Revenue of $335.9
million generated during the second quarter of 2022, up 14%
sequentially from the first quarter of 2022
Net income of $14.6
million & Adjusted EBITDA of $47.7 million during the second quarter of
2022
Improved gross margin before depreciation
and amortization across all three segments while maintaining a
positive net cash position
HOUSTON, Aug. 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 its
financial results for the quarter ended June
30, 2022.
John Schmitz, Chairman of the
Board, President and CEO, stated, "The second quarter proved to be
a significant step forward in the continued fulfillment of our
strategy to improve and bolster the base business, advance our
technology, sustainability and diversification efforts, and execute
on strategic M&A. Supported by 14% sequential revenue growth,
we significantly improved our profitability during the second
quarter with Net Income and Adjusted EBITDA growing 83% and 48%,
respectively, quarter over quarter. Reinforced by a steadily
improving activity backdrop and an increasingly tight labor and
equipment supply environment, we continue to see pricing
improvements across each of our segments.
"We are also making progress on the integration of our recent
acquisitions, capturing continued efficiencies and cost synergy
realizations, which has contributed to sequential margin
improvement across each of our segments. Additionally on the cost
synergy front, SG&A costs decreased by 6% sequentially to below
8% of revenue, a threshold we last achieved in 2018.
"We have continued ramping up the buildout supporting the
consolidated infrastructure footprint we've assembled through our
recent acquisitions as well. During the second quarter of 2022, we
signed a 5-year agreement to tie in an operator's existing water
distribution and gathering pipeline system in Upton County, Texas, interconnecting with two
of our existing recycling facilities. This interconnection will
allow us to efficiently gather produced water, transport recycled
volumes between our two existing facilities and dispose of water,
if necessary, broadening the commercialization opportunities of the
systems and allowing for more efficient management of water needs
across multiple operators in the area.
"In addition, during the second quarter we commenced operations
at our two most recently announced recycling facilities in the
Northern Delaware and Rockies
regions, adding an incremental 75,000 barrels per day of recycling
capacity. With this increased recycling capacity, we are well on
our way towards achieving the 2022 recycling targets tied to our
sustainability-linked credit facility. We have a strong backlog of
additional development opportunities and I look forward to
executing on additional projects in the second half of the year. As
previously announced, I'm also pleased to have issued our inaugural
annual sustainability report during the second quarter. While
recycling remains a top priority for us, we are excited about many
of our other near-term sustainability initiatives discussed in the
sustainability report including additional technology, emissions
reduction, and green chemistry R&D investments.
"Ultimately, I am very pleased with our recent 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 with further improvements to our revenue and profitability,
while meaningfully expanding our free cash flow generation in the
second half of the year," concluded Schmitz.
Consolidated Financial Information
Revenue for the second quarter of 2022 was $335.9 million as compared to $294.8 million in the first quarter of 2022 and
$161.1 million in the second quarter
of 2021. Net income for the second quarter of 2022 was $14.6 million as compared to $8.0 million in the first quarter of 2022 and a
net loss of $19.6 million in the
second quarter of 2021.
For the second quarter of 2022, gross profit was $35.7 million, as compared to $24.7 million in the first quarter of 2022 and a
gross loss of $1.6 million in the
second quarter of 2021. Total gross margin was 10.6% in the second
quarter of 2022 as compared to 8.4% in the first quarter of 2022
and (1.0)% in the second quarter of 2021. Gross margin before
depreciation and amortization ("D&A") for the second quarter of
2022 was 19.3% as compared to 17.4% for the first quarter of 2022
and 12.0% for the second quarter of 2021.
SG&A during the second quarter of 2022 was $26.7 million as compared to $28.3 million during the first quarter of 2022
and $15.9 million during the second
quarter of 2021. SG&A during the first and second quarters of
2022 was impacted by non-recurring transaction costs of
$3.6 million and $0.6 million, respectively.
Adjusted EBITDA was $47.7 million
in the second quarter of 2022 as compared to $32.2 million in the first quarter of 2022 and
$7.6 million in the second quarter of
2021. Adjusted EBITDA during the first and second quarters of
2022 was impacted by the deduction of $11.4
million and $5.6 million,
respectively, of non-recurring bargain purchase price gains that
benefited Net Income during the quarters related to the Company's
recent acquisition activity. Additionally, Adjusted EBITDA was
impacted by $2.9 million of
non-recurring transaction costs, $1.0
million of non-cash losses on asset sales, $0.2 million in lease abandonment costs, and
$0.2 million in other adjustments
during the second quarter of 2022. Non-cash compensation expense
accounted for an additional $3.9
million adjustment during the second quarter of 2022. Please
refer to the end of this release for reconciliations of gross
profit (loss) before D&A (non-GAAP measure) to gross profit
(loss) and of Adjusted EBITDA (non-GAAP measure) to net income
(loss).
Business Segment Information
The Water Services segment generated revenues of
$196.0 million in the second quarter
of 2022 as compared to $163.6 million
in the first quarter of 2022 and $76.7
million in the second quarter of 2021. Gross margin
before D&A for Water Services was 19.4% in the second quarter
of 2022 as compared to 16.2% in the first quarter of 2022 and 7.7%
in the second quarter of 2021. Revenues for this segment improved
19.8% sequentially, with approximately 70% of the revenue growth
from the existing business and approximately 30% of the growth from
a full quarter contribution from the recent Nuverra acquisition
that closed during the first quarter of 2022. Looking at the third
quarter of 2022, the Company expects to see mid- to high-single
digit percentage revenue growth with modest continued improvements
to gross margins before D&A, supported by continued pricing
improvements and market activity.
The Water Infrastructure segment generated
revenues of $60.3 million in the
second quarter of 2022 as compared to $58.6
million in the first quarter of 2022 and $33.3 million in the second quarter of 2021.
Gross margin before D&A for Water Infrastructure was 25.5% in
the second quarter of 2022 as compared to 24.2% in the first
quarter of 2022 and 21.3% in the second quarter of 2021.
Revenues improved 3.0% sequentially, with strong incremental
margins driven by increased volumes at our recycling facilities and
a full quarter contribution from the recent Nuverra acquisition,
offset by seasonal volume decreases at our Bakken pipeline
facilities. For the third quarter of 2022, the Company anticipates
mid-single digit percentage revenue growth, with gross margins
before D&A in mid- to high-20 percent range, supported by
continued growth in recycled water volumes.
The Oilfield Chemicals segment generated revenues
of $79.6 million in the second
quarter of 2022 as compared to $72.6
million in the first quarter of 2022 and $51.1 million in the second quarter of
2021. Gross margin before D&A for Oilfield Chemicals was
14.6% in the second quarter of 2022 as compared to 14.4% in the
first quarter of 2022 and 12.5% in the second quarter of 2021.
Revenues improved 9.7% sequentially, exceeding expectations, driven
by strong growth in the Permian and Rockies regions. Supported by
the recent strong revenue growth in the first and second quarters
of 2022, the Company anticipates relatively stable to modestly
improving revenues in this segment during the third quarter of 2022
with gross margins before D&A of at least 15% as operational
efficiencies and pricing improvements counteract rising raw
materials costs.
Cash Flow and Capital Expenditures
Cash flow from operations for the second quarter of 2022 was
$11.1 million as compared to
($18.6) million in the first quarter
of 2022 and ($7.6) million in the
second quarter of 2021. Cash flow from operations during the second
quarter of 2022 was significantly impacted by a $31.5 million use of cash to fund the working
capital needs of the business resulting from growing revenues and
the ongoing integration efforts of the recent acquisitions.
Net capital expenditures for the second quarter of 2022 were
$9.9 million, comprised of
$15.5 million of capital expenditures
meaningfully offset by $5.6 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 $1.1 million during the second
quarter of 2022.
Cash flow used in investing activities during the second quarter
of 2022 included an outflow of $1.1
million related to working capital settlements for recent
acquisitions, while cash flow from financing activities accounted
for another $0.9 million of cash
outflows.
Balance Sheet and Capital Structure
Total cash and cash equivalents were $25.7 million as of June
30, 2022 as compared to $24.8
million as of March 31, 2022.
The Company had no borrowings outstanding under its
sustainability-linked credit facility as of June 30, 2022 or March 31,
2022.
As of June 30, 2022 and
March 31, 2022, the borrowing base
under the sustainability-linked credit facility was $216.5 million and $204.1 million, respectively. The Company had
available borrowing capacity under its sustainability-linked credit
facility as of June 30, 2022 and
March 31, 2022, of approximately
$195.6 million and $188.5 million, respectively, after giving effect
to $20.9 million and $15.6 million of outstanding letters of credit as
of June 30, 2022 and March 31, 2022.
Total liquidity was $221.3 million
as of June 30, 2022, as compared to
$213.3 million as of March 31, 2022. The Company had 92,833,593
weighted average Class A shares outstanding and 16,221,101 weighted
average Class B shares outstanding during the second quarter of
2022.
2021 Sustainability Report
On April 28, 2022, Select issued
its 2021 Sustainability Report, the Company's inaugural release.
Select's 2021 Sustainability Report highlights the policies,
processes, procedures and performance by which Select establishes
and advances Environmental, Social, and Governance ("ESG") goals
and criteria, as well as how the Company aims to act as a force for
environmental stewardship and promote sustainable development in
communities in which it operates. The report reviews the
application of Select's business principles and supporting policies
across the business. The report includes information based on
internal discussions, external stakeholder feedback, and
consultations with third-party experts. Select intends to regularly
report on our ESG policies, procedures, and performance, both on
our website and through our annual Sustainability Report. Readers
are encouraged to read the report in its entirety, which is
accessible at https://www.selectenergy.com/sustainability/.
Conference Call
Select has scheduled a conference call on Wednesday, August 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
http://investors.selectenergy.com/events-and-presentations. A
telephonic replay of the conference call will be available through
August 17, 2022 and may be accessed
by calling 201-612-7415 using passcode 13731255#. 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. (collectively, with its
consolidated subsidiaries, referred to as "Select" or the
"Company") is a leading provider of sustainable water and chemical
solutions to the energy industry. Select develops, manufactures and
delivers a full suite of chemical products for use in oil and gas
well completion and production operations as well as integration
into the full water life-cycle. These solutions are supported by
the Company's critical water infrastructure assets 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, 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
"could," "believe," "anticipate," "expect," "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. 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
|
|
Six months
ended
|
|
|
|
June 30,
2022
|
|
March 31,
2022
|
|
June 30,
2021
|
|
June 30,
2022
|
|
June 30,
2021
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
$
|
195,996
|
|
$
|
163,606
|
|
$
|
76,651
|
|
$
|
359,602
|
|
$
|
140,874
|
|
Water
Infrastructure
|
|
|
60,284
|
|
|
58,554
|
|
|
33,326
|
|
|
118,838
|
|
|
71,129
|
|
Oilfield
Chemicals
|
|
|
79,623
|
|
|
72,609
|
|
|
51,140
|
|
|
152,232
|
|
|
92,856
|
|
Total
revenue
|
|
|
335,903
|
|
|
294,769
|
|
|
161,117
|
|
|
630,672
|
|
|
304,859
|
|
Costs of
revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
|
158,060
|
|
|
137,046
|
|
|
70,745
|
|
|
295,106
|
|
|
133,069
|
|
Water
Infrastructure
|
|
|
44,939
|
|
|
44,378
|
|
|
26,237
|
|
|
89,317
|
|
|
52,636
|
|
Oilfield
Chemicals
|
|
|
67,988
|
|
|
62,163
|
|
|
44,754
|
|
|
130,151
|
|
|
82,520
|
|
Other
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Depreciation and
amortization
|
|
|
29,253
|
|
|
26,500
|
|
|
21,018
|
|
|
55,753
|
|
|
42,668
|
|
Total costs of
revenue
|
|
|
300,241
|
|
|
270,087
|
|
|
162,754
|
|
|
570,328
|
|
|
310,893
|
|
Gross profit
(loss)
|
|
|
35,662
|
|
|
24,682
|
|
|
(1,637)
|
|
|
60,344
|
|
|
(6,034)
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
26,695
|
|
|
28,315
|
|
|
15,890
|
|
|
55,010
|
|
|
35,784
|
|
Depreciation and
amortization
|
|
|
526
|
|
|
567
|
|
|
624
|
|
|
1,093
|
|
|
1,273
|
|
Lease abandonment
costs
|
|
|
162
|
|
|
91
|
|
|
222
|
|
|
253
|
|
|
326
|
|
Total operating
expenses
|
|
|
27,383
|
|
|
28,973
|
|
|
16,736
|
|
|
56,356
|
|
|
37,383
|
|
Income (loss) from
operations
|
|
|
8,279
|
|
|
(4,291)
|
|
|
(18,373)
|
|
|
3,988
|
|
|
(43,417)
|
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sales
of property and equipment and divestitures, net
|
|
|
731
|
|
|
1,653
|
|
|
(1,657)
|
|
|
2,384
|
|
|
(2,236)
|
|
Interest expense,
net
|
|
|
(494)
|
|
|
(720)
|
|
|
(400)
|
|
|
(1,214)
|
|
|
(835)
|
|
Foreign currency
(loss) gain, net
|
|
|
(6)
|
|
|
3
|
|
|
4
|
|
|
(3)
|
|
|
7
|
|
Bargain purchase
gain
|
|
|
5,607
|
|
|
11,434
|
|
|
—
|
|
|
17,041
|
|
|
—
|
|
Other
|
|
|
875
|
|
|
249
|
|
|
895
|
|
|
1,124
|
|
|
(734)
|
|
Income (loss) before
income tax (expense) benefit
|
|
|
14,992
|
|
|
8,328
|
|
|
(19,531)
|
|
|
23,320
|
|
|
(47,215)
|
|
Income tax (expense)
benefit
|
|
|
(182)
|
|
|
(214)
|
|
|
(84)
|
|
|
(396)
|
|
|
179
|
|
Equity in losses of
unconsolidated entities
|
|
|
(229)
|
|
|
(129)
|
|
|
—
|
|
|
(358)
|
|
|
—
|
|
Net income
(loss)
|
|
|
14,581
|
|
|
7,985
|
|
|
(19,615)
|
|
|
22,566
|
|
|
(47,036)
|
|
Less: net (income) loss
attributable to noncontrolling interests
|
|
|
(2,078)
|
|
|
(1,183)
|
|
|
3,048
|
|
|
(3,261)
|
|
|
7,362
|
|
Net income (loss)
attributable to Select Energy Services, Inc.
|
|
$
|
12,503
|
|
$
|
6,802
|
|
$
|
(16,567)
|
|
$
|
19,305
|
|
$
|
(39,674)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Basic
|
|
$
|
0.13
|
|
$
|
0.07
|
|
$
|
(0.19)
|
|
$
|
0.21
|
|
$
|
(0.47)
|
|
Class
B—Basic
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A—Diluted
|
|
$
|
0.13
|
|
$
|
0.07
|
|
$
|
(0.19)
|
|
$
|
0.20
|
|
$
|
(0.47)
|
|
Class
B—Diluted
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands,
except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
2022
|
|
March 31,
2022
|
|
December 31,
2021
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
25,742
|
|
$
|
24,797
|
|
$
|
85,801
|
Restricted
cash
|
|
|
—
|
|
|
2,602
|
|
|
—
|
Accounts receivable
trade, net of allowance for credit losses of $5,687, $4,972 and
$4,401, respectively
|
|
|
338,865
|
|
|
293,595
|
|
|
232,824
|
Accounts receivable,
related parties
|
|
|
382
|
|
|
157
|
|
|
219
|
Inventories
|
|
|
39,389
|
|
|
43,074
|
|
|
44,456
|
Prepaid expenses and
other current assets
|
|
|
32,724
|
|
|
33,979
|
|
|
31,486
|
Total current
assets
|
|
|
437,102
|
|
|
398,204
|
|
|
394,786
|
Property and
equipment
|
|
|
1,013,230
|
|
|
997,229
|
|
|
943,515
|
Accumulated
depreciation
|
|
|
(574,348)
|
|
|
(556,764)
|
|
|
(551,727)
|
Total property and
equipment, net
|
|
|
438,882
|
|
|
440,465
|
|
|
391,788
|
Right-of-use assets,
net
|
|
|
51,245
|
|
|
54,933
|
|
|
47,732
|
Other intangible
assets, net
|
|
|
103,032
|
|
|
105,881
|
|
|
108,472
|
Other long-term assets,
net
|
|
|
13,567
|
|
|
12,437
|
|
|
7,414
|
Total
assets
|
|
$
|
1,043,828
|
|
$
|
1,011,920
|
|
$
|
950,192
|
Liabilities and
Equity
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
53,986
|
|
$
|
57,311
|
|
$
|
36,049
|
Accrued accounts
payable
|
|
|
71,270
|
|
|
49,935
|
|
|
52,051
|
Accounts payable and
accrued expenses, related parties
|
|
|
2,793
|
|
|
2,375
|
|
|
1,939
|
Accrued salaries and
benefits
|
|
|
23,485
|
|
|
16,517
|
|
|
22,233
|
Accrued
insurance
|
|
|
15,335
|
|
|
18,664
|
|
|
13,408
|
Sales tax
payable
|
|
|
2,408
|
|
|
2,609
|
|
|
2,706
|
Accrued expenses and
other current liabilities
|
|
|
19,121
|
|
|
20,100
|
|
|
19,544
|
Current operating
lease liabilities
|
|
|
17,573
|
|
|
18,101
|
|
|
13,997
|
Current portion of
finance lease obligations
|
|
|
19
|
|
|
57
|
|
|
113
|
Total current
liabilities
|
|
|
205,990
|
|
|
185,669
|
|
|
162,040
|
Long-term operating
lease liabilities
|
|
|
51,597
|
|
|
55,464
|
|
|
53,198
|
Other long-term
liabilities
|
|
|
45,096
|
|
|
47,395
|
|
|
39,780
|
Total
liabilities
|
|
|
302,683
|
|
|
288,528
|
|
|
255,018
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
|
|
Class A common
stock, $0.01 par value; 350,000,000 shares authorized and
98,160,573
shares issued and outstanding as of June 30, 2022; 350,000,000
shares authorized and
98,111,119 shares issued and outstanding as of March 31, 2022;
350,000,000 shares
authorized and 94,172,920 shares issued and outstanding as of
December 31, 2021
|
|
|
982
|
|
|
981
|
|
|
942
|
Class A-2 common
stock, $0.01 par value; 40,000,000 shares authorized; no shares
issued or outstanding as of June 30, 2022, March 31, 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 June 30, 2022, March 31, 2022
and December 31, 2021
|
|
|
162
|
|
|
162
|
|
|
162
|
Preferred stock, $0.01
par value; 50,000,000 shares authorized; no shares issued and
outstanding as of June 30, 2022, March 31, 2022 and December 31,
2021
|
|
|
—
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
974,066
|
|
|
971,282
|
|
|
950,464
|
Accumulated
deficit
|
|
|
(340,167)
|
|
|
(352,670)
|
|
|
(359,472)
|
Total stockholders'
equity
|
|
|
635,043
|
|
|
619,755
|
|
|
592,096
|
Noncontrolling
interests
|
|
|
106,102
|
|
|
103,637
|
|
|
103,078
|
Total
equity
|
|
|
741,145
|
|
|
723,392
|
|
|
695,174
|
Total liabilities
and equity
|
|
$
|
1,043,828
|
|
$
|
1,011,920
|
|
$
|
950,192
|
SELECT ENERGY
SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(unaudited)
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months
ended
|
|
Three months
ended
|
|
|
June 30,
2022
|
|
June 30,
2021
|
|
June 30,
2022
|
|
March 31,
2022
|
Cash flows from
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
22,566
|
|
$
|
(47,036)
|
|
$
|
14,581
|
|
$
|
7,985
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
56,846
|
|
|
43,941
|
|
|
29,779
|
|
|
27,067
|
(Gain) loss on
disposal of property and equipment and divestitures
|
|
|
(2,384)
|
|
|
2,236
|
|
|
(731)
|
|
|
(1,653)
|
Equity in losses of
unconsolidated entities
|
|
|
358
|
|
|
—
|
|
|
229
|
|
|
129
|
Bad debt expense
(recovery)
|
|
|
1,263
|
|
|
(381)
|
|
|
692
|
|
|
571
|
Amortization of debt
issuance costs
|
|
|
417
|
|
|
344
|
|
|
123
|
|
|
294
|
Inventory
write-downs
|
|
|
189
|
|
|
82
|
|
|
189
|
|
|
—
|
Equity-based
compensation
|
|
|
7,219
|
|
|
3,946
|
|
|
3,944
|
|
|
3,275
|
Bargain purchase
gain
|
|
|
(17,041)
|
|
|
—
|
|
|
(5,607)
|
|
|
(11,434)
|
Unrealized loss on
short-term investment
|
|
|
40
|
|
|
1,169
|
|
|
—
|
|
|
40
|
Other operating items,
net
|
|
|
(478)
|
|
|
(139)
|
|
|
(577)
|
|
|
99
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
—
|
|
|
|
Accounts
receivable
|
|
|
(89,653)
|
|
|
(19,054)
|
|
|
(43,031)
|
|
|
(46,622)
|
Prepaid expenses and
other assets
|
|
|
5,620
|
|
|
(11,044)
|
|
|
1,066
|
|
|
4,554
|
Accounts payable and
accrued liabilities
|
|
|
7,570
|
|
|
14,497
|
|
|
10,425
|
|
|
(2,855)
|
Net cash (used in)
provided by operating activities
|
|
|
(7,468)
|
|
|
(11,439)
|
|
|
11,082
|
|
|
(18,550)
|
Cash flows from
investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(30,976)
|
|
|
(13,451)
|
|
|
(15,513)
|
|
|
(15,463)
|
Investment in note
receivable
|
|
|
—
|
|
|
(1,101)
|
|
|
—
|
|
|
—
|
Purchase of equity
method investments
|
|
|
(4,267)
|
|
|
(2,200)
|
|
|
(800)
|
|
|
(3,467)
|
Collection of note
receivable
|
|
|
184
|
|
|
—
|
|
|
—
|
|
|
184
|
Distribution from cost
method investment
|
|
|
60
|
|
|
120
|
|
|
40
|
|
|
20
|
Acquisitions, net of
cash and restricted cash received
|
|
|
5,857
|
|
|
—
|
|
|
(1,084)
|
|
|
6,941
|
Proceeds received from
sales of property and equipment
|
|
|
17,683
|
|
|
5,141
|
|
|
5,560
|
|
|
12,123
|
Other
|
|
|
(429)
|
|
|
—
|
|
|
—
|
|
|
(429)
|
Net cash used in
investing activities
|
|
|
(11,888)
|
|
|
(11,491)
|
|
|
(11,797)
|
|
|
(91)
|
Cash flows from
financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings from
revolving line of credit
|
|
|
30,000
|
|
|
—
|
|
|
10,000
|
|
|
20,000
|
Payments on revolving
line of credit
|
|
|
(30,000)
|
|
|
—
|
|
|
(10,000)
|
|
|
(20,000)
|
Payments on long-term
debt
|
|
|
(18,780)
|
|
|
—
|
|
|
—
|
|
|
(18,780)
|
Payments of finance
lease obligations
|
|
|
(103)
|
|
|
(156)
|
|
|
(42)
|
|
|
(61)
|
Payment of debt
issuance costs
|
|
|
(2,144)
|
|
|
—
|
|
|
(113)
|
|
|
(2,031)
|
Proceeds from share
issuance
|
|
|
25
|
|
|
29
|
|
|
13
|
|
|
12
|
Distributions to
noncontrolling interests
|
|
|
—
|
|
|
(1,074)
|
|
|
—
|
|
|
—
|
Repurchase of common
stock
|
|
|
(19,695)
|
|
|
(1,206)
|
|
|
(787)
|
|
|
(18,908)
|
Net cash used in
financing activities
|
|
|
(40,697)
|
|
|
(2,407)
|
|
|
(929)
|
|
|
(39,768)
|
Effect of exchange rate
changes on cash
|
|
|
(6)
|
|
|
20
|
|
|
(13)
|
|
|
7
|
Net decrease in cash,
cash equivalents and restricted cash
|
|
|
(60,059)
|
|
|
(25,317)
|
|
|
(1,657)
|
|
|
(58,402)
|
Cash, cash equivalents
and restricted cash, beginning of period
|
|
|
85,801
|
|
|
169,039
|
|
|
27,399
|
|
|
85,801
|
Cash, cash equivalents
and restricted cash, end of period
|
|
$
|
25,742
|
|
$
|
143,722
|
|
$
|
25,742
|
|
$
|
27,399
|
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 (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
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, 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 (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.
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,
|
|
|
Six months ended
June 30,
|
(unaudited) (in
thousands)
|
|
June 30,
2022
|
|
|
March 31,
2022
|
|
June 30,
2021
|
|
|
2022
|
|
2021
|
|
|
|
Net income
(loss)
|
|
$
|
14,581
|
|
|
$
|
7,985
|
|
$
|
(19,615)
|
|
|
$
|
22,566
|
|
$
|
(47,036)
|
Interest expense,
net
|
|
|
494
|
|
|
|
720
|
|
|
400
|
|
|
|
1,214
|
|
|
835
|
Income tax expense
(benefit)
|
|
|
182
|
|
|
|
214
|
|
|
84
|
|
|
|
396
|
|
|
(179)
|
Depreciation and
amortization
|
|
|
29,779
|
|
|
|
27,067
|
|
|
21,642
|
|
|
|
56,846
|
|
|
43,941
|
EBITDA
|
|
|
45,036
|
|
|
|
35,986
|
|
|
2,511
|
|
|
|
81,022
|
|
|
(2,439)
|
Non-cash compensation
expenses
|
|
|
3,944
|
|
|
|
3,275
|
|
|
2,524
|
|
|
|
7,219
|
|
|
3,946
|
Nonrecurring severance
expenses
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
3,225
|
Non-cash loss on sale
of assets or subsidiaries
|
|
|
1,013
|
|
|
|
520
|
|
|
2,150
|
|
|
|
1,533
|
|
|
2,847
|
Nonrecurring
transaction costs
|
|
|
2,879
|
|
|
|
3,617
|
|
|
149
|
|
|
|
6,496
|
|
|
561
|
Lease abandonment
costs
|
|
|
162
|
|
|
|
91
|
|
|
222
|
|
|
|
253
|
|
|
326
|
Bargain purchase
gain
|
|
|
(5,607)
|
|
|
|
(11,434)
|
|
|
—
|
|
|
|
(17,041)
|
|
|
—
|
Equity in losses of
unconsolidated entities
|
|
|
229
|
|
|
|
129
|
|
|
—
|
|
|
|
358
|
|
|
—
|
Foreign currency loss
(gain), net
|
|
|
6
|
|
|
|
(3)
|
|
|
(4)
|
|
|
|
3
|
|
|
(7)
|
Adjusted
EBITDA
|
|
$
|
47,662
|
|
|
$
|
32,181
|
|
$
|
7,552
|
|
|
$
|
79,843
|
|
$
|
8,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
June 30,
2022
|
|
March 31,
2022
|
|
June 30,
2021
|
Gross profit (loss) by
segment
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
$
|
22,567
|
|
$
|
10,998
|
|
$
|
(6,432)
|
Water
infrastructure
|
|
|
3,907
|
|
|
5,745
|
|
|
643
|
Oilfield
chemicals
|
|
|
9,188
|
|
|
7,939
|
|
|
4,152
|
Other
|
|
|
(1)
|
|
|
—
|
|
|
—
|
As reported gross
profit (loss)
|
|
|
35,661
|
|
|
24,682
|
|
|
(1,637)
|
|
|
|
|
|
|
|
|
|
|
Plus depreciation and
amortization
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
15,369
|
|
|
15,562
|
|
|
12,338
|
Water
infrastructure
|
|
|
11,438
|
|
|
8,431
|
|
|
6,446
|
Oilfield
chemicals
|
|
|
2,447
|
|
|
2,507
|
|
|
2,234
|
Other
|
|
|
—
|
|
|
—
|
|
|
—
|
Total depreciation and
amortization
|
|
|
29,254
|
|
|
26,500
|
|
|
21,018
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A
|
|
$
|
64,915
|
|
$
|
51,182
|
|
$
|
19,381
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A by segment
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
37,936
|
|
|
26,560
|
|
|
5,906
|
Water
infrastructure
|
|
|
15,345
|
|
|
14,176
|
|
|
7,089
|
Oilfield
chemicals
|
|
|
11,635
|
|
|
10,446
|
|
|
6,386
|
Other
|
|
|
(1)
|
|
|
—
|
|
|
—
|
Total gross profit
before D&A
|
|
$
|
64,915
|
|
$
|
51,182
|
|
$
|
19,381
|
|
|
|
|
|
|
|
|
|
|
Gross margin before
D&A by segment
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
19.4 %
|
|
|
16.2 %
|
|
|
7.7 %
|
Water
infrastructure
|
|
|
25.5 %
|
|
|
24.2 %
|
|
|
21.3 %
|
Oilfield
chemicals
|
|
|
14.6 %
|
|
|
14.4 %
|
|
|
12.5 %
|
Other
|
|
|
n/a
|
|
|
n/a
|
|
|
n/a
|
Total gross margin
before D&A
|
|
|
19.3 %
|
|
|
17.4 %
|
|
|
12.0 %
|
Contacts:
|
Select Energy
Services
|
|
Chris George – Senior
Vice President, Corporate
|
|
Development, Investor
Relations & Sustainability
|
|
(713)
296-1073
|
|
IR@selectenergyservices.com
|
|
|
|
Dennard Lascar Investor
Relations
|
|
Ken Dennard
|
|
(713)
529-6600
|
|
WTTR@dennardlascar.com
|
View original
content:https://www.prnewswire.com/news-releases/select-energy-services-reports-second-quarter-2022-financial-results-and-provides-operational-updates-301598282.html
SOURCE Select Energy Services, Inc.