Aris Water Solutions, Inc. (ARIS) Bundle
Understanding Aris Water Solutions, Inc. (ARIS) Revenue Streams
Understanding Aris Water Solutions, Inc. Revenue Streams
Aris Water Solutions, Inc. generates revenue primarily through two segments: Produced Water Handling and Water Solutions, along with other revenue sources. The breakdown of revenue sources for the three and nine months ended September 30, 2024, is detailed in the table below:
| Revenue Source | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|---|---|
| Produced Water Handling | $59,006 | $47,574 | $172,927 | $143,390 |
| Produced Water Handling — Affiliate | $29,418 | $28,036 | $84,859 | $74,357 |
| Water Solutions | $16,600 | $20,370 | $42,097 | $49,180 |
| Water Solutions — Affiliate | $4,225 | $3,048 | $12,920 | $19,195 |
| Other Revenue | $3,063 | $761 | $4,032 | $1,871 |
| Total Revenue | $112,312 | $99,789 | $316,835 | $287,993 |
The company's total revenue for the third quarter of 2024 was $112.3 million, which represents a 13% increase compared to $99.8 million in the third quarter of 2023. For the nine months ended September 30, 2024, total revenue reached $316.8 million, up 10% from $288.0 million in the same period in 2023.
Year-Over-Year Revenue Growth Rate
The year-over-year revenue growth rate demonstrates a positive trend in the company's financial performance:
- Produced Water Handling revenue increased by 24% in Q3 2024 compared to Q3 2023.
- Produced Water Handling revenue for the nine months increased by 21% year-over-year.
- Water Solutions revenue decreased by 19% in Q3 2024 compared to Q3 2023, and 14% for the nine-month period.
Contribution of Different Business Segments to Overall Revenue
The contributions of the different business segments to overall revenue for the nine months ended September 30, 2024, were as follows:
- Produced Water Handling: $172.9 million (54.6% of total revenue)
- Produced Water Handling — Affiliate: $84.9 million (26.8% of total revenue)
- Water Solutions: $42.1 million (13.3% of total revenue)
- Water Solutions — Affiliate: $12.9 million (4.1% of total revenue)
- Other Revenue: $4.0 million (1.3% of total revenue)
Analysis of Significant Changes in Revenue Streams
Significant changes in revenue streams for the three months ended September 30, 2024, compared to the same period in 2023 include:
- Produced Water Handling Fees increased by $9.5 million due to a volume increase driven by long-term acreage dedication agreements.
- Skim Oil Sales Revenue increased by $3.3 million due to higher volumes and recoveries.
- Water Solutions revenues decreased by $3.8 million primarily from a shift towards more recycled produced water.
The following table summarizes the produced water handling revenues and volumes for the periods indicated:
| Period | Produced Water Handling Revenue (in thousands) | Produced Water Handling Volumes (thousands of barrels per day) |
|---|---|---|
| Q3 2024 | $59,006 | 1,118 |
| Q3 2023 | $47,574 | 1,053 |
| 9M 2024 | $172,927 | 1,123 |
| 9M 2023 | $143,390 | 1,024 |
Overall, the financial data reflects a robust performance in the produced water handling segment, while the water solutions segment has experienced some challenges, primarily due to shifts in demand and pricing.
A Deep Dive into Aris Water Solutions, Inc. (ARIS) Profitability
A Deep Dive into Aris Water Solutions, Inc. Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the third quarter of 2024, the total revenue was $112.3 million, with a cost of revenue of $66.5 million, resulting in a gross profit of $45.8 million and a gross margin of 40.8%. The operating profit was $28.3 million, reflecting an operating margin of 25.2%. The net income for the same period was $16.4 million, yielding a net profit margin of 14.6%.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $112.3 million | $99.8 million | +13% |
| Cost of Revenue | $66.5 million | $64.1 million | +4% |
| Gross Profit | $45.8 million | $35.7 million | +28% |
| Operating Income | $28.3 million | $22.2 million | +27% |
| Net Income | $16.4 million | $12.2 million | +34% |
Trends in Profitability Over Time
Comparing the nine months ended September 30, 2024, to the same period in 2023, total revenue increased to $316.8 million from $288.0 million, a growth of 10%. The net income for the nine-month period also rose significantly, from $30.4 million in 2023 to $46.4 million in 2024, marking an increase of 53%.
| Metric | 9M 2024 | 9M 2023 | Change (%) |
|---|---|---|---|
| Total Revenue | $316.8 million | $288.0 million | +10% |
| Net Income | $46.4 million | $30.4 million | +53% |
Comparison of Profitability Ratios with Industry Averages
The company’s net profit margin of 14.6% in Q3 2024 is above the industry average of approximately 10% for environmental services, indicating strong profitability relative to peers. Additionally, the gross margin of 40.8% exceeds the industry average of 35%, showcasing effective cost management and operational efficiency.
Analysis of Operational Efficiency
Direct operating costs per barrel remained stable at $0.32 in Q3 2024, consistent with Q3 2023. The gross margin per barrel improved to $0.32 from $0.26, reflecting a 23% increase. The adjusted operating margin per barrel also saw growth, reaching $0.45, up from $0.40, representing a 13% increase.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Direct Operating Costs/Barrel | $0.32 | $0.32 | 0% |
| Gross Margin/Barrel | $0.32 | $0.26 | +23% |
| Adjusted Operating Margin/Barrel | $0.45 | $0.40 | +13% |
Debt vs. Equity: How Aris Water Solutions, Inc. (ARIS) Finances Its Growth
Debt vs. Equity: How Aris Water Solutions, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the company reported a total debt of $452.2 million, comprised of:
- 7.625% Senior Sustainability-Linked Notes: $400 million
- Credit Facility: $55 million
This is an increase from $427.3 million on December 31, 2023. The company’s long-term debt was $455 million as of September 30, 2024, compared to $426 million at the end of 2023.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at approximately 1.44 based on total equity of $314.5 million as of September 30, 2024. This ratio is higher than the industry average of 1.0.
Recent Debt Issuances and Credit Ratings
The company has maintained its 7.625% Senior Sustainability-Linked Notes, which are due April 1, 2026. The company has not received a formal credit rating, but the terms of its debt indicate a focus on sustainability-linked financing.
Refinancing Activity
In October 2024, the company amended its Credit Facility, which had a weighted average interest rate of 8.017% as of September 30, 2024, down from 8.276% at the end of 2023.
Balancing Debt Financing and Equity Funding
The company utilizes a combination of debt and equity to fund its operations and growth initiatives. As of September 30, 2024, it had a cash balance of $32.8 million and working capital of $64.3 million. The company has executed a strategic approach to leverage financing options while maintaining compliance with its debt covenants.
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Senior Sustainability-Linked Notes | $400 | 7.625% | April 1, 2026 |
| Credit Facility | $55 | 8.017% | October 12, 2027 |
| Total Debt | $455 | N/A | N/A |
The company’s financial strategy emphasizes maintaining a balance between leveraging debt for growth opportunities while managing its equity base. This approach is critical as the company seeks to expand its operational capabilities in the water solutions sector.
Assessing Aris Water Solutions, Inc. (ARIS) Liquidity
Assessing Aris Water Solutions, Inc.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, Aris Water Solutions, Inc. reported a current ratio of 1.72. This is calculated using current assets of $97.1 million and current liabilities of $56.5 million. The quick ratio, which excludes inventory from current assets, stands at 1.65.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is $64.3 million as of September 30, 2024. This reflects a robust position compared to the previous year, indicating a 15% increase from $55.8 million recorded in September 2023.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, show the following trends:
- Operating Cash Flow: Net cash provided by operating activities totaled $111.2 million, down from $152.5 million in the same period of 2023.
- Investing Cash Flow: Net cash used in investing activities was $87.0 million, compared to $111.8 million in 2023.
- Financing Cash Flow: Net cash provided by financing activities amounted to $3.5 million, contrasting with a net cash used of $17.7 million in 2023.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, Aris Water Solutions, Inc. had a cash balance of $32.8 million and $291.7 million available under its Credit Facility. The company also had $400 million in face value of Notes outstanding and $55 million drawn under its Credit Facility, indicating a solid liquidity position. However, the decrease in operating cash flow and increase in accounts receivable represent potential liquidity concerns that need monitoring.
| Liquidity Metric | September 30, 2024 | September 30, 2023 | Change (%) |
|---|---|---|---|
| Current Assets | $97.1 million | $83.0 million | 17% Increase |
| Current Liabilities | $56.5 million | $27.2 million | 108% Increase |
| Working Capital | $64.3 million | $55.8 million | 15% Increase |
| Cash Balance | $32.8 million | $24.2 million | 35% Increase |
| Available Credit Facility | $291.7 million | $175.0 million | 67% Increase |
Is Aris Water Solutions, Inc. (ARIS) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is 29.75, based on a trailing twelve months (TTM) earnings per share (EPS) of $0.64.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 2.15, calculated based on a book value per share of $2.36.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 12.5, with an enterprise value of $1.54 billion and EBITDA of $123 million for the last twelve months.
Stock Price Trends
Over the last 12 months, the stock price has shown the following trends:
- Start of 2023: $14.50
- Peak Price: $17.50 in July 2023
- Lowest Price: $12.00 in March 2023
- Current Price (as of October 2024): $16.00
Dividend Yield and Payout Ratios
The current dividend yield is 2.63% based on an annual dividend of $0.42 per share. The payout ratio is approximately 65.6% of net income.
Analyst Consensus
According to recent analyst ratings:
- Buy: 8 analysts
- Hold: 4 analysts
- Sell: 1 analyst
| Metrics | Value |
|---|---|
| P/E Ratio | 29.75 |
| P/B Ratio | 2.15 |
| EV/EBITDA Ratio | 12.5 |
| Current Stock Price | $16.00 |
| Dividend Yield | 2.63% |
| Payout Ratio | 65.6% |
| Analyst Buy Ratings | 8 |
| Analyst Hold Ratings | 4 |
| Analyst Sell Ratings | 1 |
Key Risks Facing Aris Water Solutions, Inc. (ARIS)
Key Risks Facing Aris Water Solutions, Inc.
Aris Water Solutions, Inc. is exposed to various internal and external risks that could significantly impact its financial health. Understanding these risks is crucial for investors.
Industry Competition
The company operates in a competitive landscape characterized by numerous players in the water management and environmental services sector. Increased competition can lead to pricing pressures, potentially reducing margins. For instance, the average revenue per barrel for produced water handling increased to $0.86 in Q3 2024 from $0.78 in Q3 2023, indicating some pricing power but also highlighting the competitive dynamics.
Regulatory Changes
Changes in environmental regulations can impose additional costs or operational constraints. The company's strategic agreement with major oil companies aims to develop technologies for produced water treatment, but regulatory compliance remains a risk. The costs associated with compliance can affect the overall profitability. For example, the company reported a net income of $16.4 million in Q3 2024, a 34% increase from the previous year, which may be impacted by regulatory costs in future quarters.
Market Conditions
Fluctuations in oil and gas prices can influence the demand for water management services. The company’s operations are indirectly tied to the drilling activity which is sensitive to commodity prices. For instance, a 10% increase in produced water handling volumes was reported in Q3 2024, which is contingent on the activity levels in the oil and gas sector.
Operational Risks
Operational inefficiencies, such as higher than expected costs for water treatment and management, pose a risk. Direct operating costs per barrel were consistent at $0.32 in Q3 2024 as compared to the same quarter in 2023, indicating potential challenges in cost management.
Financial Risks
Financial risks primarily revolve around debt management. As of September 30, 2024, total long-term debt stood at $455 million, with a weighted average interest rate of 8.017%. The company’s ability to service this debt is crucial, especially if cash flows decline. Interest payments on the debt amounted to $15.3 million as of October 1, 2024.
Strategic Risks
The company’s strategic partnerships, such as the Joint Industry Project with major oil companies, could be jeopardized by shifting priorities or performance issues. The ongoing development of beneficial reuse technologies is essential for future growth and profitability. The company aims to complete Phase 1 testing by the end of 2024, with potential implications for future contracts.
Mitigation Strategies
To counter these risks, the company has adopted several strategies:
- Investing in technology to enhance operational efficiency and reduce costs.
- Diversifying revenue streams through partnerships and new projects, such as the research grant from the Department of Energy aimed at optimizing produced water treatment.
- Maintaining a robust balance sheet with a cash balance of $32.8 million and working capital of $64.3 million as of September 30, 2024, to ensure liquidity.
| Risk Factor | Description | Current Metrics |
|---|---|---|
| Industry Competition | Pricing pressures from numerous competitors | Produced Water Handling Revenue/Barrel: $0.86 |
| Regulatory Changes | Costs may increase due to compliance | Net Income: $16.4 million |
| Market Conditions | Demand fluctuates with oil and gas prices | Produced Water Handling Volumes: 1,123 kbwpd |
| Operational Risks | Cost management challenges | Direct Operating Costs/Barrel: $0.32 |
| Financial Risks | Debt management and interest payments | Total Long-Term Debt: $455 million |
| Strategic Risks | Performance issues in partnerships | Phase 1 Testing Completion: End of 2024 |
Future Growth Prospects for Aris Water Solutions, Inc. (ARIS)
Future Growth Prospects for Aris Water Solutions, Inc.
Analysis of Key Growth Drivers
Product Innovations: The company is actively involved in developing technologies for treating produced water for beneficial reuse. A strategic agreement with Chevron U.S.A., ConocoPhillips, and Exxon Mobil Corporation aims to pilot new processes by the end of 2024, potentially expanding revenue streams in various sectors, including agriculture and hydrogen production.
Market Expansions: The produced water handling volumes have increased, reaching 1,123 thousand barrels of water per day (kbwpd) for the nine months ended September 30, 2024, compared to 1,024 kbwpd during the same period in 2023, reflecting a growth of 10%.
Acquisitions: The company continues to explore potential acquisitions that align with its strategic goals, particularly in water management solutions, which may enhance its service offerings and geographic footprint.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, total revenue is projected to be approximately $316.8 million, indicating a growth of 10% from $288.0 million in 2023. Adjusted EBITDA is expected to reach $190.4 million, up from $155.0 million in the previous year.
| Metric | 2023 | 2024 (Projected) | Growth (%) |
|---|---|---|---|
| Total Revenue | $288.0 million | $316.8 million | 10% |
| Adjusted EBITDA | $155.0 million | $190.4 million | 22.8% |
Strategic Initiatives or Partnerships that May Drive Future Growth
The Joint Industry Project (JIP) with major oil companies is a significant strategic initiative that aims to enhance the processes for treating produced water. Additionally, a research grant from the Department of Energy is expected to further expand the company's capabilities in treating and desalinating produced water for agricultural use, which could open new markets.
Competitive Advantages that Position the Company for Growth
The company benefits from long-term, fee-based contracts that are subject to annual Consumer Price Index (CPI) adjustments, providing a stable revenue foundation. Moreover, the integrated pipeline network allows for operational efficiencies and reduces costs, further enhancing competitive positioning.
As of September 30, 2024, the company had a cash balance of $32.8 million and working capital of $64.3 million, providing the financial flexibility to pursue growth opportunities.
| Financial Metric | Value |
|---|---|
| Cash Balance | $32.8 million |
| Working Capital | $64.3 million |
| Outstanding Debt | $400.0 million |
| Credit Facility Available | $291.7 million |
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Updated on 16 Nov 2024
Resources:
- Aris Water Solutions, Inc. (ARIS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Aris Water Solutions, Inc. (ARIS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Aris Water Solutions, Inc. (ARIS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.