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Select Water Solutions, Inc. (WTTR)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered margin-led upside despite lower activity: revenue $364.2M (-2.7% q/q; flat y/y), net income $11.7M (+22% q/q), Adjusted EBITDA $72.6M (+13% q/q), and gross margin before D&A improved to 27.1% from 25.2% in Q1 .
  • Water Infrastructure was the bright spot: revenue +11.7% q/q to $80.9M and gross margin before D&A expanded to 55.2%; management announced new multi‑year contracts adding 59k dedicated acres and 385k ROFR acres and asset conveyances from customers in NM, underpinning growth into 2026 .
  • Guidance reset reflects macro softness and portfolio rationalization: Q3 consolidated Adjusted EBITDA guided down to $55–$60M; Water Services -25% q/q with margins ~19–20%; Water Infrastructure Q3 flat-to-down slight, then +10% q/q in Q4; 2026 Infrastructure +20% y/y remains intact .
  • Strategic catalysts: OMNI asset swap (divesting trucking, adding Bakken solids, landfill, oil reclamation) to improve margins and simplify operations; evaluating strategic alternatives for Peak Rentals to access dedicated growth capital for distributed power solutions .

What Went Well and What Went Wrong

What Went Well

  • Water Infrastructure margin and growth outperformed: “Gross margins before D&A for the Water Infrastructure segment increased to 55% during the quarter,” driven by accretive throughput across large-scale networks .
  • Multi-year contract wins with asset conveyances: 12‑year Eddy County agreement (42k dedicated acres, 235k ROFR) and Lea County operatorship transfer; “strong endorsement…customers…willing to convey direct ownership and operatorship” to Select .
  • Strong cash generation despite growth capex: Operating cash flow $82.6M and free cash flow $10.8M; capex $79.4M primarily for contracted infrastructure projects .

What Went Wrong

  • Activity-driven top-line softness: consolidated revenue fell to $364.2M (-$10.2M q/q); Water Services revenue -4.4% q/q, Chemical Technologies revenue -11% q/q, partially offset by Infrastructure strength .
  • Q3 step-down expected: Water Services revenue guided down ~25% q/q on OMNI divestments and lower activity; consolidated Adjusted EBITDA guided to $55–$60M (down from Q2) .
  • Cost inflation in SG&A and rising D&A: SG&A $38.9M (incremental costs from Peak carve-out); D&A up ~$3M q/q to ~$43M in Q2 and expected ~ $45M in Q3 .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Revenue ($USD Millions)$365.1 $374.4 $364.2
Net Income ($USD Millions)$14.9 $9.6 $11.7
Adjusted EBITDA ($USD Millions)$69.6 $64.0 $72.6
Gross Margin % (GAAP)16.5% 14.9% 15.9%
Gross Margin before D&A %26.7% 25.2% 27.1%
Diluted EPS ($)$0.13 $0.08 $0.10

Consensus vs. Actual

MetricQ1 2025 EstimateQ1 2025 ActualQ2 2025 EstimateQ2 2025 Actual
Revenue ($USD Millions)$360.8*$374.4 $364.9*$364.2
Primary EPS ($)$0.06*$0.1335*$0.1422*$0.1531*

Values marked with * retrieved from S&P Global.

Segment Revenue and Margins

SegmentQ2 2024 Rev ($M)Q1 2025 Rev ($M)Q2 2025 Rev ($M)Q2 2024 GM b/D&AQ1 2025 GM b/D&AQ2 2025 GM b/D&A
Water Infrastructure$68.6 $72.4 $80.9 51.0% 53.7% 55.2%
Water Services$230.0 $225.6 $215.7 22.5% 19.5% 19.6%
Chemical Technologies$66.6 $76.3 $67.7 16.4% 15.2% 17.5%

KPIs and Balance Sheet

KPIQ2 2024Q1 2025Q2 2025
Operating Cash Flow ($M)$83.1 ($5.1) $82.6
Free Cash Flow ($M)$37.4 ($51.5) $10.8
Net Capex ($M)—$46.5 $71.7
Liquidity ($M)—$260.2 $279.3
Term Loan ($M)—$250.0 $250.0
Revolver Borrowings ($M)—$0.0 $25.0
Borrowing Base ($M)—$252.2 $270.3

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Adjusted EBITDAQ3 2025—$55–$60M New; sequentially lower vs Q2 actual
Water Infrastructure RevenueQ3 2025—Flat to down low single-digit % New
Water Infrastructure RevenueQ4 2025—+10% q/q New
Water Infrastructure GrowthFY 2026+15–25% y/y (directional from FY24) +20% y/y Maintained/up-weighted to specific +20%
Water Infrastructure GM b/D&AQ3 2025>50% (implied) >50% Maintained
Water Services RevenueQ3 2025-5% to -10% q/q (Q1 outlook) ~ -25% q/q Lowered
Water Services GM b/D&AQ3 202520–22% (Q1 outlook) ~19–20% Lowered
Chemical Tech RevenueQ3 2025Mid single-digit down (Q1 outlook) Low-to-mid single-digit down Maintained/slightly refined
Chemical Tech GM b/D&AQ3 202514–16% (Q1 outlook) 15–17% Raised slightly
SG&AH2 2025—Hold relatively steady on gross dollars New
D&AQ3 2025—~ $45M New
Effective Tax Rate (book)FY 2025—Low-20% range; cash taxes ~≤$10M New
Net CapexFY 2025$170–$190M (Feb) $225–$250M; bias high-end Raised
Maintenance CapexNear term—$50–$60M New
DividendQ3 2025—$0.07 per share declared (paid Aug 15) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Water Infrastructure build-out (Northern Delaware)Announced new projects; expected Q2 ramp Expanded contracts; 100 miles pipeline; >1.3M bpd fixed recycling capacity pro forma New 12‑yr Eddy County contract; operatorship in Lea; pro forma ~1.8M bpd capacity and >1M acres dedication/ROFR in NM Accelerating
Contract acreage & ROFR+150k acres added in Q4 2024 +265k combined dedications/ROFR added in Q1 +59k dedicated; +385k ROFR; customers conveying assets Expanding
Peak Rentals (distributed power)—Early commentary on growth and electrification needs Formal carve-out; evaluating strategic alternatives; battery + generator hybrid economics (fuel/time -80%) Strategic separation advancing
OMNI asset swap/rationalization——Divested trucking (Northeast/MidCon/Bakken) and exited additional regions; acquired Bakken landfill/treatment/reclamation Portfolio rationalization
Macro activity/tariffsAnticipated modest down L48; first-half slower start Tariff/trade dislocations risk to H2 activity Soft activity impacting Water Services/Chemicals; Q3 step-down before Q4 Infrastructure rebound Softening
Colorado water rightsNew partnership (AV Farms), 16.3k acre-feet; long-term municipal/industrial/ag focus +$10M incremental investment; 39% stake; long-cycle high-margin Progress on engineering study; stakeholder engagement; unique large-scale water banking program Long-cycle build progressing

Management Commentary

  • CEO on Infrastructure margins and throughput: “Gross margins before D&A for the Water Infrastructure segment increased to 55%…a testament to the team’s ability to add accretive volumetric throughput across our large-scale water networks.”
  • CEO on customer asset conveyance: “Each of these customers is…willing to convey direct ownership and operatorship…to Select…for broader commercialization as well.”
  • CFO on Q2 performance and outlook: “Adjusted EBITDA of $73M [rounded]…above the high end of our previous guided range…Infrastructure poised for 10% q/q growth in Q4 2025 and ~20% y/y in 2026.”
  • CEO on Peak Rentals economics: battery-integrated systems cut generator run-time and fuel consumption to ~20% vs diesel-direct, improving economics and reliability in off-grid operations .

Q&A Highlights

  • Backlog and network effects: Management sees steady backlog despite conversion of opportunities to signed contracts; new add-ons arising as the NM network expands across dedicated and ROFR acreage, enabling system-wide balancing and commercialization .
  • Peak Rentals scope: Focused on smaller, portable recip units (e.g., ~400kW), scaling natural gas units for production and infrastructure; fleet growth contingent on strategic outcome and order book expansion .
  • 2026 Capex framing: ~$225M of deployment across 2H25 and H1’26 under current contracts, with $75–$100M expected in H1’26; upside if new contracts are added, extending build into Q3’26 .
  • Bakken solids management: OMNI swap strengthens integrated solids-liquids footprint; oil reclamation is important to pairing with wastewater disposal and recycling assets .
  • Chemicals resilience: Despite revenue pressure from pressure pumping customers, product development wins (e.g., drag/friction reducers) and in-basin manufacturing support margins and share gains .

Estimates Context

  • Q2 2025: Revenue essentially in line vs consensus ($364.2M actual vs $364.9M estimate); Primary EPS beat ($0.153 vs $0.142) driven by Infrastructure margin expansion and cost control. Diluted GAAP EPS was $0.10 . Values retrieved from S&P Global.*
  • Q1 2025: Revenue and Primary EPS both beat consensus ($374.4M vs $360.8M; $0.1335 vs $0.06), reflecting stronger activity and margin improvements across segments . Values retrieved from S&P Global.*

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Infrastructure-driven mix shift continues: margin-rich, contracted Infrastructure now anchors the thesis; expect Q3 pause then Q4 acceleration and 2026 +20% y/y growth .
  • Portfolio simplification is a catalyst: OMNI swap and trucking exits should lift consolidated margins, reduce operational risk, and sharpen focus on Infrastructure .
  • Peak Rentals separation could unlock value: a standalone capital structure may accelerate distributed power growth while preserving strategic alignment to support Infrastructure electrification needs .
  • Near-term setup: Q3 guide is softer on Services/Chemicals; watch Q4 Infrastructure ramp and additional contract wins to re-rate earnings trajectory .
  • Capital intensity remains elevated but targeted: 2025 net capex raised to $225–$250M with maintenance $50–$60M; liquidity robust at $279M; borrowing base increased to $270M .
  • Dividends maintained: $0.07 per share declared for August; balance sheet flexibility preserved with term loan and revolver capacity .
  • Narrative moving the stock: execution on NM network build-out, asset conveyances, and Peak strategic path are likely stock reaction catalysts; macro activity headwinds and Q3 step-down are the key watch-outs .