|
158,060
|
|
|
94,667
|
|
|
465,951
|
|
|
227,736
|
Water
Infrastructure
|
|
|
54,197
|
|
|
44,939
|
|
|
28,494
|
|
|
143,514
|
|
|
81,130
|
Oilfield
Chemicals
|
|
|
64,519
|
|
|
67,988
|
|
|
49,583
|
|
|
194,670
|
|
|
132,103
|
Other
|
|
|
(1)
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
Depreciation and
amortization
|
|
|
26,672
|
|
|
29,253
|
|
|
22,904
|
|
|
82,425
|
|
|
65,572
|
Total costs of
revenue
|
|
|
316,232
|
|
|
300,241
|
|
|
195,648
|
|
|
886,560
|
|
|
506,541
|
Gross
profit
|
|
|
58,840
|
|
|
35,662
|
|
|
8,985
|
|
|
119,184
|
|
|
2,951
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
29,782
|
|
|
26,695
|
|
|
22,044
|
|
|
84,792
|
|
|
57,828
|
Depreciation and
amortization
|
|
|
543
|
|
|
526
|
|
|
562
|
|
|
1,636
|
|
|
1,835
|
Lease abandonment
costs
|
|
|
83
|
|
|
162
|
|
|
154
|
|
|
336
|
|
|
480
|
Total operating
expenses
|
|
|
30,408
|
|
|
27,383
|
|
|
22,760
|
|
|
86,764
|
|
|
60,143
|
Income (loss) from
operations
|
|
|
28,432
|
|
|
8,279
|
|
|
(13,775)
|
|
|
32,420
|
|
|
(57,192)
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sales
of property and
equipment and divestitures, net
|
|
|
(479)
|
|
|
731
|
|
|
315
|
|
|
1,905
|
|
|
(1,921)
|
Interest expense,
net
|
|
|
(616)
|
|
|
(494)
|
|
|
(419)
|
|
|
(1,830)
|
|
|
(1,254)
|
Foreign currency
(loss) gain, net
|
|
|
(6)
|
|
|
(6)
|
|
|
(6)
|
|
|
(9)
|
|
|
1
|
Bargain purchase
gain
|
|
|
(3,273)
|
|
|
5,607
|
|
|
—
|
|
|
13,768
|
|
|
—
|
Other
|
|
|
1,153
|
|
|
875
|
|
|
(222)
|
|
|
2,277
|
|
|
(956)
|
Income (loss) before
income tax (expense)
benefit
|
|
|
25,211
|
|
|
14,992
|
|
|
(14,107)
|
|
|
48,531
|
|
|
(61,322)
|
Income tax (expense)
benefit
|
|
|
(276)
|
|
|
(182)
|
|
|
32
|
|
|
(672)
|
|
|
211
|
Equity in losses of
unconsolidated entities
|
|
|
(218)
|
|
|
(229)
|
|
|
(129)
|
|
|
(576)
|
|
|
(129)
|
Net income
(loss)
|
|
|
24,717
|
|
|
14,581
|
|
|
(14,204)
|
|
|
47,283
|
|
|
(61,240)
|
Less: net (income) loss
attributable to
noncontrolling interests
|
|
|
(3,393)
|
|
|
(2,078)
|
|
|
2,160
|
|
|
(6,654)
|
|
|
9,522
|
Net income (loss)
attributable to Select Energy
Services, Inc.
|
|
$
|
21,324
|
|
$
|
12,503
|
|
$
|
(12,044)
|
|
$
|
40,629
|
|
$
|
(51,718)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to
common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Basic
|
|
$
|
0.23
|
|
$
|
0.13
|
|
$
|
(0.14)
|
|
$
|
0.44
|
|
$
|
(0.60)
|
Class
B—Basic
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to
common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Diluted
|
|
$
|
0.22
|
|
$
|
0.13
|
|
$
|
(0.14)
|
|
$
|
0.43
|
|
$
|
(0.60)
|
Class
B—Diluted
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands,
except share data)
|
|
|
|
September 30, 2022
|
|
December 31, 2021
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
13,222
|
|
$
|
85,801
|
Accounts receivable
trade, net of allowance for credit losses of $4,891 and $4,401,
respectively
|
|
|
388,797
|
|
|
232,824
|
Accounts receivable,
related parties
|
|
|
303
|
|
|
219
|
Inventories
|
|
|
40,314
|
|
|
44,456
|
Prepaid expenses and
other current assets
|
|
|
37,334
|
|
|
31,486
|
Total current
assets
|
|
|
479,970
|
|
|
394,786
|
Property and
equipment
|
|
|
1,018,402
|
|
|
943,515
|
Accumulated
depreciation
|
|
|
(591,340)
|
|
|
(551,727)
|
Total property and
equipment, net
|
|
|
427,062
|
|
|
391,788
|
Right-of-use assets,
net
|
|
|
48,275
|
|
|
47,732
|
Other intangible
assets, net
|
|
|
100,455
|
|
|
108,472
|
Other long-term assets,
net
|
|
|
16,639
|
|
|
7,414
|
Total assets
|
|
$
|
1,072,401
|
|
$
|
950,192
|
Liabilities and Equity
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
55,844
|
|
$
|
36,049
|
Accrued accounts
payable
|
|
|
64,861
|
|
|
52,051
|
Accounts payable and
accrued expenses, related parties
|
|
|
3,775
|
|
|
1,939
|
Accrued salaries and
benefits
|
|
|
21,704
|
|
|
22,233
|
Accrued
insurance
|
|
|
21,520
|
|
|
13,408
|
Sales tax
payable
|
|
|
2,863
|
|
|
2,706
|
Accrued expenses and
other current liabilities
|
|
|
21,957
|
|
|
19,544
|
Current operating
lease liabilities
|
|
|
16,957
|
|
|
13,997
|
Current portion of
finance lease obligations
|
|
|
19
|
|
|
113
|
Total current
liabilities
|
|
|
209,500
|
|
|
162,040
|
Long-term operating
lease liabilities
|
|
|
48,552
|
|
|
53,198
|
Other long-term
liabilities
|
|
|
44,947
|
|
|
39,780
|
Total
liabilities
|
|
|
302,999
|
|
|
255,018
|
Commitments and
contingencies
|
|
|
|
|
|
|
Class A common
stock, $0.01 par value; 350,000,000 shares authorized and
98,097,930 shares issued
and outstanding as of September 30, 2022; 350,000,000 shares
authorized and 94,172,920 shares
issued and outstanding as of December 31, 2021
|
|
|
981
|
|
|
942
|
Class A-2 common
stock, $0.01 par value; 40,000,000 shares authorized; no shares
issued or
outstanding as of September 30, 2022 and
December 31, 2021
|
|
|
—
|
|
|
—
|
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, 2022 and
December 31, 2021
|
|
|
162
|
|
|
162
|
Preferred stock, $0.01
par value; 50,000,000 shares authorized; no shares issued and
outstanding as of
September 30, 2022 and
December 31, 2021
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
977,063
|
|
|
950,464
|
Accumulated
deficit
|
|
|
(318,843)
|
|
|
(359,472)
|
Total stockholders'
equity
|
|
|
659,363
|
|
|
592,096
|
Noncontrolling
interests
|
|
|
110,039
|
|
|
103,078
|
Total
equity
|
|
|
769,402
|
|
|
695,174
|
Total liabilities and equity
|
|
$
|
1,072,401
|
|
$
|
950,192
|
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited)
(in
thousands)
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
September 30, 2022
|
|
June 30, 2022
|
|
September 30, 2022
|
|
September 30, 2021
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
24,717
|
|
$
|
14,581
|
|
$
|
47,283
|
|
$
|
(61,240)
|
Adjustments to
reconcile net income (loss) to net cash provided
by (used in) operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
27,215
|
|
|
29,779
|
|
|
84,061
|
|
|
67,407
|
Loss (gain) on
disposal of property and equipment and
divestitures
|
|
|
479
|
|
|
(731)
|
|
|
(1,905)
|
|
|
1,921
|
Equity in losses of
unconsolidated entities
|
|
|
218
|
|
|
229
|
|
|
576
|
|
|
129
|
Bad debt expense
(recovery)
|
|
|
828
|
|
|
692
|
|
|
2,091
|
|
|
(651)
|
Amortization of debt
issuance costs
|
|
|
122
|
|
|
123
|
|
|
539
|
|
|
516
|
Inventory
write-downs
|
|
|
(801)
|
|
|
189
|
|
|
(612)
|
|
|
139
|
Equity-based
compensation
|
|
|
3,804
|
|
|
3,944
|
|
|
11,023
|
|
|
6,248
|
Bargain purchase
gain
|
|
|
3,273
|
|
|
(5,607)
|
|
|
(13,768)
|
|
|
—
|
Unrealized (gain) loss
on short-term investment
|
|
|
(40)
|
|
|
—
|
|
|
—
|
|
|
1,406
|
Other operating items,
net
|
|
|
(232)
|
|
|
(577)
|
|
|
(710)
|
|
|
(309)
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(51,815)
|
|
|
(43,031)
|
|
|
(141,468)
|
|
|
(32,509)
|
Prepaid expenses and
other assets
|
|
|
(5,820)
|
|
|
1,066
|
|
|
(200)
|
|
|
(10,284)
|
Accounts payable and
accrued liabilities
|
|
|
3,413
|
|
|
10,425
|
|
|
10,983
|
|
|
13,331
|
Net cash provided by
(used in) operating activities
|
|
|
5,361
|
|
|
11,082
|
|
|
(2,107)
|
|
|
(13,896)
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(19,839)
|
|
|
(15,513)
|
|
|
(50,815)
|
|
|
(29,925)
|
Investment in note
receivable
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,101)
|
Purchase of equity
method investments
|
|
|
(2,500)
|
|
|
(800)
|
|
|
(6,767)
|
|
|
(2,200)
|
Collection of note
receivable
|
|
|
—
|
|
|
—
|
|
|
184
|
|
|
—
|
Distribution from cost
method investment
|
|
|
—
|
|
|
40
|
|
|
60
|
|
|
120
|
Acquisitions and
divestitures
|
|
|
984
|
|
|
(1,084)
|
|
|
6,412
|
|
|
(18,644)
|
Proceeds received from
sales of property and equipment
|
|
|
3,750
|
|
|
5,560
|
|
|
21,433
|
|
|
6,491
|
Net cash used in
investing activities
|
|
|
(17,605)
|
|
|
(11,797)
|
|
|
(29,493)
|
|
|
(45,259)
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from
revolving line of credit
|
|
|
52,000
|
|
|
10,000
|
|
|
82,000
|
|
|
—
|
Payments on revolving
line of credit
|
|
|
(52,000)
|
|
|
(10,000)
|
|
|
(82,000)
|
|
|
—
|
Payments on long-term
debt
|
|
|
—
|
|
|
—
|
|
|
(18,780)
|
|
|
—
|
Payments of finance
lease obligations
|
|
|
(5)
|
|
|
(42)
|
|
|
(108)
|
|
|
(238)
|
Payment of debt
issuance costs
|
|
|
—
|
|
|
(113)
|
|
|
(2,144)
|
|
|
—
|
Proceeds from share
issuance
|
|
|
10
|
|
|
13
|
|
|
35
|
|
|
43
|
Distributions to
noncontrolling interests
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,074)
|
Repurchase of common
stock
|
|
|
(272)
|
|
|
(787)
|
|
|
(19,967)
|
|
|
(1,206)
|
Net cash used in
financing activities
|
|
|
(267)
|
|
|
(929)
|
|
|
(40,964)
|
|
|
(2,475)
|
Effect of exchange rate
changes on cash
|
|
|
(9)
|
|
|
(13)
|
|
|
(15)
|
|
|
4
|
Net decrease in cash
and cash equivalents
|
|
|
(12,520)
|
|
|
(1,657)
|
|
|
(72,579)
|
|
|
(61,626)
|
Cash and cash
equivalents, beginning of period
|
|
|
25,742
|
|
|
27,399
|
|
|
85,801
|
|
|
169,039
|
Cash and cash
equivalents, end of period
|
|
$
|
13,222
|
|
$
|
25,742
|
|
$
|
13,222
|
|
$
|
107,413
|
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 accounting
principles generally accepted in the U.S. ("GAAP"). We define
EBITDA as net income (loss), plus interest expense, income taxes
and depreciation and amortization. We define Adjusted EBITDA as
EBITDA plus/(minus) loss/(income) from discontinued operations,
plus any impairment charges or asset write-offs pursuant to 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, plus/(minus) foreign currency
losses/(gains) and plus/(minus) losses/(gains) on unconsolidated
entities less bargain purchase gains from business combinations. 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 (loss) is the GAAP measure most directly comparable
to EBITDA and Adjusted EBITDA. Gross profit 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.
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,
|
|
|
(unaudited) (in thousands)
|
|
September 30, 2022
|
|
|
June 30, 2022
|
|
September 30, 2021
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
24,717
|
|
|
$
|
14,581
|
|
$
|
(14,204)
|
|
|
Interest expense,
net
|
|
|
616
|
|
|
|
494
|
|
|
419
|
|
|
Income tax expense
(benefit)
|
|
|
276
|
|
|
|
182
|
|
|
(32)
|
|
|
Depreciation and
amortization
|
|
|
27,215
|
|
|
|
29,779
|
|
|
23,466
|
|
|
EBITDA
|
|
|
52,824
|
|
|
|
45,036
|
|
|
9,649
|
|
|
Non-cash compensation
expenses
|
|
|
3,804
|
|
|
|
3,944
|
|
|
2,302
|
|
|
Nonrecurring severance
expenses
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
Non-cash loss on sale
of assets or subsidiaries
|
|
|
1,608
|
|
|
|
1,013
|
|
|
189
|
|
|
Nonrecurring
transaction costs
|
|
|
965
|
|
|
|
2,879
|
|
|
2,709
|
|
|
Lease abandonment
costs
|
|
|
83
|
|
|
|
162
|
|
|
154
|
|
|
Bargain purchase
gain
|
|
|
3,273
|
|
|
|
(5,607)
|
|
|
—
|
|
|
Equity in losses of
unconsolidated entities
|
|
|
218
|
|
|
|
229
|
|
|
129
|
|
|
Foreign currency loss,
net
|
|
|
6
|
|
|
|
6
|
|
|
6
|
|
|
Adjusted
EBITDA
|
|
$
|
62,781
|
|
|
$
|
47,662
|
|
$
|
15,138
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
(unaudited) (in thousands)
|
|
September 30, 2022
|
|
June 30, 2022
|
|
September 30, 2021
|
Gross profit (loss) by segment
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
$
|
33,471
|
|
$
|
22,567
|
|
$
|
4,109
|
Water
infrastructure
|
|
|
12,728
|
|
|
3,907
|
|
|
1,433
|
Oilfield
chemicals
|
|
|
12,640
|
|
|
9,188
|
|
|
3,443
|
Other
|
|
|
1
|
|
|
(1)
|
|
|
—
|
As reported gross
profit
|
|
|
58,840
|
|
|
35,661
|
|
|
8,985
|
|
|
|
|
|
|
|
|
|
|
Plus depreciation and amortization
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
16,927
|
|
|
15,369
|
|
|
13,698
|
Water
infrastructure
|
|
|
7,471
|
|
|
11,438
|
|
|
6,860
|
Oilfield
chemicals
|
|
|
2,274
|
|
|
2,447
|
|
|
2,346
|
Other
|
|
|
—
|
|
|
—
|
|
|
—
|
Total depreciation and
amortization
|
|
|
26,672
|
|
|
29,254
|
|
|
22,904
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A
|
|
$
|
85,512
|
|
$
|
64,915
|
|
$
|
31,889
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss) before D&A by
segment
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
50,398
|
|
|
37,936
|
|
|
17,807
|
Water
infrastructure
|
|
|
20,199
|
|
|
15,345
|
|
|
8,293
|
Oilfield
chemicals
|
|
|
14,914
|
|
|
11,635
|
|
|
5,789
|
Other
|
|
|
1
|
|
|
(1)
|
|
|
—
|
Total gross profit
before D&A
|
|
$
|
85,512
|
|
$
|
64,915
|
|
$
|
31,889
|
|
|
|
|
|
|
|
|
|
|
Gross margin before D&A by
segment
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
22.8 %
|
|
|
19.4 %
|
|
|
15.8 %
|
Water
infrastructure
|
|
|
27.2 %
|
|
|
25.5 %
|
|
|
22.5 %
|
Oilfield
chemicals
|
|
|
18.8 %
|
|
|
14.6 %
|
|
|
10.5 %
|
Other
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
Total gross margin
before D&A
|
|
|
22.8 %
|
|
|
19.3 %
|
|
|
15.6 %
|
Contacts:
|
Select Energy
Services
|
|
Chris George – Senior
Vice President,
Corporate Development, Investor Relations &
Sustainability
|
|
(713)
296-1073
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IR@selectenergyservices.com
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Dennard Lascar Investor
Relations
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|
Ken Dennard
|
|
(713)
529-6600
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|
WTTR@dennardlascar.com
|
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content:https://www.prnewswire.com/news-releases/select-energy-services-announces-acquisition-of-breakwater-energy-partners-reports-third-quarter-2022-financial-results-and-provides-other-operational--acquisition-updates-301665674.html
SOURCE Select Energy Services, Inc.