Select Energy Services, Inc. (WTTR) Bundle
Understanding Select Energy Services, Inc. (WTTR) Revenue Streams
Understanding Select Energy Services, Inc.’s Revenue Streams
For the year 2024, the total revenue for Select Energy Services, Inc. decreased by $107.5 million, or 8.9%, to $1.1 billion compared to $1.2 billion in the previous period. This decline was primarily due to a $98.8 million decrease in Water Services revenue and a $53.6 million decrease in Chemical Technologies revenue, which was partially offset by a $45.0 million increase in Water Infrastructure revenue.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects a decrease of 8.9% from the prior year. In terms of specific segments:
- Water Services: Decreased by $98.8 million, or 12.5%, to $692.3 million
- Water Infrastructure: Increased by $45.0 million, or 26.6%, to $214.1 million
- Chemical Technologies: Decreased by $53.6 million, or 21.4%, to $196.6 million
Contribution of Different Business Segments to Overall Revenue
The contribution of different business segments to the overall revenue for the current period is as follows:
| Segment | Revenue ($ millions) | Percentage of Total Revenue |
|---|---|---|
| Water Services | 692.3 | 62.8% |
| Water Infrastructure | 214.1 | 19.4% |
| Chemical Technologies | 196.6 | 17.8% |
Analysis of Significant Changes in Revenue Streams
The significant changes in revenue streams indicate a shift in operational focus and market dynamics:
- The decrease in Water Services revenue is attributed to lower customer activity levels primarily driven by macroeconomic factors affecting frac crew deployments.
- The increase in Water Infrastructure revenue is largely due to contributions from acquisitions and growth in the recycling business line.
- The decline in Chemical Technologies revenue is similarly linked to macroeconomic challenges, particularly affecting pricing and deployment levels in the market.
In summary, the revenue trends for 2024 reflect challenges in certain segments while highlighting growth opportunities in others, particularly in Water Infrastructure.
A Deep Dive into Select Energy Services, Inc. (WTTR) Profitability
A Deep Dive into Select Energy Services, Inc. Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the nine months ended September 30, 2024, the company reported:
- Gross Profit: $175,271,000
- Operating Profit: $123,145,000
- Net Income: $37,584,000
The gross profit margin was approximately 15.9%, operating profit margin was about 11.2%, and net profit margin stood at 3.4%.
Trends in Profitability Over Time
Comparing the nine months ended September 30, 2024 with the same period in 2023:
- Gross Profit: Decreased from $211,455,000 in 2023 to $175,271,000 in 2024.
- Operating Profit: Decreased from $111,783,000 in 2023 to $123,145,000 in 2024.
- Net Income: Decreased from $51,580,000 in 2023 to $37,584,000 in 2024.
Comparison of Profitability Ratios with Industry Averages
As of 2024, industry averages for comparable companies in the oil and gas services sector are:
- Gross Margin: 18.5%
- Operating Margin: 12.0%
- Net Margin: 5.0%
The company's gross margin of 15.9%, operating margin of 11.2%, and net margin of 3.4% indicate a need for improvement relative to industry standards.
Analysis of Operational Efficiency
The company reported a decrease in costs of revenue, resulting in improved gross margins:
| Segment | Revenue (2024) | Costs of Revenue (2024) | Gross Profit (2024) | Gross Margin % (2024) |
|---|---|---|---|---|
| Water Services | $698,630,000 | $545,900,000 | $152,730,000 | 21.9% |
| Water Infrastructure | $215,700,000 | $102,800,000 | $112,900,000 | 52.4% |
| Chemical Technologies | $197,724,000 | $165,800,000 | $31,924,000 | 16.2% |
The overall operational efficiency has shown improvement with a total gross margin of 16.8% for the current period compared to 14.5% in the previous period, driven by effective cost controls.
For the quarter ended September 30, 2024, the net income was reported at $18,810,000 with an EBITDA of $66,135,000, reflecting a quarter-over-quarter increase in profitability metrics.
Debt vs. Equity: How Select Energy Services, Inc. (WTTR) Finances Its Growth
Debt vs. Equity Structure
The financing structure of the company reflects a balance between debt and equity, crucial for supporting its growth initiatives. As of September 30, 2024, the company reported a total debt of $80.0 million under the Sustainability-Linked Credit Facility. This represents the only outstanding borrowing since there were no borrowings at the end of 2023 .
In terms of the company's overall financial health, the debt-to-equity ratio serves as a critical metric. The ratio is calculated by dividing total debt by total equity. As of September 30, 2024, total equity stood at approximately $878.999 million, leading to a debt-to-equity ratio of approximately 0.09, which is significantly lower than the industry average of around 0.5 .
| Metric | Value |
|---|---|
| Total Debt | $80.0 million |
| Total Equity | $878.999 million |
| Debt-to-Equity Ratio | 0.09 |
| Industry Average Debt-to-Equity Ratio | 0.5 |
Recent activities in debt issuance include the establishment of the Sustainability-Linked Credit Facility, which was amended on March 17, 2022, with a total capacity of $270.0 million . The interest rate on the outstanding borrowings is 7.26% . As of September 30, 2024, the company maintained compliance with all debt covenants, reflecting a stable financial position .
The company has adopted a strategy that emphasizes a balanced approach to financing, leveraging both debt and equity. This strategy aims to optimize the cost of capital while maintaining a robust financial position. The current cash and cash equivalents total $10.9 million, and there is an available borrowing capacity of $127.8 million under the credit facility .
In summary, the company exhibits a conservative approach to debt financing relative to equity, positioning itself favorably against industry standards. This strategy not only supports the company’s growth objectives but also enhances financial stability in a fluctuating market environment.
Assessing Select Energy Services, Inc. (WTTR) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
As of September 30, 2024, the current ratio was 1.16, indicating that the company has 1.16 times more current assets than current liabilities. The quick ratio stood at 0.52, suggesting a reliance on inventory for liquidity.
Analysis of Working Capital Trends
The working capital for the period ending September 30, 2024, was calculated as follows:
- Current Assets: $135.1 million
- Current Liabilities: $116.3 million
- Working Capital: $18.8 million
This represents a decrease from $30.2 million as of December 31, 2023, primarily due to declines in cash and cash equivalents and accounts receivable.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow statements reveal the following:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) | Percentage Change |
|---|---|---|---|---|
| Net Cash Provided by Operating Activities | $167,119 | $202,162 | ($35,043) | (17.3)% |
| Net Cash Used in Investing Activities | ($264,243) | ($104,939) | ($159,304) | (151.8)% |
| Net Cash Provided by Financing Activities | $50,981 | ($79,498) | $130,479 | 164.1% |
The decrease in cash flow from operating activities was mainly due to a reduction in net income and working capital conversion.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents totaled $10.9 million. The company had approximately $127.8 million of available borrowing capacity under its Sustainability-Linked Credit Facility, with total borrowings of $80.0 million and outstanding letters of credit totaling $19.0 million. The interest rate applied to outstanding borrowings was 7.26%.
In terms of cash flow management, free cash flow for the nine months ended September 30, 2024, was $61.3 million, compared to $111.1 million in the prior year, reflecting a significant decline due to increased capital expenditures and reduced operating cash flow.
Is Select Energy Services, Inc. (WTTR) Overvalued or Undervalued?
Valuation Analysis
In evaluating the valuation of Select Energy Services, Inc. (WTTR), we will examine key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Select Energy Services is 20.1, based on the latest earnings per share (EPS) of $0.32 for the last twelve months.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.3, calculated using a book value per share of $1.23.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is reported at 9.5, reflecting the enterprise value of approximately $1.6 billion and EBITDA of $169.9 million.
Stock Price Trends
Over the last 12 months, the stock price has experienced the following trends:
- 12 months ago: $5.20
- Current price: $6.10
- Percentage increase: 17.3%
Dividend Yield and Payout Ratios
The current dividend yield is 2.5%, with a quarterly dividend of $0.06 per share. The payout ratio is approximately 19.4%, indicating a sustainable dividend policy based on the earnings.
Analyst Consensus on Stock Valuation
The consensus among analysts is as follows:
- Buy: 5
- Hold: 2
- Sell: 0
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 20.1 |
| P/B Ratio | 1.3 |
| EV/EBITDA Ratio | 9.5 |
| Current Stock Price | $6.10 |
| Dividend Yield | 2.5% |
| Payout Ratio | 19.4% |
| Analyst Consensus (Buy/Hold/Sell) | 5/2/0 |
Key Risks Facing Select Energy Services, Inc. (WTTR)
Key Risks Facing Select Energy Services, Inc.
There are several internal and external risks impacting the financial health of the company. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
In the current operating environment, the company has faced significant competition. For the Current Period, the company reported a revenue decrease of $107.5 million, or 8.9%, resulting in total revenue of $1.1 billion compared to $1.2 billion in the Prior Period. This decline is primarily attributed to lower frac crew deployments and price reductions influenced by competitor actions.
Regulatory Changes
Regulatory changes can pose risks related to operational compliance and cost structures. Increased scrutiny and changing regulations in the oil and gas sector can lead to higher compliance costs and potential fines. The company is also subject to various lawsuits and claims that could affect its financial position.
Market Conditions
The overall health of the oil and gas industry is subject to fluctuations in commodity prices. Although recent trends indicate a healthy financial position for the industry, any downturn could significantly impact the company’s operations. For example, the company’s net income decreased by $14.0 million, or 27.1%, to $37.6 million for the Current Period.
Operational Risks
Operational risks include increasing labor costs, which represented a significant portion of the company's expenses. Labor costs totaled $134.2 million for the Current Quarter, compared to $140.6 million in the Prior Quarter. Moreover, the company also incurred vehicle and equipment costs of $80.0 million for the Current Quarter.
Financial Risks
Financial risks are highlighted by the company’s increased interest expense. The net interest expense rose by $0.9 million, or 21.3%, to $5.2 million for the Current Period. Furthermore, the company has outstanding borrowings of $80.0 million under its Sustainability-Linked Credit Facility as of September 30, 2024.
Mitigation Strategies
The company has taken several steps to mitigate risks, including maintaining a strong liquidity position with cash and cash equivalents totaling $10.9 million and a borrowing capacity of $127.8 million under its credit facility. Additionally, the company aims to prioritize sustained positive free cash flow and a strong balance sheet.
| Risk Factor | Description | Impact on Financials |
|---|---|---|
| Industry Competition | Increased price competition affecting revenue | Revenue decreased by $107.5 million (8.9%) |
| Regulatory Changes | Compliance costs and potential fines | Increased operational costs |
| Market Conditions | Fluctuations in commodity prices | Net income decreased by $14.0 million (27.1%) |
| Operational Risks | Rising labor and equipment costs | Labor costs of $134.2 million; Equipment costs of $80.0 million |
| Financial Risks | Increased interest expense | Interest expense of $5.2 million (21.3% increase) |
| Liquidity Position | Cash and borrowing capacity | Cash of $10.9 million; Borrowing capacity of $127.8 million |
Future Growth Prospects for Select Energy Services, Inc. (WTTR)
Future Growth Prospects for Select Energy Services, Inc. (WTTR)
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Innovations in product offerings, particularly in water management solutions.
- Expansion into new markets, particularly focusing on the Permian Basin and Northeast Ohio.
- Strategic acquisitions to enhance operational capacity and market reach.
- Partnerships aimed at improving service delivery and operational efficiency.
Future Revenue Growth Projections and Earnings Estimates
Projected revenues for the upcoming fiscal year indicate a recovery trajectory. The company reported a revenue decrease of $107.5 million, or 8.9%, to $1.1 billion for the current period compared to $1.2 billion for the prior period. However, the Water Infrastructure segment experienced a growth of $45.0 million, or 26.6%, indicating potential for future revenue recovery.
| Segment | Current Revenue ($ million) | Prior Revenue ($ million) | Change ($ million) | Percentage Change (%) |
|---|---|---|---|---|
| Water Services | 692.3 | 791.1 | (98.8) | (12.5) |
| Water Infrastructure | 214.1 | 169.1 | 45.0 | 26.6 |
| Chemical Technologies | 196.6 | 250.2 | (53.6) | (21.4) |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has recently made several strategic acquisitions that enhance its service offerings. Notable acquisitions include:
- Bobcat Acquisition: Completed on April 18, 2024, for $8.1 million, enhancing operations in the Marcellus/Utica region.
- Trinity Acquisition: Finalized on April 1, 2024, with an initial consideration of $29.4 million, significantly strengthening disposal operations.
Competitive Advantages That Position the Company for Growth
The company benefits from several competitive advantages:
- Established relationships with key clients in the energy sector.
- Diverse service offerings that include water management and chemical solutions.
- A strong balance sheet with $10.9 million in cash and approximately $127.8 million of available borrowing capacity under its Sustainability-Linked Credit Facility as of September 30, 2024.
Financial Overview
As of September 30, 2024, the company had total assets of $1.35 billion, up from $1.22 billion at the end of 2023. The breakdown by segment is as follows:
| Segment | Total Assets ($ million) |
|---|---|
| Water Services | 544.5 |
| Water Infrastructure | 615.0 |
| Chemical Technologies | 131.9 |
Net income for the current period was reported at $37.6 million, a decrease of 27.1% from $51.6 million in the prior period, attributed to increased operational costs and higher tax expenses.
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Updated on 16 Nov 2024
Resources:
- Select Energy Services, Inc. (WTTR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Select Energy Services, Inc. (WTTR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Select Energy Services, Inc. (WTTR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.