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Select Water Solutions, Inc. (WTTR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 revenue was $322.2M, down 11.5% QoQ and 13.2% YoY, while adjusted EBITDA was $59.5M (vs. $72.6M in Q2), reflecting trucking divestitures and lower skim oil sales; management guided Q4 adjusted EBITDA to $60–$64M and Water Infrastructure to ~10% sequential growth .
  • Revenue beat S&P Global consensus by ~$16.2M (+5.3%), but EPS normalized missed (actual $0.0418 vs. $0.0542 est.) and EBITDA missed (actual $50.2M vs. $56.8M est.), signaling mixed estimate performance despite strong Chemical Technologies outperformance (13% QoQ revenue, 19.9% GM) *.
  • Strategic wins: ~65,000 new acres of long‑term infrastructure dedications in the Permian and a multi‑year, basin‑wide water transfer/logistics contract covering ~309,000 acres; capex guidance raised to $250–$275M for 2025 to fund backlog .
  • Liquidity remained solid ($175.5M) despite growth capex; cash from operations ($71.7M) outpaced adjusted EBITDA for the second consecutive quarter as working capital normalized .
  • Near‑term trading catalysts: Q4 adjusted EBITDA delivery vs. $60–$64M guide, incremental contract awards, and progress on lithium extraction royalties and beneficial reuse initiatives discussed on the call .

What Went Well and What Went Wrong

What Went Well

  • Chemical Technologies outperformed: revenue +13% QoQ to $76.6M; GM before D&A 19.9% vs. guided 15–17%, driven by new product development and market share gains .
    Quote: “During the third quarter, our Chemical Technologies segment saw very strong revenue and gross profit gains... leading to performance that significantly outpaced our expectation and guidance” .
  • Infrastructure contracting momentum: ~65,000 acres of new dedications and a new 12‑year Texas/NM agreement; plus an exclusive water transfer contract spanning ~309,000 leasehold/ROFR acres, integrating services with infrastructure .
  • Operating cash flow resilience: CFO $71.7M with working capital release ($31.8M AR inflow), again exceeding adjusted EBITDA, underpinning growth investments .

What Went Wrong

  • Consolidated revenue and margins compressed: total revenue $322.2M (−11.5% QoQ, −13.2% YoY), total gross margin 13.5% (vs. 15.9% Q2 and 16.8% YoY), driven by trucking divestitures and skim oil price/volume declines .
  • Water Services headwinds: segment revenue −22.6% QoQ to $166.9M; GM before D&A down to 18.0% (from 19.6%), with lower US L48 activity and asset divestments weighing on results .
  • EPS/EBITDA estimate misses*: EPS normalized actual $0.0418 vs. $0.0542 est.; EBITDA actual $50.2M vs. $56.8M est.; revenue beat offset by profitability pressure*.

Financial Results

Headline Financials (GAAP)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$371.3 $374.4 $364.2 $322.2
Net Income ($USD Millions)$18.8 $9.6 $11.7 $2.3
Diluted EPS (Class A, $USD)$0.21 $0.08 $0.10 $0.03

Estimates vs Actuals (S&P Global)

MetricQ3 2025 ConsensusQ3 2025 ActualOutcome
Revenue ($USD Millions)$306.1*$322.2*Bold beat (+5.3%)*
EPS Normalized ($USD)$0.0542*$0.0418*Bold miss*
EBITDA ($USD Millions)$56.8*$50.2*Bold miss*

Values retrieved from S&P Global.*

Segment Breakdown

MetricQ3 2024Q2 2025Q3 2025
Water Infrastructure Revenue ($USD Millions)$82.0 $80.9 $78.8
Water Infrastructure Gross Margin before D&A (%)56.7% 55.2% 53.1%
Water Services Revenue ($USD Millions)$234.0 $215.7 $166.9
Water Services Gross Margin before D&A (%)20.5% 19.6% 18.0%
Chemical Technologies Revenue ($USD Millions)$55.3 $67.7 $76.6
Chemical Technologies Gross Margin before D&A (%)12.4% 17.5% 19.9%

KPIs

KPIQ3 2024Q2 2025Q3 2025
Adjusted EBITDA ($USD Millions)$72.8 $72.6 $59.5
Cash from Operations ($USD Millions)$51.9 $82.6 $71.7
Free Cash Flow ($USD Millions)$20.4 $10.8 $(19.4)
Net Capital Expenditures ($USD Millions)—$71.7 $91.1
Liquidity ($USD Millions)—$279.3 $175.5
Cash & Equivalents ($USD Millions)—$51.2 $17.8

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Adjusted EBITDAQ3 2025$55–$60M (from Q2 release/call) Actual delivered $59.5M Met high end
Consolidated Adjusted EBITDAQ4 2025“Tick‑up” expected (Q2) $60–$64M Raised/Specified
Water Infrastructure RevenueQ4 2025+10% QoQ (Q2) ~+10% QoQ confirmed Maintained
Water Infrastructure GM before D&AQ4 2025>50% (Q2) >50% Maintained
Water Infrastructure Growth (YoY)FY 2026~20% (Q2) >20% Raised
Chemical Technologies GM before D&AQ4 202515–17% (Q2) 18–20% Raised
Water Services RevenueQ4 2025Decline expected (Q2) Low‑to‑mid single‑digit decline Specified
Water Services GM before D&AQ4 2025~19–20% (Q2) 19–20% Maintained
Net Capital ExpendituresFY 2025$225–$250M (Q1/Q2) $250–$275M Raised
SG&AQ4 2025—~$40M New detail
D&AQ4 2025~$45M in Q3, rising (Q2 call) ~$46–$48M Specified
Cash TaxesFY 2025≤$10M (Q2 call) ≤$10M; muted over next couple years Maintained
DividendQ4 2025—$0.07 per share payable Nov 17, 2025 Declared

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
Water Infrastructure build‑out (Northern Delaware)Converting freshwater to produced water networks; >1M acres dedication/ROFR; double‑digit growth trajectory ~65k new acres; multiple 12‑yr/7‑yr contracts; >20% YoY growth expected in 2026 Strengthening
Integrated services (water transfer)Evaluating services rationalization; building integration Exclusive basin‑wide water transfer/logistics contract (~309k acres) Expanding
Chemical tech product wins21% QoQ growth in Q1; margin resiliency 13% QoQ growth; 19.9% GM, new products for longer laterals and multi‑frac ops Positive
Disposal optionality & pore space constraintsBuilding disposal capacity; NM permitting limits noted Dual‑pipe networks; stranded disposal acquisitions; optionality recycle‑first plus disposal Critical tailwind
Beneficial reuse & mineral extraction (lithium)Colorado AV Farms partnership; municipal/industrial water TX first produced water lithium extraction facility; royalties $2.5–$5M/yr potential ramp Emerging monetization
Peak Rentals (distributed power)Carve‑out; exploring alternatives Growth in nat gas gens and battery storage; aim for separate capital structure Strategic separation progressing
Macro/tariffs & AI/automationTariff impacts limited (polyethylene pipelines); remote operating center ROC (24/7 monitoring) optimizing networks; automation drives leak prevention and efficiency Operational edge

Management Commentary

  • “We are proud to currently recycle nearly one million barrels per day in the Permian Basin, with the vast majority flowing through our fixed facilities... We also continue to responsibly grow our Permian Basin disposal capacity” — John Schmitz .
  • “We expect to hold consolidated revenues relatively steady during the fourth quarter with our consolidated Adjusted EBITDA increasing sequentially to an estimated $60 – $64 million” — John Schmitz .
  • “Cash flow provided by operations during the third quarter of 2025 benefited from a $26.0 million decrease in net working capital, including a $31.8 million inflow from reduced accounts receivable balances” — Press release .
  • “Looking ahead, we anticipate a strong fourth quarter performance from our Water Infrastructure business... We expect Water Infrastructure growing approximately 10%... and >20% in 2026” — Press release .

Q&A Highlights

  • Disposal capacity and network integration: Management emphasized “recycle‑first” economics with disposal as backstop, leveraging stranded asset acquisitions to enhance network water balancing .
  • Chemical Technologies drivers: New chemistries tailored to longer laterals and complex multi‑frac operations, integrated with produced water/recycling, underpin market share gains .
  • Distributed power (Peak): Strategy to secure separate capital for growth in nat gas generation and battery systems; ensure water infrastructure capital is not crowded out .
  • Integrated water transfer: Multi‑year basin‑wide contract reflects confidence in Select’s automation and 24/7 ROC monitoring; reduces customer liability and improves margins .
  • Haynesville outlook: Consolidation and LNG ramp expected to drive activity; Select’s leading disposal network positions it for basin expansion and high marginal returns .

Estimates Context

  • Q3 2025: Revenue beat consensus ($322.2M vs. $306.1M), while EPS normalized ($0.0418 vs. $0.0542) and EBITDA ($50.2M vs. $56.8M)* missed. Mixed overall relative to Street*.
  • Trajectory: Q2 2025 EPS beat ($0.1531 vs. $0.1422)* with revenue in‑line and EBITDA below*, and Q1 2025 revenue/EPS beat but EBITDA modestly below*, indicating repeated profitability underperformance versus EBITDA targets despite top‑line resilience*.
  • Implications: Street models likely need higher Chemical Technologies margins and lower skim oil contribution, plus explicit incorporation of trucking divestitures and Q4 mix effects*.

Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Water Infrastructure remains the core growth engine: ~10% QoQ growth guided for Q4 and >20% YoY in 2026, supported by ~65k acres of new dedications and multi‑year customer agreements .
  • Chemical Technologies is a bright spot: sustained margin uplift (19.9% GM before D&A) and share gains from new products tailored to longer laterals/multi‑frac operations .
  • Profitability mix matters: trucking divestitures and skim oil pressure weighed on EPS/EBITDA; watch Q4 delivery vs. $60–$64M adjusted EBITDA guidance as a near‑term catalyst .
  • Balance sheet/liquidity intact amid growth capex: liquidity $175.5M; CFO $71.7M with WC release; net capex raised to $250–$275M to fund contracted backlog .
  • Strategic optionality: integrated water transfer/logistics contract and disposal acquisitions enhance network economics and customer “care and custody” positioning .
  • Emerging royalties from lithium extraction can add high‑margin, stable cash flows (~$2.5–$5M/yr potential over ramp), with future beneficial reuse opportunities under development .
  • Medium‑term thesis: a streamlined, contracted water midstream platform (recycle‑first, disposal optionality, automation) driving resilient cash flows, with upside from brownfield commercialization and mineral extraction/beneficial reuse .
Notes:
- All financials and segment data cited from Q3 2025 8-K and press releases unless otherwise indicated.
- S&P Global consensus and actuals tables marked with asterisks; values retrieved from S&P Global.*