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SELECT ENERGY SERVICES ANNOUNCES ACQUISITION OF BREAKWATER ENERGY PARTNERS, REPORTS THIRD QUARTER 2022 FINANCIAL RESULTS AND PROVIDES OTHER OPERATIONAL & ACQUISITION UPDATES

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Select Energy Services (NYSE: WTTR) reported third-quarter 2022 revenue of $375 million, marking a 12% increase from Q2 2022. Net income rose to $24.7 million and Adjusted EBITDA grew to $62.8 million, reflecting gains of 70% and 32% respectively. The company completed the acquisitions of Breakwater Energy Partners and assets from Cypress Environmental Services on November 1, 2022, enhancing its water recycling capabilities in the Permian Basin and Bakken regions, with expected combined revenues of $110-$115 million for 2022.

Positive
  • Revenue increased by 12% sequentially to $375 million.
  • Net income of $24.7 million, up 70% quarter-over-quarter.
  • Adjusted EBITDA reached $62.8 million, up 32% from Q2 2022.
  • Successful acquisitions of Breakwater and Cypress expected to generate $110-$115 million in revenue for 2022.
  • Enhanced water recycling capacity of nearly 3 million barrels daily through Breakwater acquisition.
Negative
  • Cash flow from operations decreased to $5.4 million from $11.1 million in Q2 2022 due to working capital needs.
  • Total cash and cash equivalents decreased to $13.2 million from $25.7 million in Q2 2022.

Revenue of $375 million generated during the third quarter of 2022, up 12% sequentially from the second quarter of 2022

Net income of $24.7 million & Adjusted EBITDA of $62.8 million during the third quarter of 2022, representing sequential increases of 70% and 32%, respectively

Acquired Breakwater Energy Partners, LLC ("Breakwater"), a leading provider of contracted water recycling and infrastructure solutions focused in the Permian Basin on November 1, 2022

Acquired Bakken Shale water gathering pipeline and disposal assets from Cypress Environmental Services, LLC ("Cypress") on November 1, 2022

HOUSTON, Nov. 2, 2022 /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 the acquisitions of Breakwater and certain water gathering pipeline and disposal assets from Cypress, as well as its financial and operating results for the quarter ended September 30, 2022.

John Schmitz, Chairman of the Board, President and CEO, stated, "Our strong third quarter results, combined with our recent acquisitions, display our ability to execute on our strategy to improve and bolster the base business, advance our technology, sustainability and diversification efforts, and execute on strategic M&A. We progressed each of these initiatives while also commencing our previously announced regular quarterly dividend program. Reinforced by a steady activity backdrop, a challenging labor market and a tight equipment supply environment, we continue to capture market share and see pricing improvements across each of our segments. During the third quarter we achieved 12% sequential revenue growth and 59% incremental gross margins, resulting in significantly improved profitability with Net Income and Adjusted EBITDA growing 70% and 32%, respectively, quarter over quarter.

"Our Chemicals segment continues to produce record revenue and margins, we continue to improve efficiencies and gain market share in our Water Services segment, and our Water Infrastructure segment achieved quarterly revenue more than 10% above our previous pre-pandemic peak level. Overall, I'm very pleased with our financial and operational execution and believe we are well positioned to continue to improve the profitability of the business in the quarters to come.

"In addition to these improvements in the base business, we identified and completed the acquisition of Breakwater, a core Permian infrastructure, recycling and logistics business, to further our growth, consolidation and sustainability strategies, while our Cypress transaction adds to our infrastructure scale and development opportunities in the Bakken. With these additions, we have meaningfully enhanced our Water Infrastructure and Water Services footprints, and significantly expanded the capacity and reach of our sustainable recycling solutions. We expect to see immediately accretive benefits from both acquisitions and believe we have a meaningful opportunity to invest organically around the acquired operations and asset footprints as well.

"In Breakwater, we are acquiring one of the market leaders in advanced water recycling, infrastructure and logistics solutions focused in the Permian Basin. Importantly, we're also adding significant operational leadership depth to the organization and welcoming more than 300 new employees to the Select family. With a strategic portfolio of highly contracted recycling assets in the core of the Midland Basin, we believe Breakwater has developed one of the leading recycling footprints in the U.S. today. This footprint expands Select's recycling capabilities to nearly 3 million barrels of total daily capacity across fixed and mobile capabilities, while adding a number of new strategic customer relationships and strengthening existing relationships with new recycling opportunities. During the third quarter, we exceeded our full year 2022 target for produced water recycling volumes established in our sustainability-linked credit facility, while this acquisition positions us to quickly meet and meaningfully exceed our future targets as well. These recycling facilities also offer significant network flexibility via geographic and infrastructure interconnectedness, currently allowing for approximately 10 customers at any given time to deliver produced water and receive recycled water as demand ebbs and flows with their own activity needs, while reducing capital outlays and operating expenses for our customers.

"Through the Cypress acquisition, we've added a portfolio of strategic wastewater disposal facilities in North Dakota at an attractive value, further consolidating the Bakken region following our previous Agua Libre Midstream and Nuverra acquisitions. With more than 60% of the current volumes being delivered to these assets via contracted pipelines, we believe there is continued opportunity to expand and network the assets with our existing infrastructure footprint in the region.

"Additionally, I'm very confident in the strategic and clear financial benefits of these acquisitions. On a combined basis, the acquired operations from Breakwater and Cypress are expected to generate approximately $110$115 million of revenue and more than $30 million of Adjusted EBITDA on a 2022 full year basis, with a strong trajectory and room for growth in 2023.

"Ultimately, I am very pleased with our financial performance, supported by our recent acquisitions, pricing improvements, organic growth opportunities and our other strategic investments. I look forward to building upon our recent positive results, while meaningfully expanding our free cash flow generation in the quarters ahead. Supported by these factors, I am proud to have recently announced our first ever quarterly dividend payment of $0.05 per share for the third quarter of 2022. Returning capital to shareholders remains a core component of our overall capital allocation strategy and this represents an important commitment for Select," concluded Schmitz.

Consolidated Financial Information

Revenue for the third quarter of 2022 was $375.1 million as compared to $335.9 million in the second quarter of 2022 and $204.6 million in the third quarter of 2021. Net income for the third quarter of 2022 was $24.7 million as compared to $14.6 million in the second quarter of 2022 and a net loss of $14.2 million in the third quarter of 2021.

For the third quarter of 2022, gross profit was $58.8 million, as compared to $35.7 million in the second quarter of 2022 and $9.0 million in the third quarter of 2021. Total gross margin was 15.7% in the third quarter of 2022 as compared to 10.6% in the second quarter of 2022 and 4.4% in the third quarter of 2021. Gross margin before depreciation and amortization ("D&A") for the third quarter of 2022 was 22.8% as compared to 19.3% for the second quarter of 2022 and 15.6% for the third quarter of 2021.

Selling, general and administrative expense ("SG&A") during the third quarter of 2022 was $29.8 million as compared to $26.7 million during the second quarter of 2022 and $22.0 million during the third quarter of 2021. SG&A during the third and second quarters of 2022 and the third quarter of 2021 was impacted by non-recurring transaction costs of $0.7 million, $0.6 million and $2.4 million, respectively.

Adjusted EBITDA was $62.8 million in the third quarter of 2022 as compared to $47.7 million in the second quarter of 2022 and $15.1 million in the third quarter of 2021.  Adjusted EBITDA during the third quarter of 2022 was impacted by a $3.3 million bargain purchase gain adjustment, $1.0 million of non-recurring transaction costs, $1.6 million of non-cash losses on asset sales, $0.1 million in lease abandonment costs, and $0.2 million in other adjustments. Non-cash compensation expense accounted for an additional $3.8 million adjustment during the third quarter of 2022. 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 (loss).

Business Segment Information

The Water Services segment generated revenues of $221.2 million in the third quarter of 2022 as compared to $196.0 million in the second quarter of 2022 and $112.5 million in the third quarter of 2021.  Gross margin before D&A for Water Services was 22.8% in the third quarter of 2022 as compared to 19.4% in the second quarter of 2022 and 15.8% in the third quarter of 2021. Revenues for this segment improved 12.9% sequentially, supported by continued pricing improvements, resulting in strong 49% incremental gross margins before D&A. Looking at the fourth quarter of 2022, the Company expects to see relatively steady revenue and gross margins before D&A, as partial quarter contributions from Breakwater partially offset normal seasonal impacts to the base business.

The Water Infrastructure segment generated revenues of $74.4 million in the third quarter of 2022 as compared to $60.3 million in the second quarter of 2022 and $36.8 million in the third quarter of 2021. Gross margin before D&A for Water Infrastructure was 27.2% in the third quarter of 2022 as compared to 25.5% in the second quarter of 2022 and 22.5% in the third quarter of 2021.  Revenues improved 23.4% sequentially, with 34% incremental gross margins before D&A, driven by significantly increased volumes at our recycling and disposal facilities, which more than offset modest decreases in our traditional water sourcing activities. For the fourth quarter of 2022, the Company anticipates low double digit percentage revenue growth, with gross margins before D&A in the high-20 percent range, as partial quarter contributions from our recent acquisitions complement our existing base business.  

The Oilfield Chemicals segment generated revenues of $79.4 million in the third quarter of 2022 as compared to $79.6 million in the second quarter of 2022 and $55.4 million in the third quarter of 2021.  Gross margin before D&A for Oilfield Chemicals was 18.8% in the third quarter of 2022 as compared to 14.6% in the second quarter of 2022 and 10.5% in the third quarter of 2021. While revenues held relatively flat sequentially, this segment generated significant margin improvement as the Company expanded its manufacturing focus on its higher margin, proprietary products to meet customer demand, while ceasing the manufacturing and distribution of several lower margin commoditized products. For the fourth quarter of 2022, the Company anticipates mid-single digit percentage revenue growth and relatively stable margins for the Oilfield Chemicals segment as the segment continues to perform well at its recent high water mark levels.

Cash Flow and Capital Expenditures

Cash flow from operations for the third quarter of 2022 was $5.4 million as compared to $11.1 million in the second quarter of 2022 and ($2.5) million in the third quarter of 2021. Cash flow from operations during the third quarter of 2022 was significantly impacted by a $54.2 million use of cash to fund the working capital needs of the business resulting from growing revenues and the systems integration efforts of recent acquisitions.

Net capital expenditures for the third quarter of 2022 were $16.1 million, comprised of $19.8 million of capital expenditures partially offset by $3.8 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 ($10.7) million during the third quarter of 2022.

Cash flow used in investing activities during the third quarter of 2022 included an incremental $2.5 million investment in ICE Thermal Solutions, LLC, while cash flow from financing activities accounted for $0.3 million of cash outflows.

Balance Sheet and Capital Structure

Total cash and cash equivalents were $13.2 million as of September 30, 2022 as compared to $25.7 million as of June 30, 2022. The Company had no borrowings outstanding under its sustainability-linked credit facility as of September 30, 2022 or June 30, 2022 or its prior credit facility as of December 31, 2021.

As of September 30, 2022 and June 30, 2022, the borrowing base under the sustainability-linked credit facility was $254.4 million and $216.5 million, respectively. The Company had available borrowing capacity under its sustainability-linked credit facility as of September 30, 2022 and June 30, 2022, of approximately $231.5 million and $195.6 million, respectively, after giving effect to $22.9 million and $20.9 million of outstanding letters of credit as of September 30, 2022 and June 30, 2022.

Total liquidity was $244.7 million as of September 30, 2022, as compared to $221.3 million as of June 30, 2022. The Company had 94,014,963 weighted average shares of Class A common stock outstanding and 16,221,101 weighted average shares of Class B common stock outstanding during the third quarter of 2022.

Breakwater Acquisition

On November 1, 2022, Select completed the acquisition of Breakwater Energy Partners, LLC through a stock-for-stock transaction. In connection with closing, Select issued a total of approximately 9.2 million shares of Select Class A common stock and repaid or assumed approximately $12.6 million of outstanding indebtedness and other obligations, subject to customary post-closing adjustments.

Breakwater is a leading provider of water infrastructure, recycling, transfer and disposal solutions to leading E&P customers in the Permian Basin, with complementary water logistics operations in the Eagle Ford Shale. Breakwater operates four commercial recycling facilities, supported by a portfolio of long-term contracts, with 0.6 million barrels per day of operational capacity. Breakwater has an incremental 1.4 million barrels per day of permitted recycling capacity available for development across its four currently operating fixed facilities as well as a fifth facility location yet to be developed. Additionally, Breakwater currently operates nine active modular recycling facilities with 1.5 million barrels per day of throughput capacity. These facilities are supported by 46 miles of gathering and distribution pipelines, 70,000 barrels per day of wastewater disposal capacity and 4.7 million barrels of storage capacity, with an additional 3.7 million barrels of permitted storage capacity available for development.

BofA Securities, Inc. acted as financial advisor and Vinson & Elkins acted as legal counsel to Select. Jefferies LLC acted as exclusive financial advisor and Locke Lord LLP acted as legal counsel to Breakwater.

Cypress Asset Acquisition

On November 1, 2022, Select completed the acquisition of a portfolio of water gathering pipeline and disposal assets in the Bakken Shale from Cypress Environmental Services, LLC. As consideration for the transaction, Select issued approximately 950,000 shares of Select Class A common stock. Cypress's water solutions operations consist of eight saltwater disposal facilities with daily permitted capacity of 85,000 barrels per day across North Dakota. The acquired business currently receives more than 60% of its daily volumes via pipelines and is supported by a number of long-term contracts with key customers in the region.

Conference Call

Select has scheduled a conference call on Thursday, November 3, 2022 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 November 17, 2022 and may be accessed by calling 201-612-7415 using passcode 13733891#.  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 continued success of the Company.  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. 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 Breakwater's 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 severity and duration of world health events, including the COVID-19 pandemic, which had a negative impact on our business; the global macroeconomic uncertainty related to the Russia-Ukraine war; 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; operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; 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.

WTTR-ER

 

SELECT ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited) 
(in thousands, except share and per share data)




Three months ended


Nine months ended



September 30,
2022


June 30,
2022


September 30,
2021


September 30,
2022


September 30,
2021

Revenue


















Water Services


$

221,243


$

195,996


$

112,474


$

580,845


$

253,348

Water Infrastructure



74,396



60,284



36,787



193,234



107,916

Oilfield Chemicals



79,433



79,623



55,372



231,665



148,228

Total revenue



375,072



335,903



204,633



1,005,744



509,492

Costs of revenue
















Water Services



170,845



158,060



94,667



465,951



227,736

Water Infrastructure



54,197



44,939



28,494



143,514



81,130

Oilfield Chemicals



64,519



67,988



49,583



194,670



132,103

Other



(1)



1







Depreciation and amortization



26,672



29,253



22,904



82,425



65,572

Total costs of revenue



316,232



300,241



195,648



886,560



506,541

Gross profit



58,840



35,662



8,985



119,184



2,951

Operating expenses
















Selling, general and administrative



29,782



26,695



22,044



84,792



57,828

Depreciation and amortization



543



526



562



1,636



1,835

Lease abandonment costs



83



162



154



336



480

Total operating expenses



30,408



27,383



22,760



86,764



60,143

Income (loss) from operations



28,432



8,279



(13,775)



32,420



(57,192)

Other income (expense)
















(Loss) gain on sales of property and
equipment and divestitures, net



(479)



731



315



1,905



(1,921)

Interest expense, net



(616)



(494)



(419)



(1,830)



(1,254)

Foreign currency (loss) gain, net



(6)



(6)



(6)



(9)



1

Bargain purchase gain



(3,273)



5,607





13,768



Other



1,153



875



(222)



2,277



(956)

Income (loss) before income tax (expense)
benefit



25,211



14,992



(14,107)



48,531



(61,322)

Income tax (expense) benefit



(276)



(182)



32



(672)



211

Equity in losses of unconsolidated entities



(218)



(229)



(129)



(576)



(129)

Net income (loss)



24,717



14,581



(14,204)



47,283



(61,240)

Less: net (income) loss attributable to
noncontrolling interests



(3,393)



(2,078)



2,160



(6,654)



9,522

Net income (loss) attributable to Select Energy
Services, Inc.


$

21,324


$

12,503


$

(12,044)


$

40,629


$

(51,718)

















Net income (loss) per share attributable to
common stockholders:
















Class A—Basic


$

0.23


$

0.13


$

(0.14)


$

0.44


$

(0.60)

Class B—Basic


$


$


$


$


$

















Net income (loss) per share attributable to
common stockholders:
















Class A—Diluted


$

0.22


$

0.13


$

(0.14)


$

0.43


$

(0.60)

Class B—Diluted


$


$


$


$


$

   

 

 

SELECT ENERGY SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)




September 30, 2022


December 31, 2021



(unaudited)



Assets







Current assets







Cash and cash equivalents


$

13,222


$

85,801

Accounts receivable trade, net of allowance for credit losses of $4,891 and $4,401, respectively



388,797



232,824

Accounts receivable, related parties



303



219

Inventories



40,314



44,456

Prepaid expenses and other current assets



37,334



31,486

Total current assets



479,970



394,786

Property and equipment



1,018,402



943,515

Accumulated depreciation



(591,340)



(551,727)

Total property and equipment, net



427,062



391,788

Right-of-use assets, net



48,275



47,732

Other intangible assets, net



100,455



108,472

Other long-term assets, net



16,639



7,414

Total assets


$

1,072,401


$

950,192

Liabilities and Equity







Current liabilities







Accounts payable


$

55,844


$

36,049

Accrued accounts payable



64,861



52,051

Accounts payable and accrued expenses, related parties



3,775



1,939

Accrued salaries and benefits



21,704



22,233

Accrued insurance



21,520



13,408

Sales tax payable



2,863



2,706

Accrued expenses and other current liabilities



21,957



19,544

Current operating lease liabilities



16,957



13,997

Current portion of finance lease obligations



19



113

Total current liabilities



209,500



162,040

Long-term operating lease liabilities



48,552



53,198

Other long-term liabilities



44,947



39,780

Total liabilities



302,999



255,018

Commitments and contingencies







Class A common stock, $0.01 par value; 350,000,000 shares authorized and 98,097,930 shares issued
and outstanding as of September 30, 2022; 350,000,000 shares authorized and 94,172,920 shares
issued and outstanding as of December 31, 2021



981



942

Class A-2 common stock, $0.01 par value; 40,000,000 shares authorized; no shares issued or
outstanding as of September 30, 2022 and December 31, 2021





Class B common stock, $0.01 par value; 150,000,000 shares authorized and 16,221,101 shares issued
and outstanding as of September 30, 2022 and December 31, 2021



162



162

Preferred stock, $0.01 par value; 50,000,000 shares authorized; no shares issued and outstanding as of
September 30, 2022 and December 31, 2021





Additional paid-in capital



977,063



950,464

Accumulated deficit



(318,843)



(359,472)

Total stockholders' equity



659,363



592,096

Noncontrolling interests



110,039



103,078

Total equity



769,402



695,174

Total liabilities and equity


$

1,072,401


$

950,192

 

 

SELECT ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)




Three months ended


Nine months ended



September 30, 2022


June 30, 2022


September 30, 2022


September 30, 2021

Cash flows from operating activities













Net income (loss)


$

24,717


$

14,581


$

47,283


$

(61,240)

Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities













Depreciation and amortization



27,215



29,779



84,061



67,407

Loss (gain) on disposal of property and equipment and
divestitures



479



(731)



(1,905)



1,921

Equity in losses of unconsolidated entities



218



229



576



129

Bad debt expense (recovery)



828



692



2,091



(651)

Amortization of debt issuance costs



122



123



539



516

Inventory write-downs



(801)



189



(612)



139

Equity-based compensation



3,804



3,944



11,023



6,248

Bargain purchase gain



3,273



(5,607)



(13,768)



Unrealized (gain) loss on short-term investment



(40)







1,406

Other operating items, net



(232)



(577)



(710)



(309)

Changes in operating assets and liabilities













Accounts receivable



(51,815)



(43,031)



(141,468)



(32,509)

Prepaid expenses and other assets



(5,820)



1,066



(200)



(10,284)

Accounts payable and accrued liabilities



3,413



10,425



10,983



13,331

Net cash provided by (used in) operating activities



5,361



11,082



(2,107)



(13,896)

Cash flows from investing activities













Purchase of property and equipment



(19,839)



(15,513)



(50,815)



(29,925)

Investment in note receivable









(1,101)

Purchase of equity method investments



(2,500)



(800)



(6,767)



(2,200)

Collection of note receivable







184



Distribution from cost method investment





40



60



120

Acquisitions and divestitures



984



(1,084)



6,412



(18,644)

Proceeds received from sales of property and equipment



3,750



5,560



21,433



6,491

Net cash used in investing activities



(17,605)



(11,797)



(29,493)



(45,259)

Cash flows from financing activities













Borrowings from revolving line of credit



52,000



10,000



82,000



Payments on revolving line of credit



(52,000)



(10,000)



(82,000)



Payments on long-term debt







(18,780)



Payments of finance lease obligations



(5)



(42)



(108)



(238)

Payment of debt issuance costs





(113)



(2,144)



Proceeds from share issuance



10



13



35



43

Distributions to noncontrolling interests









(1,074)

Repurchase of common stock



(272)



(787)



(19,967)



(1,206)

Net cash used in financing activities



(267)



(929)



(40,964)



(2,475)

Effect of exchange rate changes on cash



(9)



(13)



(15)



4

Net decrease in cash and cash equivalents



(12,520)



(1,657)



(72,579)



(61,626)

Cash and cash equivalents, beginning of period



25,742



27,399



85,801



169,039

Cash and cash equivalents, end of period


$

13,222


$

25,742


$

13,222


$

107,413

 

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 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 (loss), which is the most directly comparable GAAP measure for the periods presented:















Three months ended, 



(unaudited) (in thousands)


September 30, 2022



June 30, 2022


September 30, 2021






Net income (loss)


$

24,717



$

14,581


$

(14,204)



Interest expense, net



616




494



419



Income tax expense (benefit)



276




182



(32)



Depreciation and amortization



27,215




29,779



23,466



EBITDA



52,824




45,036



9,649



Non-cash compensation expenses



3,804




3,944



2,302



Nonrecurring severance expenses










Non-cash loss on sale of assets or subsidiaries



1,608




1,013



189



Nonrecurring transaction costs



965




2,879



2,709



Lease abandonment costs



83




162



154



Bargain purchase gain



3,273




(5,607)





Equity in losses of unconsolidated entities



218




229



129



Foreign currency loss, net



6




6



6



Adjusted EBITDA


$

62,781



$

47,662


$

15,138



















The following table presents a reconciliation of gross profit before D&A to total gross profit (loss), which is the most directly comparable GAAP measure, and a calculation of gross margin before D&A for the periods presented:














Three months ended,

(unaudited) (in thousands)


September 30, 2022


June 30, 2022


September 30, 2021

Gross profit (loss) by segment










Water services


$

33,471


$

22,567


$

4,109

Water infrastructure



12,728



3,907



1,433

Oilfield chemicals



12,640



9,188



3,443

Other



1



(1)



As reported gross profit



58,840



35,661



8,985











Plus depreciation and amortization










Water services



16,927



15,369



13,698

Water infrastructure



7,471



11,438



6,860

Oilfield chemicals



2,274



2,447



2,346

Other







Total depreciation and amortization



26,672



29,254



22,904











Gross profit before D&A


$

85,512


$

64,915


$

31,889











Gross profit (loss) before D&A by segment










Water services



50,398



37,936



17,807

Water infrastructure



20,199



15,345



8,293

Oilfield chemicals



14,914



11,635



5,789

Other



1



(1)



Total gross profit before D&A


$

85,512


$

64,915


$

31,889











Gross margin before D&A by segment










Water services



22.8 %



19.4 %



15.8 %

Water infrastructure



27.2 %



25.5 %



22.5 %

Oilfield chemicals



18.8 %



14.6 %



10.5 %

Other



n/a



n/a



n/a

Total gross margin before D&A



22.8 %



19.3 %



15.6 %

 

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

 

Cision View original content:https://www.prnewswire.com/news-releases/select-energy-services-announces-acquisition-of-breakwater-energy-partners-reports-third-quarter-2022-financial-results-and-provides-other-operational--acquisition-updates-301665674.html

SOURCE Select Energy Services, Inc.

FAQ

What were Select Energy Services' revenue figures for Q3 2022?

Select Energy Services reported revenue of $375 million for the third quarter of 2022.

How much net income did Select Energy Services report for the third quarter of 2022?

Select Energy Services reported a net income of $24.7 million for Q3 2022.

What acquisitions did Select Energy Services complete on November 1, 2022?

On November 1, 2022, Select Energy Services acquired Breakwater Energy Partners and water gathering pipeline and disposal assets from Cypress Environmental Services.

What is the expected revenue impact of the Breakwater and Cypress acquisitions?

The combined operations from Breakwater and Cypress are expected to generate approximately $110-$115 million in revenue for the full year 2022.

What is Select Energy Services' stock symbol?

The stock symbol for Select Energy Services is WTTR.

Select Water Solutions, Inc.

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