WTTR - Earnings call transcript Q1 2021 | Select Energy Services, Inc.

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Operator

Greetings and welcome to the Select Energy Services First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris George. Please go ahead.

Chris George

Thank you, operator and good morning everyone. us review Select results our first of joining and conference for you quarter to webcast financial XXXX. appreciate for Energy the call the We and operating and Schmitz, Founder, John are today Officer. me Chairman, With President, Chief Executive our Financial Swyka, Skarke, and Operating Executive Nick Chief Michael and Officer; and President Vice President Officer. Senior Chief Vice

and There the by I A for selectenergy.com. that time-sensitive have longer no accurate turn included today's call also the also speaks transcript information webcasts in as of website replay accessible note on will will be time few our housekeeping I information of of reported recorded or release. XXXX, this listening call available Before available Please a a today, this call the therefore replay over, information be and from XXXX. reading. cover. of replay telephonic items May until only may be yesterday's to The was at replay as the access XX, earnings X, May

addition, of selects during forward current the statements of comments the within conference federal statements looking call may meaning contain reflect In by United laws. this These made views securities forward-looking States management. the management the

ended cause our later annual understand report risks, to our on various to Also, risks, uncertainties, announcement in XXXX, XX, for encouraged we for read quarter our contingencies. release XX, the quarter our results, as by to please of our is which well December financial to XX-Q year and those XXXX, earnings as on contingencies file to materially management. first performance, ended form non-gap Form or made However, measures. report quarterly for achievements reconciliations from and refer Form on X-K, statements actual yesterday uncertainties, expect March today could current differ the expressed those The reports the listener XX-K

CEO, Schmitz. Now the founder chairman, I'd and our call turn to president, John like to over

John Schmitz

us. months about joining have improving Select cycle primary excited Having I'm and we set in for to believe thanks you the life today. I Good last chemical to back Chris. for been direction X apart with discussing now, to water seat solutions. Thanks and morning, for good full continue be market strategy CEO our objective as and quarter. in leader remains sustainable as My executing and position strategic outlined strengthen the our

creating in this and value drive our base, growing a first margin in with customer solutions, which our cycle will improving drive match full gains business integrated We market by share and the fluid through value company recovering should activity gross base for environment life improvements.

by advanced our and both our you Second, industrial the each consolidation, opportunities, And third through diversification, energy performance an the water value progress other like to M&A recent applications through detail. focused start evaluating chemicals, expertise a into Nick takes strategic these value add toward of deploying solutions on addressing and as in through I'd chain in and technology. more outlook and objectives investment company. and sourcing financial across before

footprint, hit profitability. I'm terms overall. we we Select in certainly quarter's weather still the in financial first were winter And the in at operations realize saw that each of disappointed February given we growth results to weather growth the we hard revenue said, impacted the revenue sequential segment regression looking That base of have by operating performance off, underperformed. challenged First with saw business, across X% the while severe February. our

a recovery further quarter However, and in we two. expect solid growth

in life corporate fluid finance with and focus support the cycle in including sales, founded Michael who aspects and appointment also to having served solution. been today, mass This realignment as to chemical partner will for sustainable operational as water roles of every region. solutions people advantage capitalize and will here back the treasurer. finance, approach in pricing, covers improve look a I footprint corporate I've in take more us time has to unconventional improve COO. leverage of Skarke a led infrastructure emphasize function recently right join In so, mine will to integrating segment, most commercialization asked support, allow direct recently control ways sales, regional heading basis. operations, to operating on costs, of we we the within strong development, and we as to Ensuring both technology Michael, across efforts efficiently our business. on our after our serving sales geographic on of high doing company. April all realignment This our our completed the oversee a a that large place operations EVP, full our to our of an Additionally, continue organization to joined segment formal by drive Michael and Select of integrated active shortly solutions leadership basins. our in number and all the Michael water water have more our has with margins organization leadership XXXX previous up roles other us first

fluid to real to And to capture share solutions. our drive wallet around our life cycle and key visibility our control full position have to chemical advanced and Second, time costs. match and more integration water finally over leverage sustainable, technology initiatives,

our position As announced we focus previous an facilities. recycling these showing leading and is wins up with X operation commenced and efforts on example, have recent

their customers, and facilities their operators them Permian start. with X recycling ESG operation decreased and began reduce water contracts. achieve stream. recycling streamline logistics, impact the results, These core X operate quarter blue-chip the good reducing a projects We water facilities have off their partnered our through costs, usage fixed waste long-term environmental the targets of to backed improve by by water decreased in first help basin in to and their very fresh These infrastructure are

quarter. addition customers to send now X currently This or either We have with load to contracted volumes more second further in already base project. the during commercialization seen facilities of is the the that success underwrote in sending, these volumes

solid these match related platform, as well. led position As leading facilities a pulling With sustainable ahead. through revenue I feel a and added market our technology growth solution, operating in by water service continued an cycle organization, chemicals and prospects we're good full a quarters activity fluid strong driver, the streamlined our other backdrop, a also life to lines very about

investment Looking at areas. across quarter our our unique X the made we both first advances a but remaining efforts strategic I believe objectives, small that in

finding are and capabilities ways our around drive initiatives to innovating We transition. and diversify energy new our

as new Ice industrial pleased water power investment emission, multiple strategic industry, effort, focused this oil are announce in is a providing zero to electric venture flow on back the to of sectors. a to across and as part we from geothermal As gas customers thermal ice harvesting. and well produce

business. we to developing more opportunities We to to with the ahead to forward Select for offer and are to to the ice advance inorganic our to Thinking to has opportunities. to energy the continue learn long-term through industrial energy ways look will much believe learn strategy. assets excited the we about are growth to offer our much team opportunities deploy new but we still diversification the continue broadly, participate as transition. and the expertise collaborate and to into much to areas, and organic and growth has And capital Select partners, both strategic We trends. and much evaluate

continue will smaller as front, energy development and acquisition corporate we the ESG strategic On in opportunities pursue certainly technology, areas and transition to investments solutions. such

synergies We meaningful a large-scale earnings there cost strategic cash a debt, small- opportunities, stability. strong set both marketplace of still and no a in Additionally, value-add and consolidation balance. substantial sit strong is broad opportunities as position M&A as and the with capabilities with flow to in add with opportunities well bank cash diversification

to this or have strengths strength, industries advantage to expand leading that oil our and cannot. leverage our chemical the the many water ways to transitions and financial solutions gas addition we into new areas In competitors energy in take to of sustainable as other of the industries ability competitive provider

the We and financial growing recent fully to With and improved to I'll financial transition and in about detail. more that into year. We performance over are and that, additional in excited the ahead. see the to outlook recycling Nick it the and expect continue quarter of to back energy discuss activity, performance half very second opportunities believe our investments, hand lie we operational

Nick Swyka

spiked materials Thank monthly months. January Coast those in to not this revenues different raw back you, material X John. combination and essentially momentum. winter shortages And results prior by to February expected good decline morning, impact and to the due of chemicals first expenses Overall, for the due encompassed ability to incipient cost the storms everyone. our although of customers. corresponding Gulf stages Financially snapped these continuation winter January, represented the increases to March's decline very speaking, levels given first of of recovery, raw saw XX% the very the we yield the in the in a the production facilities fourth the quarter. little to along large quarter quarter storm. revenue with our did pass seen on endured effects a recent the

same from of revenues While few that $X increased decline consistent of targeting as winter one the make thing are to prices last carefully commodity million, detail is supportive. a gain forward is We're million times with quarter’s I'll our segment to first go the it. range, adjusted forecasted the we invests. quantify our improving. impact But to results. quarter referring continuing sequentially be our properly the while remains through share approximately general market EBITDA X% to storm I to outlook want Activity clear $XXX

by expect freeze, water visibility, for services revenues rising the and digits. segment margins the building each April grow of impacts. and integrated quarter balance recycling X steady, our supply grew while transition X%. on to on hand. growing overall in second of John Based fuel maintaining oil liquidity the we into after all quarter, XX% healthy and and segment to water while services March As XX% XX% and sheet but quarter, are of water and maintaining field margins its chemicals, networks, held current advanced costs debt-free double decreased raw energy segments revenues the our and All water we its margins, opportunities, weather over in trends the The investing material outlined, to X% level the our disruptions, cash even infrastructure developing solutions restoring

a by issues, efficiencies, driven yielding John at the during rising declines presented second more QX are environment oversupply steady costs is seasonal its and remain automation benefits. modestly quarter period than we have operational infrastructure the While holding integrated fuel QX, headwind, Dakota. The revenue which and our first margins and Competitive increased Bakken and water pipeline increased in the sales recently pressures activity in segment, XX%. holding efforts, doubled but volumes labor revenues, while We to discussed quarter realignment utilization, relatively with revenues the offsetting revenue advanced the from recycling breakup North in anticipate improving.

from high segment grew in second anticipate However, of to the range we supply given the decreased by expected field during during the Despite QX, margin chemical contributions Bakken any the pipelines the oil the challenges, margins mid-XXs XX%, segment. chain fastest our compressing revenue QX quarter.

With of these restoration importantly, revenue the to recent growth more XX%. in more to disruptions behind second we expect even XX% rapid gross margins us, quarter and

In addition first supply storm. higher products materials capacity higher chain from as and chain for of result the naphtha to surging quarter being winter costs disruptions, we knocked supply the to yet raw such offline significant feedstock the as a during prices prices saw due

base, we gross a most revenue capabilities, Our QX of strong pricing. referenced. volumes and to end customer as were I this, result for anticipate to along dedicated customer manufacturing to constrained contracts April, as of those account XX% key very in-basin XX%, of With growth lines, been to of and XX% higher and multiple our with realign able we've success product our XX% margins well, of this margins across but

quarter million to Looking grew individual quarter, We area $XX executive of needs closer impact hitting growing a during a the Putting X% SG&A second as to expect including support QX. growing streamline $XXX focus from water quarters by adjusted sufficiently due of the activity solutions. to to consolidated as the the all operations. believe serve one-off the second see further the segments, we primarily critical match capture continue continued to we SG&A a platform of forward, million can non-cash fully we particularly of seek EBITDA organization, going with it strong beyond streamlined in technology leading to wallet back million the cycle remains It to the Overall $XX severance in position, to a compensation. the and our by very backdrop impact million and $XXX technology From efficiencies. revert current year, apply coming the business sustainable solid a continued first led together, full-life driven and chemicals and half efficiencies we onward, our revenue margins quarter platform, integrated of resulting fluid and revenue growth X%. EBITDA efforts, sales expect market quarter should

In million of first to while flow, of working we million cash by weather and debt. quarter, liquidity the increase some expanded of terms free no disruption in revenue liquidity, and on cash headwinds led overall the with our finished the quarter and hand, $XXX $XXX capital $XX million overall

even flow remains free with positive expectation that as capital Our revenue. for cash XXXX, working along we increases will generate

while million quarter opportunities, to forecasts more million a our of forecast gaining forecast of purposes. business share. asset resulting CapEx an light capital $XX CapEx full than Maintaining reducing provided downward, just the potential CapEx $XX previously million are million have maintenance $XX $XX our in and million market in year We targeted disciplined of growth investment. first for to net $X.X a we approach all net We invested to for no

no depreciation anticipate minimal interest $XX and million year, million to expense material $XX we expense, current our consistent Finally, the for with tax roughly expense. of quarter

We will With so will within but the are over Q&A. evaluate to opportunities for Operator? acquisition, for continue framework. operator investment actively disciplined do that, a it actively turn I'll to and and

Operator

Simmons. first Ian [Operator question from Our MacPherson Instructions] comes with

Ian MacPherson

market formulate improvement end, but recognizing wallet, you're and at that how and the are visibility QX it's company-specific positive viewing in mentioned any you in probably yet some etc. and You beyond how, those that general continued can on the cadence point this if completions ingredients, uplift, executional prosecuting back from visibility the also you quarter expansion, QX, time? seasonal relief And second into beyond

Nick Swyka

Sure.

typically don't give longer-term Ian, So we guidance.

certainly we the factors oil currently With price see, supportive, strip. positive is the forward is as very the

customers see into hedging more and our that of more we So out strip. longer

seen been large, cycle. of through our drilling from conversations these supportive, on year positive and the generating here. results by and rate with And completion earnings Clearly cash, customers high programs. You've very of look customers, as able to return and the generate have to this are those they second their half finally, a we

over take CapEx higher number pace. growth putting to from And So, factors together, companies. probably those private we the E&P XX% side the that's think about account a XX% you into QX's when

to to spend factors into with there going lot a money not we're but that, so, And grow of the are positive and prepared we're them.

Ian MacPherson

some on also Good to volumes on you've recycling there. contracted the those hear of that top commitments incremental projects, foundational

M&A assets further projects full that organic contracted those that capacity? to same Or, spin nameplate green be a think strategic your lines? do next Does are approaching similar So those might opposed along light more as now projects? you comparable

Nick Swyka

and a running full party volumes. lot in quarter bringing are We're as certainly a pleased to contribute QX, and third margin in those they're how those with going more performing, for are and revenue those

So attractive. those are

of similar customers multiple discussions have for other We projects. type with ongoing

had is wouldn't we I year, we CapEx with surprised the well. so be on as the announcements mentioned. more And clearly growth table But through that number that M&A if

you So want I or "This to opportunities good is to a wouldn't likely." more fronts. other, There's multiple less direction discussions on one the likely, and say, or point

Operator

Citi. next with comes Your from question Lowe J.B

J.B. Lowe

grow bucket the for businesses? business Industrial do Solutions the what is to the exposure next portfolio, the Kind would few if feasible to to those vision And you of into recycling. revenue guess, that to? strategic think your ESG question years, percentage broader I like grow those on what of you plus I guess a you your Group, over

John Schmitz

Yes.

So this John. is

have, inside push and you X industrial execute we to on, that described, As company. far as pieces and continue this we've have the

think which You oil have gas have the assets, water, piece, meaningfully to assets, assets, first really outside those assets industries and be store is move We can the water, unutilized and those and proved water. business. deliver that applied those

of molecule the because the we we and, match we're and across. oil and the oil a gas well and term, the in and believe logically need term, and fashion, in believe short gas proven it, a that stream it, we we the chemistry execute that outside that's focused the waste skill a and space, that that that we if once space, creating really that set up, right that stream prove a we areas out believe we inside and execute water expand a take Longer space, and gas and re-use So with in on to profit. oil there's very making assets model useful can own

about that. other And logically that's we're focused plan, it, industries. people and the sets our on So in that's on working term and knowledge we're description skill longer still term longer of

looking needs in our partner focused does So we're to and who apply, very into, it. on applying be where it

J.B. Lowe

on Would ask Okay. gas is and describe at actually, companies. said or company would made. the was what geothermal and facility, then just oil and be details like actually company the electric great. for you as, well on production out as geothermal way? just you to it about guess investment some guys drilling would Wanted this Would it planning what I simple just to going would Could you doing a be be geothermal doing? actually be the what power providing power a you just that

John Schmitz

very space, to relates our to and Yes. and overall gas how through I it, made appreciate for investment our thesis let do to what I Michael in this synergies oil the explain the that. investment. think going an I'm it Skarke in and was but can company, He involved talk he it. to we we

Michael Skarke

Sure.

we that plan to is heat and entrepreneurs back really X for partnered know with. with that use harvest platform a really electricity it's flow near in to and be on water, start, a and initial produced location. support to Geothermal, excited Their ICE are So

And in help there's testing services, get the fit so and back where well can to there with a operator we plan. with we flow execute logically our that and them think on

Now, produced goes industrial, beyond and just the solutions into back and geothermal as then well. harvesting and really heat water, moves strategy flow from other

J.B. Lowe

think, And dig to Nick, guys one lines product opportunities, that then, most guys guys you some and you question, bit same which likely, something is, market into you the market A, think participate about have We'll that is getting and talk a you consolidation in Could getting B, Last just, share? just little mentioned then, I that consolidation mentioned, also are where more. me share. in. you from about you could

John Schmitz

think are redirect I we into this our regional Yes, focus. share getting of in our market both or organization basin

and X make as it. highest Recycle water and then, the we that are that can those of one So we we're water more to capture when going how our direct are value, to Logically, come to spend, areas. teams bring certain and how the in do and those have we and together of fits together, facilities customer. on is Basin, directed match especially applied, can of basis, described example services through together big offerings But worlds a areas water we chemistry value Permian to service that. very how really that we capture the chemistry of a that think Permian, of you and and on perfect that the put to and their itself regional the to that then our margin

consolidation of focus and together, ours, space. management logically, a are that a of come is We anywhere These need to they all of teams that that that So close revenues frank, go in need cost needed outside and, be what know were. there away. our structures is our revenues we but big to across not are portion to really to that,

of is we is through really factor a that to elimination and We or for very target it industry, with as the way. seen an as big The and and look for ESG, well the a piece that need M&A just continue big is, a for focused last technologies lot. advancement of ICE, add, think technology our we on capture, about select. So a value a M&A

do in-house well to continue them M&A. as as We

of we're something in through technology our a So of as But well. lot as well. that's large a that screen transaction on very potentials M&A focused the is definitely has it eliminations on

Nick Swyka

we market pickups you anticipate at in think chemicals level QX our I segment had to a that additional on point QX. fastest share division certainly I'd share, market gain looking And guidance the some JB, there. revenue then our there,

So successful. been very we've

the I meeting of think, products. in and industry demands having the latest the

nimble us Our diversified in-basin think capability, larger manufacturing coastal to suppliers. more I little than allows the be a

that's an where very And term excited in here. so about we're the area near

J.B. Lowe

Yes.

helped that Nick, has how on touching Just front? that acquisition WCS out real much on the quick,

Nick Swyka

both And in water system, part chemicals really, there integrating with bridge fluid our match A it's of and product is offering when John that about lot. a here. mechanically treating full talks and through the bridge the of WCS key

Operator

comes [Operator Instructions] Company. Burke Rice next question Daniel our & Johnson with from

Daniel Burke

Instrumentals services weather half And I And could generalized the then that from on in little the in water a guide of the of QX course benefit of recovering if was as to a about pricing water you on healthy. and in or well. could like event some mention contributor. you're expound encouraging see it in second look services, what have and in segment 'XX. as wood bit in you of for was pricing business incrementals give QX thoughts maybe improvement But seeing wondering the pretty the look the ability

John Schmitz

we labor. Yes. and getting pricing. Daniel, know got commodity up, their on an price are is but need we getting Nick, needed that about right industry and now. the getting to And been we we Nick and it. of are have we're through a for applying went fuel this in the it But that. part cost our pricing start through We customer pricing, needed. it all base asking it's pressure and field There's applying is to add? priced able pressures described as know base chemicals you as We

Nick Swyka

Yes.

XX% about XX% we anticipate second QX what a in we here. what the we've the from are little a the when storm, impact is talked historically longer-term to for and wonky half the But for that. incrementals seen With growth a

people We our mentioned, putting an in price incremental on lot services, And have will we're if good leverage operating water of hiring get and to there. we return back here. to assets work, attractive segments then a equipment as John need

right so And the that all in are direction. those things are pointing

Daniel Burke

And question run That's source Nick, nosing take think There's about already at maybe helpful. I'll talked XXX point. up a I I a quarter maybe it. of Got half you this the Ian this a that fleets XXX broached. frac last of type probably expecting But level to against lot that. year. in back think to different of at places we're

Or about there? just this out your activity thoughts half So thinking about second potential upgrade continued your on a ago? you see optimism gain the share Have market more completion you for versus quarter 'XX growth. is

Nick Swyka

getting margins is internal the and focused services products right do with integrated to yours service and and the activity way. more and future. count bringing growth. in is over growth XXX continued offerings, well near our anticipate activity on anticipate certainly driving Yes, that on here we moderate helpful But we're But that we

Daniel Burke

last in. Got And Okay. then cram I'll one it. one

able very rest have of realignment, for Just, the that to you're can focused bear implemented? you've what achieve long guys terms with restructuring been, that you that this in you time. latest bring means in organizational anything a This the margin of terms like of latest industry, to cost

John Schmitz

does things. these high businesses. both that believe We variable One, in power there's communications are place Yes. to an ability cost put and

realignment very yard know. to cost is as the job us. on important at we or in to is the So we these margins believe some actual of site all which puts the level gross businesses, controlling improve needed, And that emphasis able this being the

that described and differently. and we've between one that these Nick made and each in piece regions basins second The is is match capture or described, water fluid of a wallet chemistry up

is than the So the Northeast. Permian different

wanted we sure And teams services. we the so together can believe we the right that make through gives this spots and drag to and value that capture the our in the that put bring And the customer sure organization. in to realignment to wallet we make right us

Operator

to the concludes will John question-and-answer This our I now remarks. closing turn session. over call for

John Schmitz

we all. again Yes. Thanks you for to talking forward today. to everybody quarter. And you participating Thank look next

Operator

teleconference. our concludes This

You at may participation. your lines disconnect thank for you time this your and

Select Energy Services (WTTR) 9 May 212021 Q1 Earnings call transcript