• Annual Revenue: $1.5 billion for 2024.
• Annual Revenue Growth: 26% increase in 2024.
• Gross Margin (Water Infrastructure): 53% in 2024.
• Adjusted EBITDA: $258 million for 2024.
• Cash Flow from Operating Activities: $235 million in 2024.
• Free Cash Flow: $78 million in 2024.
• Dividend Increase: 17% increase in base dividend during 2024.
• Shareholder Returns: $38 million in dividends and buybacks in 2024.
• Net CapEx: $157 million for 2024.
• Water Infrastructure Revenue Growth (2025): Expected 15% to 25% increase.
• SG&A Expenses: $39 million in Q4 2024.
• Consolidated Adjusted EBITDA (Q4 2024): $56 million.
• Expected Q1 2025 Adjusted EBITDA: $60 million to $64 million.
• Net Debt to EBITDA Ratio: Substantially below 1x at closing of new credit facility.
• New Credit Facility: $300 million revolving commitments and $250 million term loan commitments.
• Water Recycling Target: More than 400 million barrels annually by 2030.

• Warning! GuruFocus has detected 8 Warning Signs with BSP:AURE3.

Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Select Water Solutions Inc (NYSE:WTTR) achieved a record-setting year in 2024 with 26% annual revenue growth and a 62% increase in annual gross profit from the Water Infrastructure segment.
• The company executed nearly a dozen small bolt-on infrastructure acquisitions and increased its base dividend by 17% during the year.
• Select Water Solutions Inc (NYSE:WTTR) signed eight major new organic infrastructure projects under long-term contracts, encompassing about $150 million of growth capital.
• The company has a strong backlog of additional greenfield, brownfield, and bolt-on infrastructure projects, positioning it as one of the fastest-growing infrastructure franchises in the industry.
• Select Water Solutions Inc (NYSE:WTTR) announced a $62 million investment in Colorado's municipal, industrial, and agricultural water markets, expanding its operations beyond the traditional energy sector.

Negative Points

• The Water Services segment saw a revenue decline of about 10% in the fourth quarter, driven primarily by seasonal activity declines.
• Gross margins in the Water Services segment decreased to 16.4% in the fourth quarter, which was below expectations.
• The company anticipates a low single-digit percentage revenue decline in the first quarter of 2025 due to deferred water infrastructure revenues.
• Select Water Solutions Inc (NYSE:WTTR) expects a modestly declining macro activity outlook, which could impact water services revenue.
• The initial investment in Colorado's water markets is expected to have longer paybacks compared to current water infrastructure investments.

Q & A Highlights

Q: Can you discuss the timeline and return profile for the new venture in Colorado? A: Christopher George, CFO, explained that the Colorado venture involves high gross margin contracts that could last up to fifty years. The investment is resource development-focused, with higher margins than traditional projects. Although the payback period is longer, the returns are competitive, and the long-term stability is appealing. Mike Lyons added that the venture positions Select as a land and resource owner, leveraging senior water rights in high demand across Colorado.

Q: Regarding the 15% to 25% revenue growth in water infrastructure, what are the expectations for the exit rate revenue run rate? A: Christopher George, CFO, stated that the exit rate for the second half of the year will be substantially higher than the first half. The third quarter will see some seasonality, but the second half run rate should approach 50% growth, providing a strong trajectory into 2026.

Q: What is Select Water Solutions bringing to the Colorado venture, and what are the partners contributing? A: Christopher George, CFO, highlighted Select's 15 years of experience in water management, including automation and canal management. The partners bring expertise and access to senior water rights and storage assets. The collaboration aims to unlock new water resources and value.

Q: How did the Colorado opportunity develop, and was it an inbound or outbound deal? A: Christopher George, CFO, explained that the opportunity was part of a long-term strategy to diversify and leverage existing capabilities. The company has been developing relationships and exploring potential diversification strategies, leading to this partnership.

Q: Can you elaborate on the demand for water in Colorado and the potential to expand beyond the initial 16,300 acre-feet? A: Christopher George, CFO, and Mike Lyons noted that demand in the area exceeds 50,000 acre-feet. The venture will initially leverage state programs and existing water rights, with potential to expand through additional acquisitions and storage development.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.