Generated revenue of $405 million during the second quarter of 2023, up 20% year-over-year as compared to the second quarter of 2022

On a year-over-year basis, net income increased 55% to $22.6 million and Adjusted EBITDA improved 47% to $69.8 million during the second quarter of 2023

Delivered $102.0 million of operating cash flows, supported by significant working capital reductions

Returned $44.6 million to shareholders through quarterly cash dividends and share repurchases, repurchasing approximately 5% of outstanding Class A shares during the second quarter of 2023

During the second quarter, Select realigned its reportable segments to better reflect how its businesses are managed and provide enhanced visibility into each business' financial performance

HOUSTON, Aug. 2, 2023 /PRNewswire/ -- Select Water Solutions, Inc. (NYSE: WTTR) ("Select" or the "Company"), a leading provider of sustainable water and chemical solutions, today announced its financial and operating results for the quarter ended June 30, 2023.

John Schmitz, Chairman of the Board, President and CEO, stated, "The second quarter saw solid margin improvement resulting from our continued focus on operational integration and improved efficiency across the business. This focus, along with resilience in our production-weighted infrastructure and specialty chemistry businesses, led to 4% sequential growth in our gross profit before D&A during the second quarter despite a modestly declining U.S. onshore activity environment. Furthermore, we increased net income by 65% sequentially to $23 million while Adjusted EBITDA increased to $70 million, up 4% from the first quarter of 2023.

"The second quarter also provided strong cash flows, buoyed by a significant reduction in our working capital, including a $62 million reduction in accounts receivable. This puts us well on our way to meeting our previously announced target of a $75 million reduction in accounts receivable by year end, giving us the conviction to increase this target to $100 million by year end. This cash flow allowed us to return additional capital to shareholders while also reducing our debt. During the second quarter, we decreased our debt outstanding by $10.5 million, have reduced it further since quarter end and expect to be in a net cash position again by year end. Returning capital to shareholders remains a critical component of our capital allocation strategy, and to supplement our existing quarterly base dividend program, we completed $39 million of share repurchases during the second quarter, comprising approximately 5% of our outstanding Class A shares.

"Additionally, during the second quarter, we decided to reallocate our legacy water sourcing and certain temporary water logistics operations from our Water Infrastructure segment into our Water Services segment. We remain steadfast in our vision to be the recognized leader and trusted partner in sustainable water management solutions, and we believe our continued dedication to achieving operational excellence across the entire organization will further enhance that vision. While Select was originally built as a completions-oriented service business, we have expanded and diversified into something much greater, and we continue to see the recognition of this value-added proposition across our customer base. These changes will allow us to better manage our operations and more efficiently deploy capital across the organization.

"This segment realignment will provide improved clarity around the near-term operational and margin performance of the Water Services segment as well as its long-term value creation opportunities. Similarly, this change will enable us to better capture operational synergies and efficiencies between our water sourcing business and our completions-oriented water transfer business. For the Water Infrastructure segment, following this change the segment's revenues will now be derived from sustainable recycling, pipeline, or disposal revenues substantially all of which are either under long-term contracts or are production-related in nature, generating higher gross margins and adding more stability to the segment's operations than ever before.

"This realignment will also allow our Water Infrastructure segment leadership to dedicate their efforts full time to our highest priority business development opportunities – brownfield gathering infrastructure and disposal projects and greenfield recycling projects backed by long-term contracts. Our net capital expenditure forecast adjusts slightly to $90 to $130 million tightening modestly within our original 2023 guidance, with the range driven by execution timing of growth projects focused specifically on this opportunity set. Our recent organic recycling infrastructure projects have delivered strong performance over the last few quarters, and we expect to see these benefits continue in the third quarter. Even with recent commodity price and activity volatility, we continue to experience increased demand for new infrastructure development opportunities across all basins as water infrastructure constraints remain a challenge for our customers. Heading into the second half of the year, we have a very strong backlog remaining for both greenfield and brownfield projects, particularly around full lifecycle water recycling solutions, and we expect multiple additional capital projects will come under contract throughout 2023. This backlog of accretive capital projects positions the Water Infrastructure segment to see continued steady financial growth during 2023, 2024 and beyond. Ultimately, Select remains uniquely positioned in the competitive landscape to advance the integration of water and chemical technology solutions with high-margin, long-term contracted infrastructure.

"To put the evolution of our business into perspective, if you look back at Select's previous peak performance in 2018, Water Infrastructure and Chemical Technologies, recast in accordance with the segment realignment, accounted for approximately 15% of our consolidated gross profit before D&A. For the first half of 2023, those two segments now account for approximately 40% of our consolidated gross profit before D&A. I fully expect that more than 50% of the profitability of the Company during 2024 will come from these two segments, comprised of sustainable water treatment and recycling solutions, contracted pipelines, production-levered water disposal infrastructure and specialty chemistry manufacturing. These two segments will remain our core focus areas for growth capital allocation and the opportunity set remains robust.

"Finally, we are confident in our ability to continue to improve the operational performance of the business and we reaffirm our robust free cash flow outlook for the year. We will remain steadfastly focused on improving our operating margins, growing our free cash flow and executing on the meaningful opportunities that lie ahead to continue developing our sustainable water infrastructure and specialty chemistry solutions. I look forward to building upon our strong first half results, while significantly expanding our free cash flow generation during the remainder of 2023. This will provide ample opportunities for incremental growth, while also allowing us to advance our support of committed capital returns for our shareholders," concluded Schmitz.

During the quarter ended June 30, 2023, Select realigned its reportable segments to better reflect its strategy, how its businesses are managed and provide greater visibility into each business' financial performance. As a result of these changes, Select's legacy water sourcing and certain temporary water logistics service offerings which were previously reported in the Water Infrastructure segment are now included in the Water Services segment. Additionally, the Company's Oilfield Chemicals segment has been renamed Chemical Technologies. For more information regarding these changes, see below under "Changes in Segment Reporting."

The financial information for the second quarter of 2023 in this press release is presented under the realigned segment structure, and the historical financial information for prior periods has been recast to conform to the realigned segment structure. The changes in segment reporting have no impact on the Company's historical consolidated financial position, results of operations or cash flows.

Additional recast historical segment information that conforms to the new reporting structure is available as supplemental financial information in a presentation posted to the "Investors" section of the Company's website at www.investors.selectwater.com. Alternatively, please refer to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") concurrent with this release.

Second Quarter 2023 Consolidated Financial Information

Revenue for the second quarter of 2023 was $404.6 million as compared to $416.6 million in the first quarter of 2023 and $335.9 million in the second quarter of 2022. Net income for the second quarter of 2023 was $22.6 million as compared to $13.7 million in the first quarter of 2023 and $14.6 million in the second quarter of 2022.

For the second quarter of 2023, gross profit was $61.2 million, as compared to $59.7 million in the first quarter of 2023 and $35.7 million in the second quarter of 2022. Total gross margin was 15.1% in the second quarter of 2023 as compared to 14.3% in the first quarter of 2023 and 10.6% in the second quarter of 2022. Gross margin before depreciation and amortization ("D&A") for the second quarter of 2023 was 23.8% as compared to 22.2% for the first quarter of 2023 and 19.3% for the second quarter of 2022.

Selling, General & Administrative expenses ("SG&A") during the second quarter of 2023 was $34.3 million as compared to $35.8 million during the first quarter of 2023 and $26.7 million during the second quarter of 2022. SG&A during the second and first quarters of 2023 and the second quarter of 2022 was impacted by non-recurring transaction costs of $2.0 million, $2.9 million and $0.6 million, respectively.

Adjusted EBITDA was $69.8 million in the second quarter of 2023 as compared to $67.2 million in the first quarter of 2023 and $47.7 million in the second quarter of 2022. Adjusted EBITDA during the second quarter of 2023 was adjusted for $2.0 million of non-recurring transaction costs, $1.4 million of non-cash losses on asset sales, and $0.7 million in other non-recurring adjustments. Non-cash compensation expense accounted for an additional $4.8 million adjustment during the second quarter of 2023. 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.

Business Segment Information

The Water Services segment generated revenues of $264.6 million in the second quarter of 2023 as compared to $274.7 million in the first quarter of 2023 and $230.5 million in the second quarter of 2022.  Gross margin before D&A for Water Services was 21.9% in the second quarter of 2023 as compared to 19.9% in the first quarter of 2023 and 18.6% in the second quarter of 2022. Water Services segment revenues decreased 3.7% sequentially, resulting from modest declines in completions activity combined with the consolidation and elimination of certain non-core and underperforming operations. In contrast to the modest revenue declines, gross profit before D&A improved by 6.0% and gross margins before D&A improved by 200 basis points, as the continued integration and operational improvement efforts generate efficiency across the business. For the third quarter of 2023, the Company expects to see low- to mid-single digit percentage revenue declines, driven by a combination of current activity levels as well as additional operational integration. The Company expects gross margins before D&A to see up to 100 basis points of margin improvement, as we continue to capture additional efficiencies through ongoing integration efforts, consolidating yards in areas with remaining overlap and also reallocating assets from certain non-core facilities.

The Water Infrastructure segment generated revenues of $55.3 million in the second quarter of 2023 as compared to $55.5 million in the first quarter of 2023 and $25.8 million in the second quarter of 2022. Gross margin before D&A for Water Infrastructure was 37.8% in the second quarter of 2023 as compared to 38.1% in the first quarter of 2023 and 40.6% in the second quarter of 2022.  Water Infrastructure revenues and gross margins held steady during the second quarter, as increased water recycling volumes offset modestly lower pipeline distribution volumes. The Company anticipates Water Infrastructure revenues increasing by mid-single digit percentages during the third quarter of 2023, with gross margins before D&A improving 200-400 basis points, supported by the accretive margin contributions of recent organic projects and increased produced water recycling.

The Chemical Technologies segment generated revenues of $84.8 million in the second quarter of 2023 as compared to $86.4 million in the first quarter of 2023 and $79.6 million in the second quarter of 2022.  Gross margin before D&A for Chemical Technologies was 20.6% in the second quarter of 2023 as compared to 19.4% in the first quarter of 2023 and 14.6% in the second quarter of 2022. While revenues declined modestly during the second quarter, the decline was less than the decline in overall completions activity and gross profit before D&A improved by 4%. Select continues to see strong demand for its higher margin, proprietary chemical technologies resulting in an improved product mix which resulted in gross margin before D&A improving by more than a full percentage point during the second quarter. For the third quarter of 2023, the Company anticipates relatively steady revenues and margins for the Chemical Technologies segment as the segment seeks to replicate its all-time high-water mark quarterly gross margins.

Cash Flow and Capital Expenditures

Cash flow from operations for the second quarter of 2023 was $102.0 million as compared to ($18.0) million in the first quarter of 2023 and $11.1 million in the second quarter of 2022. Cash flow from operations during the second quarter of 2023 significantly benefited from a $35.8 million decrease in net working capital, including $61.3 million of inflows from reduced accounts receivable balances, as substantial progress was made in reducing the billing backlog resulting from the ongoing systems integration efforts of recent acquisitions.

Net capital expenditures for the second quarter of 2023 were $36.3 million, comprised of $39.4 million of capital expenditures partially offset by $3.1 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 $65.7 million during the second quarter of 2023.

Cash flow used in investing activities during the second quarter of 2023 also included $4.0 million of outflows for the acquisition of a small water containment asset base. Cash flows from financing activities during the second quarter of 2023 included $56.7 million of net outflows consisting of $38.7 million of share repurchases, including $38.4 million of open market share repurchases and $0.3 million of tax withholding repurchases, $10.5 million of net repayments on our sustainability-linked credit facility, $5.9 million of quarterly dividends paid, and $1.6 million of cash distributed to noncontrolling interests.

Balance Sheet and Capital Structure

Total cash and cash equivalents were $10.6 million as of June 30, 2023, as compared to $6.0 million as of March 31, 2023. The Company had $65.0 million and $75.5 million of borrowings outstanding under its sustainability-linked credit facility as of June 30, 2023 and March 31, 2023, respectively.

As of June 30, 2023 and March 31, 2023, the borrowing base under the sustainability-linked credit facility was $269.7 million and $257.3 million, respectively. The Company had available borrowing capacity under its sustainability-linked credit facility as of June 30, 2023 and March 31, 2023, of approximately $182.1 million and $159.2 million, respectively, after giving effect to $22.6 million of outstanding letters of credit as of both June 30, 2023 and March 31, 2023.

Total liquidity was $192.7 million as of June 30, 2023, as compared to $165.2 million as of March 31, 2023. The Company had 101,106,729 weighted average shares of Class A common stock and 16,221,101 weighted average shares of Class B common stock outstanding during the second quarter of 2023.

Changes to Segment Reporting

The Company has three reportable segments: Water Services, Water Infrastructure and Chemical Technologies. Effective June 1, 2023, the Company began to strategically manage certain water sourcing and temporary water logistics operations, previously included in our Water Infrastructure segment, as part of our Water Services segment. These changes were driven by several factors, including that our legacy fresh and brackish water sourcing business works more closely with our temporary water transfer operations that are within Water Services, the continued transition of completions water demand from fresh and brackish water to recycled water, as well as the diversifying demand for these water logistics services beyond the immediate vicinity of our existing pipeline infrastructure. Due to this ongoing evolution, the Company concluded that the Water Services segment management is best suited to manage these operations. Due to the expertise of such management, it is anticipated that more efficient sharing and utilization of resources will yield potential synergies over time.

Following these changes, the Water Infrastructure segment will be specifically dedicated to the Company's strategic efforts and near-term growth priorities around increasing production-weighted and long-term contracted revenues around fixed pipelines and recycling and disposal facilities.

Concurrently, the Company has also renamed its Oilfield Chemicals segment as Chemical Technologies. This change was based on a number of factors including the continued success of Select's chemicals business in delivering customized, specialty chemical products developed through proprietary research and development efforts, the deemphasis of certain traditional commoditized chemistry products within the oil and gas industry, and the continued investments in time and resources to develop, manufacture and sell specialty chemical products for non-oilfield industrial-related applications. This segment name change is a naming convention-only modification and did not impact any current or prior year numbers. Overall, we believe these segment changes better align the business with the current and future state of the Company's operations and capital allocation and strategic objectives.

Following these changes, Select will continue to operate multiple service lines, aggregated into three reportable segments, Water Services, Water Infrastructure and Chemical Technologies.

The Water Services reportable segment will consist of:

  • Water Sourcing (previously reported in Water Infrastructure);
  • Water Transfer (including certain water logistics operations previously reported in Water Infrastructure);
  • Water Containment;
  • Water Monitoring;
  • Flowback & Well Testing;
  • Fluids Hauling; and
  • Accommodations and Rentals.

The Water Infrastructure reportable segment will consist of:

  • Water Recycling & Reuse;
  • Gathering & Distribution Pipelines; and
  • Fluid Disposal.

The Chemical Technologies reportable segment's service lines remain unchanged, consisting of:

  • Chemical Manufacturing;
  • Completion Chemicals; and
  • Water Treatment.

The changes in segment reporting have no impact on the Company's historical consolidated financial position, results of operations or cash flows; however, prior periods have been recast to include the water sourcing and water logistics operations within the Water Services segment and remove the results of those operations from the Water Infrastructure segment.

Additional recast historical segment information that conforms to the new reporting structure is available as supplemental financial information in a presentation posted to the "Investors" section of the Company's website at www.investors.selectwater.com. Alternatively, please refer to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") concurrent with this release.

Second Quarter Earnings Conference Call

Select has scheduled a conference call on Thursday, August 3, 2023 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.selectwater.com/events-presentations/current.  A telephonic replay of the conference call will be available through August 17, 2023 and may be accessed by calling 201-612-7415 using passcode 13740154#.  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 Water Solutions, 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 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 Company's continued success.  For more information, please visit Select's website, https://www.selectwater.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. Examples of forward-looking statements include, but are not limited to, the expectations of plans, business strategies, objectives and growth and anticipated financial and operational performance. 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 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 global macroeconomic uncertainty related to the Russia-Ukraine war; central bank policy actions and disruptions in the bank and capital markets, including, bank failures and associated liquidity risks and other factors; 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; the severity and duration of world health events; 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.

 

Contacts:

Select Water Solutions, Inc.


Chris George – Senior Vice President, Corporate


Development, Investor Relations & Sustainability


(713) 296-1073


IR@selectwater.com




Dennard Lascar Investor Relations


Ken Dennard / Natalie Hairston


(713) 529-6600 


WTTR@dennardlascar.com

 

WTTR-ER

 

SELECT WATER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)
















Three months ended June 30, 


Six months ended June 30, 



2023


2022


2023


2022

Revenue













Water Services


$

264,597


$

230,502


$

539,275


$

429,122

Water Infrastructure



55,277



25,778



110,743



49,318

Chemical Technologies



84,754



79,623



171,202



152,232

Total revenue



404,628



335,903



821,220



630,672

Costs of revenue













Water Services



206,576



187,675



426,517



353,391

Water Infrastructure



34,392



15,324



68,726



31,032

Chemical Technologies



67,303



67,988



137,012



130,151

Other





1





1

Depreciation and amortization



35,183



29,253



68,126



55,753

Total costs of revenue



343,454



300,241



700,381



570,328

Gross profit



61,174



35,662



120,839



60,344

Operating expenses













Selling, general and administrative



34,335



26,695



70,164



55,010

Depreciation and amortization



739



526



1,334



1,093

Impairments and abandonments



356





11,522



Lease abandonment costs



9



162



85



253

Total operating expenses



35,439



27,383



83,105



56,356

Income from operations



25,735



8,279



37,734



3,988

Other income (expense)













(Loss) gain on sales of property and equipment and divestitures, net



(1,246)



731



1,665



2,384

Interest expense, net



(2,042)



(494)



(3,525)



(1,214)

Foreign currency gain (loss), net



1



(6)



(3)



(3)

Bargain purchase gain





5,607





17,041

Other



872



875



1,718



1,124

Income before income tax expense



23,320



14,992



37,589



23,320

Income tax expense



(387)



(182)



(585)



(396)

Equity in losses of unconsolidated entities



(372)



(229)



(738)



(358)

Net income



22,561



14,581



36,266



22,566

Less: net income attributable to noncontrolling interests



(2,446)



(2,078)



(3,804)



(3,261)

Net income attributable to Select Water Solutions, Inc.


$

20,115


$

12,503


$

32,462


$

19,305














Net income per share attributable to common stockholders:













Class A—Basic


$

0.20


$

0.13


$

0.31


$

0.21

Class B—Basic


$


$


$


$














Net income per share attributable to common stockholders:













Class A—Diluted


$

0.20


$

0.13


$

0.31


$

0.20

Class B—Diluted


$


$


$


$

 

SELECT WATER SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share data)




June 30, 2023



March 31, 2023


December 31, 2022









Assets










Current assets










Cash and cash equivalents


$

10,562


$

6,028


$

7,322

Accounts receivable trade, net of allowance for credit losses



430,765



492,613



429,983

Accounts receivable, related parties



290



607



5,087

Inventories



42,893



40,846



41,164

Prepaid expenses and other current assets



36,483



39,774



34,380

Total current assets



520,993



579,868



517,936

Property and equipment



1,120,626



1,112,899



1,084,005

Accumulated depreciation



(609,392)



(597,861)



(584,451)

Total property and equipment, net



511,234



515,038



499,554

Right-of-use assets, net



41,923



44,562



47,662

Goodwill



4,683





Other intangible assets, net



125,514



125,799



138,800

Other long-term assets, net



22,745



19,985



18,901

Total assets


$

1,227,092


$

1,285,252


$

1,222,853

Liabilities and Equity










Current liabilities










Accounts payable


$

47,387


$

77,585


$

61,539

Accrued accounts payable



75,872



75,625



67,462

Accounts payable and accrued expenses, related parties



3,057



4,469



3,305

Accrued salaries and benefits



24,613



15,431



28,686

Accrued insurance



17,714



23,503



26,180

Sales tax payable



3,655



4,036



3,056

Accrued expenses and other current liabilities



19,301



19,783



23,292

Current operating lease liabilities



16,162



16,898



17,751

Current portion of finance lease obligations



15



19



19

Total current liabilities



207,776



237,349



231,290

Long-term operating lease liabilities



40,712



43,372



46,388

Long-term debt



65,000



75,500



16,000

Other long-term liabilities



49,651



45,696



45,447

Total liabilities



363,139



401,917



339,125

Commitments and contingencies










Class A common stock, $0.01 par value



1,038



1,090



1,094

Class A-2 common stock, $0.01 par value







Class B common stock, $0.01 par value



162



162



162

Preferred stock, $0.01 par value;







Additional paid-in capital



1,023,370



1,063,149



1,075,915

Accumulated deficit



(278,732)



(298,847)



(311,194)

Total stockholders' equity



745,838



765,554



765,977

Noncontrolling interests



118,115



117,781



117,751

Total equity



863,953



883,335



883,728

Total liabilities and equity


$

1,227,092


$

1,285,252


$

1,222,853

 

SELECT WATER SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



















Three months ended


Six months ended



June 30, 2023


March 31, 2023


June 30, 2022


June 30, 2023


June 30, 2022

Cash flows from operating activities
















Net income


$

22,561


$

13,705


$

14,581


$

36,266


$

22,566

Adjustments to reconcile net income to net cash provided by (used in) operating activities
















Depreciation and amortization



35,922



33,538



29,779



69,460



56,846

Loss (gain) on disposal of property and equipment and divestitures



1,246



(2,911)



(731)



(1,665)



(2,384)

Equity in losses of unconsolidated entities



372



366



229



738



358

Bad debt expense



856



1,975



692



2,831



1,263

Amortization of debt issuance costs



122



122



123



244



417

Inventory adjustments



367



75



189



442



189

Equity-based compensation



4,809



2,964



3,944



7,773



7,219

Impairment and abandonments



356



11,166





11,522



Bargain purchase gain







(5,607)





(17,041)

Unrealized loss on short-term investment











40

Other operating items, net



(462)



(442)



(577)



(904)



(478)

Changes in operating assets and liabilities
















Accounts receivable



61,308



(64,922)



(43,031)



(3,614)



(89,653)

Prepaid expenses and other assets



(1,753)



(5,431)



1,066



(7,184)



5,620

Accounts payable and accrued liabilities



(23,739)



(8,221)



10,425



(31,960)



7,570

Net cash provided by (used in) operating activities



101,965



(18,016)



11,082



83,949



(7,468)

Cash flows from investing activities
















Purchase of property and equipment



(39,350)



(27,885)



(15,513)



(67,235)



(30,976)

Purchase of equity method investments



(500)





(800)



(500)



(4,267)

Collection of note receivable











184

Distribution from cost method investment







40





60

Acquisitions, net of cash and restricted cash received



(4,000)



(9,418)



(1,084)



(13,418)



5,857

Proceeds received from sales of property and equipment



3,077



6,724



5,560



9,801



17,683

Other











(429)

Net cash used in investing activities



(40,773)



(30,579)



(11,797)



(71,352)



(11,888)

Cash flows from financing activities
















Borrowings from revolving line of credit



28,500



76,750



10,000



105,250



30,000

Payments on revolving line of credit



(39,000)



(17,250)



(10,000)



(56,250)



(30,000)

Payments on long-term debt











(18,780)

Payments of finance lease obligations



(5)



(5)



(42)



(10)



(103)

Payment of debt issuance costs







(113)





(2,144)

Dividends paid



(5,880)



(6,206)





(12,086)



Proceeds from share issuance







13





25

Contributions from noncontrolling interests





4,950





4,950



Distributions to noncontrolling interests



(1,581)







(1,581)



Repurchase of common stock



(38,694)



(10,935)



(787)



(49,629)



(19,695)

Net cash (used in) provided by financing activities



(56,660)



47,304



(929)



(9,356)



(40,697)

Effect of exchange rate changes on cash



2



(3)



(13)



(1)



(6)

Net increase (decrease) in cash, cash equivalents and restricted cash



4,534



(1,294)



(1,657)



3,240



(60,059)

Cash, cash equivalents and restricted cash, beginning of period



6,028



7,322



27,399



7,322



85,801

Cash, cash equivalents and restricted cash, end of period


$

10,562


$

6,028


$

25,742


$

10,562


$

25,742

 

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 and abandonment 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 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, which is the most directly comparable GAAP measure for the periods presented:
















Three months ended,





June 30, 2023


March 31, 2023


June 30, 2022





(unaudited)





(in thousands)


Net income



$

22,651


$

13,705


$

14,581


Interest expense, net




2,042



1,483



494


Income tax expense




387



198



182


Depreciation and amortization




35,922



33,538



29,779


EBITDA




60,912



48,924



45,036


Trademark abandonment






11,106




Other impairments and abandonments




356



60




Bargain purchase gain








(5,607)


Non-cash loss on sale of assets or subsidiaries




1,426



823



1,013


Non-cash compensation expenses




4,809



2,964



3,944


Non-recurring transaction costs




1,963



2,881



2,879


Lease abandonment costs




9



76



162


Equity in losses of unconsolidated entities




372



366



229


Foreign currency loss (gain), net




(1)



4



6


Adjusted EBITDA



$

69,846


$

67,204


$

47,662


 

The following table presents a reconciliation of gross profit before D&A to total gross profit, which is the most directly comparable GAAP measure, and a calculation of gross margin before D&A for the periods presented:














Three months ended,




June 30, 2023


March 31, 2023


June 30, 2022




(unaudited)




(in thousands)


Gross profit by segment











Water Services


$

34,881


$

32,137


$

23,582


Water Infrastructure



11,512



12,872



2,892


Chemical Technologies



14,782



14,656



9,188


Other







(1)


As reported gross profit



61,175



59,665



35,661













Plus depreciation and amortization











Water Services



23,140



22,600



19,245


Water Infrastructure



9,373



8,260



7,562


Chemical Technologies



2,669



2,083



2,447


Other








Total depreciation and amortization



35,182



32,943



29,254













Gross profit before D&A


$

96,357


$

92,608


$

64,915













Gross profit before D&A by segment











Water Services



58,021



54,737



42,827


Water Infrastructure



20,885



21,132



10,454


Chemical Technologies



17,451



16,739



11,635


Other







(1)


Total gross profit before D&A


$

96,357


$

92,608


$

64,915













Gross margin before D&A by segment











Water Services



21.9 %



19.9 %



18.6 %


Water Infrastructure



37.8 %



38.1 %



40.6 %


Chemical Technologies



20.6 %



19.4 %



14.6 %


Other



n/a



n/a



n/a


Total gross margin before D&A



23.8 %



22.2 %



19.3 %


 

Cision View original content:https://www.prnewswire.com/news-releases/select-water-solutions-announces-second-quarter-2023-financial-results-and-operational-updates-301891967.html

SOURCE Select Water Solutions

Copyright 2023 PR Newswire

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