Generated revenue of $417 million during the first quarter of 2023, up
9% sequentially from the fourth quarter of 2022
Water Infrastructure segment generated
revenue of $102 million during the
first quarter of 2023, up 32% sequentially from the fourth quarter
of 2022
Net income increased 81% sequentially to
$13.7 million and Adjusted EBITDA
improved 29% sequentially to $67.2
million during the first quarter of 2023 relative to the
fourth quarter of 2022
Contracted multiple new infrastructure
projects supported by long-term contracts in the Haynesville,
Midcon and Rockies regions
HOUSTON, May 2, 2023
/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 and operating results for the quarter ended March 31, 2023.
John Schmitz, Chairman of the
Board, President and CEO, stated "The first quarter represented a
strong quarter of sequential earnings and revenue growth, most
notably the 32% revenue growth in our Water Infrastructure segment,
while we expanded margins across every business segment. Select
benefitted from a solid full quarter of growth from our recent
organic recycling infrastructure projects as well as our recent
acquisitions, particularly Breakwater. This dynamic combination led
to 9% consolidated sequential revenue growth during the quarter and
company record quarterly revenue of $417
million amidst an overall flat U.S. onshore activity
environment. Additionally, we nearly doubled net income to
$14 million while Adjusted EBITDA
increased significantly to $67
million, up 29% sequentially.
"The market for sustainable, scalable full lifecycle water
solutions in the energy industry has never been stronger. We are
clearly seeing the operational synergies, growth and earnings
benefits of our recent acquisitions, particularly in the Permian
Basin. However, in addition to the multiple new acquisitions and
projects we previously announced and executed on in the Midland and
Delaware Basins during the first quarter, we also added new
long-term contracted infrastructure projects in East Texas, Louisiana, Oklahoma and Colorado during the first quarter. Even with
recent commodity price volatility, we continue to see increased
demand for new infrastructure development opportunities across all
basins as water infrastructure constraints remain a challenge for
our customers. We have a very strong backlog of both greenfield and
brownfield projects, particularly around full lifecycle water
recycling solutions, and we expect to see multiple additional
capital projects come under contract throughout 2023. 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. This backlog of
accretive capital projects positions Select to see continued
financial growth and stability during 2023, 2024 and beyond.
"Our previously announced corporate rebranding initiative to
transform into Select Water Solutions remains on-target for a
second quarter consummation. While our brand and invoicing channel
consolidation draws closer, our cash flow remained challenged
during the first quarter as a sizable working capital build
resulted from both growing revenues and a continued build-up of
acquisition-related invoicing. We have dedicated significant
internal and external resources to our ongoing systems integration
and ERP project implementation efforts and are working diligently
to complete these efforts in conjunction with our rebranding
effort. These investments will allow us to meaningfully improve our
internal processes, better support our customers, resolve the
integration-related ticketing and invoicing backlog, and unlock a
meaningful amount of cash from the balance sheet during the second
half of 2023. Towards that goal, we are targeting a reduction of
$75 million from our current accounts
receivable balance, on a relative days sales outstanding basis,
between the first quarter and the end of 2023 through these
investments and improvements, with further reductions to be
identified for 2024.
"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, including back-office
administration, will further enhance that vision. Ultimately, we
are confident in our ability to continue to improve the operational
performance of the business and we remain committed to our robust
free cash flow outlook for the year.
"Accordingly, we continually evaluate our capital allocation
opportunities in light of this anticipated free cash flow.
Returning capital to shareholders is an important part of our
capital allocation strategy, and in support of our existing base
dividend program, we were pleased to reinitiate our share
repurchase program during the first quarter with an additional
$50 million authorization. We
completed $8 million of repurchases
during March 2023, with an additional
$25 million completed through the end
of April 2023, which together
comprised of more than 4% of our outstanding Class A shares.
"I am pleased with our financial performance during the first
quarter of 2023 and am confident meaningful opportunities lie ahead
to continue developing our sustainable water infrastructure
solutions while driving long-term growth and substantial financial
returns. Supported by our recent acquisitions, advanced chemical
technologies, strategic investments and increased organic
infrastructure growth opportunities, we expect to see continued
revenue, adjusted EBITDA and net income growth in 2023. We look
forward to building upon our strong first quarter 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.
First Quarter 2023 Consolidated Financial Information
Revenue for the first quarter of 2023 was $416.6 million as compared to $381.7 million in the fourth quarter of 2022 and
$294.8 million in the first quarter
of 2022. Net income for the first quarter of 2023 was $13.7 million as compared to $7.6 million in the fourth quarter of 2022 and
$8.0 million in the first quarter of
2022. Net income for the first quarter of 2023 was impacted by
$11.1 million of non-ordinary,
non-cash trademark abandonment expense. This expense is associated
with the Company's ongoing corporate rebranding initiative and the
decision to retire certain legacy acquired trademarks and operating
brands within Select's future operations.
For the first quarter of 2023, gross profit was $59.7 million, as compared to $41.6 million in the fourth quarter of 2022 and
$24.7 million in the first quarter of
2022. Total gross margin was 14.3% in the first quarter of 2023 as
compared to 10.9% in the fourth quarter of 2022 and 8.4% in the
first quarter of 2022. Gross margin before depreciation and
amortization ("D&A") for the first quarter of 2023 was 22.2% as
compared to 19.0% for the fourth quarter of 2022 and 17.4% for the
first quarter of 2022.
Selling, General & Administrative expenses ("SG&A")
during the first quarter of 2023 was $35.8
million as compared to $34.1
million during the fourth quarter of 2022 and $28.3 million during the first quarter of 2022.
SG&A during the first quarter of 2023 and the fourth and first
quarter of 2022 was impacted by non-recurring transaction costs of
$2.9 million, $3.9 million and $3.6
million, respectively.
Adjusted EBITDA was $67.2 million
in the first quarter of 2023 as compared to $52.2 million in the fourth quarter of 2022 and
$32.2 million in the first quarter of
2022. Adjusted EBITDA during the first quarter of 2023 was adjusted
for $11.1 million of non-recurring
and non-cash trademark abandonment expense in connection with our
rebranding initiative, $2.9 million
of non-recurring transaction costs, $0.8
million of non-cash losses on asset sales, and $0.5 million in other non-recurring adjustments.
Non-cash compensation expense accounted for an additional
$3.0 million adjustment during the
first 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
$228.6 million in the first quarter
of 2023 as compared to $218.5 million
in the fourth quarter of 2022 and $163.6
million in the first quarter of 2022. Gross margin
before D&A for Water Services was 20.5% in the first quarter of
2023 as compared to 18.5% in the fourth quarter of 2022 and 16.2%
in the first quarter of 2022. Water Services segment revenues
increased 5% sequentially with strong 65% incremental gross margins
driving meaningful profitability improvement, as the Company
progressed efficiency initiatives and non-recurring costs that
previously impacted the fourth quarter abated. For the second
quarter of 2023, the Company expects to see relatively stable
revenue with gross margins before D&A improving by 100–200
basis points, as we continue to capture additional operational
efficiencies in a relatively stable activity environment.
The Water Infrastructure segment generated
revenues of $101.5 million in the
first quarter of 2023 as compared to $77.2
million in the fourth quarter of 2022 and $58.6 million in the first quarter of 2022. Gross
margin before D&A for Water Infrastructure was 28.5% in the
first quarter of 2023 as compared to 22.4% in the fourth quarter of
2022 and 24.2% in the first quarter of 2022. Water
Infrastructure revenues increased significantly by 32% sequentially
from an already record-high fourth quarter with strong 48%
incremental gross margins driving meaningful consolidated segment
margin improvement. This considerable sequential growth was driven
by increased organic water recycling volumes and pipeline
throughput combined with a full quarter contribution from our
recent Breakwater and Cypress acquisitions and other recent asset
acquisitions. Supported by the recent robust revenue growth seen
during the first quarter of 2023, the Company anticipates
relatively steady revenues in Water Infrastructure during the
second quarter of 2023 with gross margins before D&A improving
200-300 basis points supported by the accretive margin
contributions of our recent organic projects.
The Oilfield Chemicals segment generated revenues
of $86.4 million in the first quarter
of 2023 as compared to $86.0 million
in the fourth quarter of 2022 and $72.6
million in the first quarter of 2022. Gross margin
before D&A for Oilfield Chemicals was 19.4% in the first
quarter of 2023 as compared to 17.4% in the fourth quarter of 2022
and 14.4% in the first quarter of 2022. We continue to see strong
demand for our higher-margin, proprietary chemical technologies
resulting in improved product mix driving further margin
improvements across the segment. For the second quarter of 2023,
the Company anticipates mid-single digit percentage revenue
improvements and steady margins for the Oilfield Chemicals segment
as the segment continues to advance from its all-time high-water
mark levels.
Cash Flow and Capital Expenditures
Cash flow from operations for the fourth quarter of 2023 was
($18.0) million as compared to
$35.3 million in the fourth quarter
of 2022 and ($18.6) million in the
first quarter of 2022. Cash flow from operations during the first
quarter of 2023 was significantly impacted by a $78.6 million use of cash to fund the working
capital needs of the business resulting from both growing revenues
and the continued systems integration efforts of recent
acquisitions.
Net capital expenditures for the first quarter of 2023 were
$21.2 million, comprised of
$27.9 million of capital expenditures
partially offset by $6.7 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 ($39.2) million during the first
quarter of 2023.
Cash flow used in investing activities during the first quarter
of 2023 included $9.4 million of
outflows for previously announced Permian Basin infrastructure
acquisitions. Cash flows from financing activities during the first
quarter of 2023 included $47.3
million of net inflows consisting of $59.5 million of net borrowings on our
sustainability-linked credit facility, $10.9
million of share repurchases, including $7.7 million of open market share repurchases and
$3.2 million of tax withholding
repurchases, $6.2 million of
dividends and distributions paid, and $5.0
million of cash funding from noncontrolling interests.
Balance Sheet and Capital Structure
Total cash and cash equivalents were $6.0
million as of March 31, 2023
as compared to $7.3 million as of
December 31, 2022. The Company had
$75.5 million and $16.0 million of borrowings outstanding under its
sustainability-linked credit facility as of March 31, 2023 and December 31, 2022, respectively.
As of March 31, 2023 and
December 31, 2022, the borrowing base
under the sustainability-linked credit facility was $257.3 million and $245.0
million, respectively. The Company had available borrowing
capacity under its sustainability-linked credit facility as of
March 31, 2023 and December 31, 2022, of approximately $159.2 million and $206.1
million, respectively, after giving effect to $22.6 million and $22.9
million of outstanding letters of credit as of March 31, 2023 and December 31, 2022, respectively.
Total liquidity was $165.2 million
as of March 31, 2023, as compared to
$213.4 million as of December 31, 2022. The Company had
105,403,461 weighted average shares of Class A common stock
outstanding and 16,221,101 weighted average shares of Class B
common stock outstanding during the first quarter of 2023.
Business Development Updates
Haynesville Gathering Expansion & Acreage
Dedication
During the first quarter of 2023, Select signed a multi-year
gathering and disposal agreement with a minimum volume commitment
("MVC") in exchange for a capacity dedication with a large
independent operator in the Haynesville Shale. Select is in the
process of constructing a 5-mile produced water pipeline that would
connect the operator's water infrastructure system to Select's
existing 60-mile underground twin pipeline network in the
Haynesville Shale in Texas and
Louisiana. The operator has agreed
to a 15 million barrel MVC over a five-year term with a total
contract term of ten years. Additionally, the $5 million project is supported by an
approximately 30,000-acre dedication under which the operator has
dedicated all future produced water volumes generated within the
dedicated area to Select's interconnected produced water gathering
and disposal systems, providing significant long-term upside to the
existing MVC agreement. We expect for construction to be complete
and for the pipeline to be operational by the end of the third
quarter of 2023.
MidCon Gathering & Disposal Project
During the first quarter of 2023, Select signed a multi-year
gathering and disposal agreement with a large public operator in
the MidCon region. The $4 million
project is supported by an MVC in exchange for a capacity
dedication and the construction of a 6-mile produced water pipeline
connecting the operator's water infrastructure system to an
existing Select wastewater disposal facility. We expect for
construction to be complete and for the pipeline to be operational
by the end of the third quarter of 2023.
DJ Basin Water Distribution Pipeline
Select recently signed a multi-year water sourcing and delivery
agreement with an MVC in exchange for a reserved volume commitment
with a major integrated oil and gas company in the DJ Basin in
Colorado. During January 2023, Select completed construction and
commenced operations on the $8
million project, consisting of a 6-mile 24" pipeline to
connect a nearby water source to the operator's leasehold. To
support the project, the operator agreed to an initial up front
capital commitment of $10 million and
a 35 million barrel MVC over a three-year period.
East Texas Gathering & Disposal Projects
Select recently signed two multi-year gathering and disposal
agreements with the same public operator in the Haynesville Shale
region in East Texas supporting a
combined $5 million of capital
projects. Both agreements have ten-year terms and wellbore
dedications in exchange for disposal capacity dedications from
Select. The first agreement contemplates the construction of a
5-mile pipeline that connects the operator's infrastructure assets
to a newly constructed wastewater disposal facility in East Texas, and the second agreement
contemplates construction of a 2-mile pipeline that connects the
operator's infrastructure assets to an existing Select wastewater
disposal facility in East Texas.
We expect well completion and pipeline construction to be completed
and for the facilities to be operational by the end of the second
quarter of 2023.
Conference Call
Select has scheduled a conference call on Wednesday, May 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.selectenergy.com/events-and-presentations/current.
A telephonic replay of the conference call will be available
through May 17, 2023 and may be
accessed by calling 201-612-7415 using passcode 13737963#. 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 Company's continued
success. 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. 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, 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,
including the COVID-19 pandemic, which had a negative impact on our
business; 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 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
WTTR-ER
SELECT ENERGY
SERVICES, INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (unaudited) (in thousands, except
share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Revenue
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
$
|
228,597
|
|
$
|
218,524
|
|
$
|
163,606
|
Water
Infrastructure
|
|
|
101,547
|
|
|
77,178
|
|
|
58,554
|
Oilfield
Chemicals
|
|
|
86,448
|
|
|
85,974
|
|
|
72,609
|
Total
revenue
|
|
|
416,592
|
|
|
381,676
|
|
|
294,769
|
Costs of
revenue
|
|
|
|
|
|
|
|
|
|
Water
Services
|
|
|
181,699
|
|
|
178,146
|
|
|
137,046
|
Water
Infrastructure
|
|
|
72,576
|
|
|
59,899
|
|
|
44,378
|
Oilfield
Chemicals
|
|
|
69,709
|
|
|
70,978
|
|
|
62,163
|
Depreciation and
amortization
|
|
|
32,943
|
|
|
31,082
|
|
|
26,500
|
Total costs of
revenue
|
|
|
356,927
|
|
|
340,105
|
|
|
270,087
|
Gross
profit
|
|
|
59,665
|
|
|
41,571
|
|
|
24,682
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
|
|
35,829
|
|
|
34,143
|
|
|
28,315
|
Depreciation and
amortization
|
|
|
595
|
|
|
573
|
|
|
567
|
Trademark
abandonment
|
|
|
11,106
|
|
|
—
|
|
|
—
|
Impairment of
cost-based investment
|
|
|
60
|
|
|
—
|
|
|
—
|
Lease abandonment
costs
|
|
|
76
|
|
|
113
|
|
|
91
|
Total operating
expenses
|
|
|
47,666
|
|
|
34,829
|
|
|
28,973
|
Income (loss) from
operations
|
|
|
11,999
|
|
|
6,742
|
|
|
(4,291)
|
Other income
(expense)
|
|
|
|
|
|
|
|
|
|
Gain on sales of
property and equipment and divestitures, net
|
|
|
2,911
|
|
|
287
|
|
|
1,653
|
Interest expense,
net
|
|
|
(1,483)
|
|
|
(870)
|
|
|
(720)
|
Foreign currency
(loss) gain, net
|
|
|
(4)
|
|
|
1
|
|
|
3
|
Bargain purchase
gain
|
|
|
—
|
|
|
(416)
|
|
|
11,434
|
Other
|
|
|
846
|
|
|
2,449
|
|
|
249
|
Income before income
tax expense
|
|
|
14,269
|
|
|
8,193
|
|
|
8,328
|
Income tax
expense
|
|
|
(198)
|
|
|
(285)
|
|
|
(214)
|
Equity in losses of
unconsolidated entities
|
|
|
(366)
|
|
|
(337)
|
|
|
(129)
|
Net income
|
|
|
13,705
|
|
|
7,571
|
|
|
7,985
|
Less: net (income) loss
attributable to noncontrolling interests
|
|
|
(1,358)
|
|
|
78
|
|
|
(1,183)
|
Net income attributable
to Select Energy Services, Inc.
|
|
$
|
12,347
|
|
$
|
7,649
|
|
$
|
6,802
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
Class
A—Basic
|
|
$
|
0.12
|
|
$
|
0.08
|
|
$
|
0.07
|
Class
B—Basic
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
Class
A—Diluted
|
|
$
|
0.12
|
|
$
|
0.07
|
|
$
|
0.07
|
Class
B—Diluted
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
SELECT ENERGY
SERVICES, INC. CONSOLIDATED BALANCE
SHEETS (in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
|
(unaudited)
|
|
(unaudited)
|
Assets
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
6,028
|
|
$
|
7,322
|
Accounts receivable
trade, net of allowance for credit losses of $6,009 and $4,918,
respectively
|
|
|
492,613
|
|
|
429,983
|
Accounts receivable,
related parties
|
|
|
607
|
|
|
5,087
|
Inventories
|
|
|
40,846
|
|
|
41,164
|
Prepaid expenses and
other current assets
|
|
|
39,774
|
|
|
34,380
|
Total current
assets
|
|
|
579,868
|
|
|
517,936
|
Property and
equipment
|
|
|
1,112,899
|
|
|
1,084,005
|
Accumulated
depreciation
|
|
|
(597,861)
|
|
|
(584,451)
|
Total property and
equipment, net
|
|
|
515,038
|
|
|
499,554
|
Right-of-use assets,
net
|
|
|
44,562
|
|
|
47,662
|
Other intangible
assets, net
|
|
|
125,799
|
|
|
138,800
|
Other long-term assets,
net
|
|
|
19,985
|
|
|
18,901
|
Total
assets
|
|
$
|
1,285,252
|
|
$
|
1,222,853
|
Liabilities and
Equity
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
77,585
|
|
$
|
61,539
|
Accrued accounts
payable
|
|
|
75,625
|
|
|
67,462
|
Accounts payable and
accrued expenses, related parties
|
|
|
4,469
|
|
|
3,305
|
Accrued salaries and
benefits
|
|
|
15,431
|
|
|
28,686
|
Accrued
insurance
|
|
|
23,503
|
|
|
26,180
|
Sales tax
payable
|
|
|
4,036
|
|
|
3,056
|
Accrued expenses and
other current liabilities
|
|
|
19,783
|
|
|
23,292
|
Current operating
lease liabilities
|
|
|
16,898
|
|
|
17,751
|
Current portion of
finance lease obligations
|
|
|
19
|
|
|
19
|
Total current
liabilities
|
|
|
237,349
|
|
|
231,290
|
Long-term operating
lease liabilities
|
|
|
43,372
|
|
|
46,388
|
Long-term
debt
|
|
|
75,500
|
|
|
16,000
|
Other long-term
liabilities
|
|
|
45,696
|
|
|
45,447
|
Total
liabilities
|
|
|
401,917
|
|
|
339,125
|
Commitments and
contingencies
|
|
|
|
|
|
|
Class A common
stock, $0.01 par value; 350,000,000 shares authorized and
108,981,323 shares issued
and outstanding as of March 31, 2023; 350,000,000 shares authorized
and 109,389,528 shares issued
and outstanding as of December 31, 2022
|
|
|
1,090
|
|
|
1,094
|
Class A-2 common
stock, $0.01 par value; 40,000,000 shares authorized; no shares
issued or outstanding
as of March 31, 2023 and December 31, 2022
|
|
|
—
|
|
|
—
|
Class B common
stock, $0.01 par value; 150,000,000 shares authorized and
16,221,101 shares issued
and outstanding as of March 31, 2023 and December 31,
2022
|
|
|
162
|
|
|
162
|
Preferred stock, $0.01
par value; 50,000,000 shares authorized; no shares issued and
outstanding as of
March 31, 2023 and December 31, 2022
|
|
|
—
|
|
|
—
|
Additional paid-in
capital
|
|
|
1,063,149
|
|
|
1,075,915
|
Accumulated
deficit
|
|
|
(298,847)
|
|
|
(311,194)
|
Total stockholders'
equity
|
|
|
765,554
|
|
|
765,977
|
Noncontrolling
interests
|
|
|
117,781
|
|
|
117,751
|
Total
equity
|
|
|
883,335
|
|
|
883,728
|
Total liabilities
and equity
|
|
$
|
1,285,252
|
|
$
|
1,222,853
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECT ENERGY
SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH
FLOWS (unaudited) (in thousands)
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
|
March 31,
2023
|
|
March 31,
2022
|
Cash flows from
operating activities
|
|
|
|
|
|
|
Net income
|
|
$
|
13,705
|
|
$
|
7,985
|
Adjustments to
reconcile net income to net cash used in operating
activities
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
33,538
|
|
|
27,067
|
Gain on disposal of
property and equipment and divestitures
|
|
|
(2,911)
|
|
|
(1,653)
|
Equity in losses of
unconsolidated entities
|
|
|
366
|
|
|
129
|
Bad debt
expense
|
|
|
1,975
|
|
|
571
|
Amortization of debt
issuance costs
|
|
|
122
|
|
|
294
|
Inventory
write-downs
|
|
|
75
|
|
|
—
|
Equity-based
compensation
|
|
|
2,964
|
|
|
3,275
|
Impairment of
cost-based investment
|
|
|
60
|
|
|
—
|
Trademark
abandonment
|
|
|
11,106
|
|
|
—
|
Bargain purchase
gain
|
|
|
—
|
|
|
(11,434)
|
Unrealized loss on
short-term investment
|
|
|
—
|
|
|
40
|
Other operating items,
net
|
|
|
(442)
|
|
|
99
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(64,922)
|
|
|
(46,622)
|
Prepaid expenses and
other assets
|
|
|
(5,431)
|
|
|
4,554
|
Accounts payable and
accrued liabilities
|
|
|
(8,221)
|
|
|
(2,855)
|
Net cash used in
operating activities
|
|
|
(18,016)
|
|
|
(18,550)
|
Cash flows from
investing activities
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(27,885)
|
|
|
(15,463)
|
Purchase of equity
method investments
|
|
|
—
|
|
|
(3,467)
|
Collection of note
receivable
|
|
|
—
|
|
|
184
|
Distribution from cost
method investment
|
|
|
—
|
|
|
20
|
Acquisitions and
divestitures
|
|
|
(9,418)
|
|
|
6,941
|
Proceeds received from
sales of property and equipment
|
|
|
6,724
|
|
|
12,123
|
Other
|
|
|
—
|
|
|
(429)
|
Net cash used in
investing activities
|
|
|
(30,579)
|
|
|
(91)
|
Cash flows from
financing activities
|
|
|
|
|
|
|
Borrowings from
revolving line of credit, net
|
|
|
59,500
|
|
|
—
|
Payments on long-term
debt
|
|
|
—
|
|
|
(18,780)
|
Payments of finance
lease obligations
|
|
|
(5)
|
|
|
(61)
|
Payment of debt
issuance costs
|
|
|
—
|
|
|
(2,031)
|
Dividends and
distributions paid
|
|
|
(6,206)
|
|
|
—
|
Proceeds from share
issuance
|
|
|
—
|
|
|
12
|
Distributions to
noncontrolling interests
|
|
|
4,950
|
|
|
—
|
Repurchase of common
stock
|
|
|
(10,935)
|
|
|
(18,908)
|
Net cash provided by
(used in) financing activities
|
|
|
47,304
|
|
|
(39,768)
|
Effect of exchange rate
changes on cash
|
|
|
(3)
|
|
|
7
|
Net decrease in cash,
cash equivalents and restricted cash
|
|
|
(1,294)
|
|
|
(58,402)
|
Cash, cash equivalents
and restricted cash, beginning of period
|
|
|
7,322
|
|
|
85,801
|
Cash, cash equivalents
and restricted cash, end of period
|
|
$
|
6,028
|
|
$
|
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 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 (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, which is the most directly
comparable GAAP measure for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended,
|
|
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
|
|
|
(unaudited)
|
|
|
|
|
(in
thousands)
|
|
Net income
|
|
|
$
|
13,705
|
|
$
|
7,571
|
|
$
|
7,985
|
|
Interest expense,
net
|
|
|
|
1,483
|
|
|
870
|
|
|
720
|
|
Income tax
expense
|
|
|
|
198
|
|
|
285
|
|
|
214
|
|
Depreciation and
amortization
|
|
|
|
33,538
|
|
|
31,655
|
|
|
27,067
|
|
EBITDA
|
|
|
|
48,924
|
|
|
40,381
|
|
|
35,986
|
|
Trademark
abandonment
|
|
|
|
11,106
|
|
|
—
|
|
|
—
|
|
Impairment of
cost-based investment
|
|
|
|
60
|
|
|
—
|
|
|
—
|
|
Bargain purchase
gain
|
|
|
|
—
|
|
|
416
|
|
|
(11,434)
|
|
Non-cash loss on sale
of assets or subsidiaries
|
|
|
|
823
|
|
|
1,259
|
|
|
520
|
|
Non-cash compensation
expenses
|
|
|
|
2,964
|
|
|
4,547
|
|
|
3,275
|
|
Non-recurring
transaction costs
|
|
|
|
2,881
|
|
|
4,211
|
|
|
3,617
|
|
Lease abandonment
costs
|
|
|
|
76
|
|
|
113
|
|
|
91
|
|
Non-recurring change in
vacation policy
|
|
|
|
—
|
|
|
918
|
|
|
—
|
|
Equity in losses of
unconsolidated entities
|
|
|
|
366
|
|
|
337
|
|
|
129
|
|
Foreign currency loss
(gain), net
|
|
|
|
4
|
|
|
(1)
|
|
|
(3)
|
|
Adjusted
EBITDA
|
|
|
$
|
67,204
|
|
$
|
52,181
|
|
$
|
32,181
|
|
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,
|
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
|
|
(unaudited)
|
|
|
|
(in
thousands)
|
|
Gross profit by
segment
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
$
|
28,763
|
|
$
|
20,479
|
|
$
|
10,998
|
|
Water
infrastructure
|
|
|
16,246
|
|
|
7,892
|
|
|
5,745
|
|
Oilfield
chemicals
|
|
|
14,656
|
|
|
13,200
|
|
|
7,939
|
|
As reported gross
profit
|
|
|
59,665
|
|
|
41,571
|
|
|
24,682
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus depreciation and
amortization
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
18,135
|
|
|
19,899
|
|
|
15,562
|
|
Water
infrastructure
|
|
|
12,725
|
|
|
9,387
|
|
|
8,431
|
|
Oilfield
chemicals
|
|
|
2,083
|
|
|
1,796
|
|
|
2,507
|
|
Total depreciation and
amortization
|
|
|
32,943
|
|
|
31,082
|
|
|
26,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A
|
|
$
|
92,608
|
|
$
|
72,653
|
|
$
|
51,182
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit before
D&A by segment
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
46,898
|
|
|
40,378
|
|
|
26,560
|
|
Water
infrastructure
|
|
|
28,971
|
|
|
17,279
|
|
|
14,176
|
|
Oilfield
chemicals
|
|
|
16,739
|
|
|
14,996
|
|
|
10,446
|
|
Total gross profit
before D&A
|
|
$
|
92,608
|
|
$
|
72,653
|
|
$
|
51,182
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin before
D&A by segment
|
|
|
|
|
|
|
|
|
|
|
Water
services
|
|
|
20.5 %
|
|
|
18.5 %
|
|
|
16.2 %
|
|
Water
infrastructure
|
|
|
28.5 %
|
|
|
22.4 %
|
|
|
24.2 %
|
|
Oilfield
chemicals
|
|
|
19.4 %
|
|
|
17.4 %
|
|
|
14.4 %
|
|
Total gross margin
before D&A
|
|
|
22.2 %
|
|
|
19.0 %
|
|
|
17.4 %
|
|
View original
content:https://www.prnewswire.com/news-releases/select-energy-services-announces-first-quarter-2023-financial-results-and-operational-updates-301813728.html
SOURCE Select Energy Services, Inc.