Summary of Select Water Solutions Q1 2026 Earnings Call

1Key Financial Results and Metrics

Revenue: Increased by $19.5 million from Q4 2025, reaching approximately $97 million in the Water Infrastructure segment.

Adjusted EBITDA: Rose by $13.5 million to $77.6 million, significantly above guidance.

Net Income: Increased by $11.5 million from Q4 2025.

Gross Margins: Water Infrastructure gross margins before D&A reached 56%, contributing to consolidated gross margins above 30% for the first time.

SG&A Expenses: Decreased by over 6% to $40.6 million, approximately 11% of revenue.

CapEx: $78 million spent in Q1, with an increased full-year CapEx guidance of $200 million to $250 million, up from $175 million to $225 million.

2Strategic Updates and Business Highlights

Water Infrastructure Performance: Strong growth driven by increased recycling and disposal volumes; added new contracts, including multiyear agreements in the Northeast.

Acquisitions: Closed on multiple acquisitions in the Northern Delaware Basin, enhancing operational capacity and resource availability.

Water Services and Chemical Technologies: Water Services segment saw a 7% revenue increase, while Chemical Technologies is expected to grow by 10-15% in Q2 due to strong demand.

Market Positioning: Focus on leveraging existing networks for incremental revenue and enhancing water balancing capabilities.

3Forward Guidance and Outlook

Water Infrastructure Segment: Full-year growth guidance increased to 25-30% year-over-year, up from 20-25%.

Adjusted EBITDA for Q2: Expected to be in the range of $77 million to $80 million.

Long-term Outlook: Positioned for strong free cash flow generation into 2027, with a focus on maintaining a low maintenance capital model.

4Bad News, Challenges, or Points of Concern

Geopolitical Risks: Ongoing geopolitical tensions, particularly in the Middle East, could impact commodity prices and market stability.

Natural Gas Takeaway Issues: Concerns regarding natural gas takeaway capacity in New Mexico could affect E&P operators' activity levels, although management noted no immediate changes in customer outlook.

Operating Cash Flow: Experienced a short-term drag on operating cash flow due to increased accounts receivable, though expected to normalize.

5Notable Q&A Insights

Market Dynamics: Management noted that higher oil prices are leading to increased activity and retention of frac crews, which could drive demand for their services.

Pricing Opportunities: There is an active dialogue with customers regarding pricing adjustments, particularly where value can be demonstrated.

Data Center Opportunities: Management is exploring potential water solutions for data centers in West Texas, recognizing the critical need for water in these developments.

M&A Strategy: Continued focus on optimizing the asset portfolio and evaluating bolt-on acquisitions to enhance growth potential. Overall, Select Water Solutions reported a strong Q1 2026, with significant financial growth and strategic advancements, while also navigating potential market challenges and geopolitical risks.