Select Water Solutions Reports Net Income Increase to $15 Million

Select Water Solutions has released its financial results for the second quarter of 2024, showcasing advancements in key performance metrics and strategic growth via acquisitions. The company reported a net income of $15 million and an adjusted EBITDA of $69.5 million. Improved operating margins were noted, particularly in the water infrastructure segment, which attained record revenue and gross profit, achieving margins of 51% before depreciation and amortization. Although the chemical technology segment is facing challenges due to reduced industry activity, the company anticipates stable growth and improved margins within the water infrastructure segment and ongoing cost reductions in other areas.

### Key Takeaways
– Net income increased by $11 million, with adjusted EBITDA rising by $10 million.
– Record revenue and gross profit were achieved in the water infrastructure segment, with margins before depreciation and amortization hitting 51%.
– Strategic acquisitions and new contracts have positively impacted water recycling and storage initiatives.
– The water services segment experienced modest revenue growth and improved margins.
– The chemical technology segment is affected by decreased volumes, leading to lower gross margins of 16.4%.
– The company forecasts continued demand from direct-to-operator E&P customers, with flat to slightly declining revenues anticipated.
– Consolidated adjusted EBITDA is projected between $66 million and $70 million for the third quarter.
– Quarterly dividends remain steady at $0.06 per share.

### Company Outlook
– Select Water Solutions expects continued growth in the water infrastructure segment.
– There will be an ongoing focus on decisions that enhance margins.
– By year-end, the water infrastructure and chemical technology segments are expected to jointly contribute 50% to consolidated gross profit.

### Challenges
– Legacy fluids hauling service revenues continue to decline.
– The chemical technology segment is grappling with lower manufacturing volumes due to reduced industry activity.

### Positive Developments
– The water infrastructure segment exceeded its 50% margin target ahead of schedule, bolstered by higher utilization and cost reductions.
– Revenue growth in this segment results from both organic development and acquisitions.
– The company successfully doubled revenue per recycled barrel from 2022 to 2023.

### Concerns
– Delays in the Thompson Pipeline project may affect revenue expectations for the year.

### Q&A Highlights
– The company elaborated on its approach to managing disposal wells in different regions and the functionalities of its systems for water disposal, gathering, and exchange to enhance recycling capacities.
– Upcoming system expansions are expected to significantly impact capacity and financial performance, allowing utilization by multiple operators.

Select Water Solutions is focused on leveraging its robust position in water infrastructure and recycling, navigating challenges in other segments. With strategic acquisitions and organic growth initiatives, the company is well-positioned to enhance shareholder value and strengthen its presence in the water management sector.