Select Water Solutions Inc (WTTR) Reports Strong Financial Growth in 2023
Consolidated Revenue: $1.6 billion in 2023, a 14% increase year-over-year.
Water Infrastructure Revenue: $230.0 million, surging 84% from the previous year.
Operating Cash Flows: Reached $285.4 million, a significant rise from $33.2 million in 2022.
Capital Return to Shareholders: $86.7 million in 2023, including share repurchases and dividends.
New Business Projects: Four new long-term contract-backed projects announced.
Net Income: Increased to $79.2 million in 2023 from $54.9 million in 2022.
Adjusted EBITDA: $258.3 million in 2023, up from $194.8 million the previous year.
On February 20, 2024, Select Water Solutions Inc (NYSE:WTTR) released its 8-K filing, revealing a year of substantial financial growth and strategic operational advancements. The company, a leading provider of sustainable water and chemical solutions to the energy industry, supported by critical water infrastructure assets, chemical manufacturing, and water treatment and recycling capabilities, has reported a record-setting year with consolidated revenue, net income, adjusted EBITDA, and operating cash flow reaching all-time highs.
Financial Performance and Challenges
Select's financial achievements in 2023 are particularly noteworthy given the complex and often volatile nature of the chemicals industry. The company's revenue increase to $1.6 billion represents a 14% year-over-year growth, while the Water Infrastructure segment alone saw an 84% surge in revenue. Operating cash flows also saw a dramatic increase to $285.4 million, up from $33.2 million in the previous year. This robust performance underscores the company's successful expansion and operational efficiency.
Despite these achievements, Select faced challenges such as industry activity declines that impacted the Water Services and Chemical Technologies segments. However, the company's strategic focus on water infrastructure development and its diversified portfolio helped mitigate these challenges, as evidenced by the strong free cash flow that nearly matched the Adjusted EBITDA for the fourth quarter of 2023.
Strategic Developments and Outlook
Select announced four new business development projects backed by long-term contracts, highlighting the Thompson Pipeline, a $25 million distribution pipeline system in the Bakken region. The company's strategic investments and acquisitions have positioned it for continued growth, particularly in the Water Infrastructure segment, which is expected to see revenue growth of 30% to 40% and gross profit growth of 40% to 50% year-over-year in 2024.
Chairman, President, and CEO John Schmitz emphasized the company's strong backlog for infrastructure projects and its ability to fund these initiatives through diversified free cash flow generation. Schmitz also noted the potential for Water Infrastructure to comprise 40% to 50% of Select's consolidated profitability by the end of 2025.
"With continued organic growth and other potential strategic initiatives, I believe we could see Water Infrastructure reach 40% - 50% of our consolidated profitability on a standalone basis by the end of 2025," said Schmitz.
Financial Tables and Analysis
The company's balance sheet shows a healthy cash position with $57.1 million in cash and cash equivalents as of December 31, 2023, and no borrowings outstanding under its sustainability-linked credit facility. The total liquidity stood at $307.4 million, an increase from $213.4 million the previous year.
Overall, Select Water Solutions Inc (NYSE:WTTR) has demonstrated a strong financial performance in 2023, with significant revenue growth and strategic expansion in its Water Infrastructure segment. The company's focus on sustainable solutions and long-term contracted projects positions it well for continued success in the dynamic energy industry landscape.
Explore the complete 8-K earnings release (here) from Select Water Solutions Inc for further details.
This article first appeared on GuruFocus.
