Select Water Solutions(WTTR)2025-02-19 21:38Financial Data and Key Metrics Changes - In 2024, Select Energy Services, Inc. achieved record consolidated revenue of 258 million in adjusted EBITDA, 78 million in free cash flow [35][36][44] - The company reported a 26% annual revenue growth and a 62% increase in annual gross profit from the water infrastructure segment [11][12] Business Line Data and Key Metrics Changes - The water infrastructure segment saw significant growth, with a gross profit increase of 62% and a revenue growth expectation of 15% to 25% for 2025 [21][44] - The water services segment experienced a revenue decline of about 10% in Q4, but is expected to recover with low to mid-single-digit percentage revenue increases in Q1 2025 [48][49] - The chemical technologies segment reported a 14% sequential revenue growth in Q4, driven by new product development and market share gains [50] Market Data and Key Metrics Changes - The company has over 2.5 million acres under long-term area dedication, with a significant backlog of future well inventory and produced water volumes [15][42] - Demand for water recycling is increasing, with the company setting a new five-year target to recycle over 400 million barrels of produced water annually by 2029 [39] Company Strategy and Development Direction - The company is focusing on expanding its water infrastructure platform into the municipal, industrial, and agricultural water markets, with a $62 million investment in Colorado [27][30] - Select aims to enhance its capital structure to support significant growth opportunities while maintaining a conservative balance sheet [38][56] Management's Comments on Operating Environment and Future Outlook - Management expects a steady commodity price environment for oil and natural gas in 2025, with a modest reduction in US lower 48 activity levels compared to 2024 [22] - The company anticipates stronger year-over-year adjusted EBITDA growth in 2025, driven primarily by the water infrastructure segment [25][56] Other Important Information - The company has executed nearly a dozen small bolt-on infrastructure acquisitions and increased its base dividend by 17% during the year [12][36] - Select has a disciplined approach to leverage, maintaining a net debt to EBITDA leverage ratio substantially below one times [38] Q&A Session Summary Question: Can you discuss the new venture in Colorado and its return profile? - Management highlighted that the Colorado venture offers high gross margin-related revenue with contracts that could last up to 50 years, providing predictable and repeatable income [70][72] Question: How does the Colorado opportunity compare to traditional recycling projects? - The Colorado opportunity is seen as a resource development opportunity with higher margins than traditional water projects, although it requires a larger upfront investment [73][74] Question: What is the expected revenue growth trajectory for the water infrastructure segment? - Management indicated that the water infrastructure segment is expected to see a strong second half of 2025, with double-digit percentage growth anticipated in Q2 and Q3 [47][81] Question: Will the company maintain its gross margin levels in the upcoming quarters? - Management expressed confidence in maintaining gross margins in the 50% to 60% range, despite some initial operational efficiency challenges with new assets [84][86]