Thomas Patrick Curran's questions to Select Water Solutions Inc (WTTR) leadership • Q3 2024
Question
Thomas Patrick Curran from Seaport Research Partners questioned the assumptions behind the 2025 outlook, asking about the expected change in annual completions activity, the margin progression for the Water Services and Chemical Technologies segments, and the anticipated EBITDA-to-free cash flow conversion for Q4 2024 and Q1 2025.
Answer
CFO Chris George stated that the 2025 outlook assumes a neutral to modestly down completions activity environment. He projected that Chemical Technologies margins could return to the mid-to-high teens with increased manufacturing throughput, while Water Services margins have upside as they are integrated with the growing infrastructure footprint. For cash flow, George expects Q4 to be neutral, bringing the full-year conversion to ~25% of adjusted EBITDA. He anticipates a similar pace of growth capital investment in 2025, which will be the primary driver of the full-year free cash flow conversion rate, while noting the base business generates over 80% conversion before growth CapEx.