# Select Water Solutions, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Select Water Solutions, Inc.](/companies/wttr.md) (CIK 1693256)
- Form: 10-Q
- Filed: 2024-07-31
- Accepted by EDGAR: Jul 31, 2024, 16:30 ET
- Period: 2024-06-30
- Accession: 0001558370-24-010486
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1693256/000155837024010486/wttr-20240630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1693256/000155837024010486/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $365.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $731.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $305.0m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $618.8m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $60.2m | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | $112.8m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $39.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $83.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $20.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $27.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $2.0m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $3.3m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $4.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $5.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | $12.9m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $16.5m | us-gaap:NetIncomeLoss |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | $115.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-04-01 to 2024-06-30 | $49.0m | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $82.9m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $14.5m | us-gaap:PaymentsOfDividends |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $7.2m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $16.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $384.3m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $1.32bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $212.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $421.0m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $90.0m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-06-30 | $782.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 64,045 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report, as well as the historical consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on February 21, 2024 (our “2023 Form 10-K”). This discussion and analysis contains forward-looking statements based upon our current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors as described under “Cautionary Note Regarding Forward-Looking Statements” and other cautionary statements described under the heading “Risk Factors” included in our 2023 Form 10-K and this Quarterly Report on Form 10-Q. We assume no obligation to update any of these forward-looking statements.*

This discussion relates to the three and six months ended June 30, 2024 (the “Current Quarter” and the “Current Period”, respectively) and the three and six months ended June 30, 2023 (the “Prior Quarter” and the “Prior Period”, respectively).

### Overview

We are a leading provider of sustainable water-management and chemical solutions to the energy industry in the U.S. As a leader in the water solutions industry, we place the utmost importance on safe, environmentally responsible management of oilfield water throughout the lifecycle of a well. Additionally, we believe that responsibly managing water resources through our operations to help conserve and protect the environment in the communities in which we operate is paramount to our continued success.

### Sustainability

Select is committed to a corporate strategy that supports the long-term viability of our business model in a manner that focuses on all stakeholders, including our people, our customers, the environment, and the communities in which we operate. We believe this focus will help us and our customers achieve their short-term and long-term environmental, social and governance (“ESG”) goals, help us attract and retain top talent, and further our efforts to generate investor returns. We believe our commitment to foster a culture of corporate responsibility is an important part of being a company with operations spanning the contiguous U.S. Further, we believe being a good corporate steward is strategic to our growth in the energy industry and will better allow us to develop solutions that both address the needs of our customers and contribute to sustainable business practices. As a service company, we compete with other service providers based on various factors, including safety and operational performance, technological innovation, process efficiencies and reputational awareness. We have identified the following four priorities as part of our comprehensive corporate responsibility initiative: Environmental Consciousness, Health and Safety, Human Capital Management and Community Outreach. We believe there is a strong link between these corporate responsibility initiatives and our ability to provide value to our stakeholders.

We are one of the few public companies whose primary focus is on the management of water and water logistics in the energy industry with a focus on driving efficient, environmentally responsible, and economical solutions that lower costs throughout the lifecycle of the well. We believe water is a valuable resource and understand that the energy industry as well as other industries and the general public are competing for this resource. As a company, we continue to provide access to water as demanded by our customers and have significantly increased our focus on the recycling and reuse of produced water, as well as assessing other industrial water sources, to meet the industry’s water demand and align our operations with the goals of our customers. We have invested significantly in the development and acquisition of fixed and mobile recycling facilities that support the advancement of commercialized produced water reuse solutions. By doing so, we strive to reduce the amount of produced water being reinjected into SWDs and to reduce our usage of fresh water as well as that of our customers. We view our rather unique position as an opportunity to strategically transform water management by leveraging our Chemical Technologies business to develop produced water management solutions that increase our customers’ ability to reuse this produced water and add value to their operations. By implementing our innovative approach to water solutions, Select has become a leader in recycling produced water to be reused for energy production.

Our strong company culture includes commitments to all stakeholders, and we aim to create a work environment that fosters a diverse and inclusive company culture. Additionally, we prioritize safety in our operations through rigorous training, structured protocols and ongoing automation of our operations. Our prioritization of safety includes a commitment to safeguarding the communities in which we operate.

We believe that proper alignment of our management and our board of directors with our shareholders is critical to creating long-term value, including the alignment of management compensation and incentive structures and the continued leadership of an experienced, diverse and independent board of directors.

### Recent Developments

In the first half of 2024, Select executed six strategic business combinations totaling $145.8 million, and three asset acquisitions totaling $4.6 million, enhancing current and future water infrastructure capabilities. The Trinity Acquisition added strategic saltwater disposal wells and pipelines in the Permian Basin. The Bobcat Acquisition enhanced disposal operations and provided comprehensive produced water solutions in the Marcellus/Utica region. The Buckhorn Acquisition expanded solids management services by adding landfills in North Dakota and Montana. The additions of Iron Mountain Energy and Tri-State Water Logistics strengthened fluids and solids treatment and disposal assets in the Haynesville region. Finally, the Rockies infrastructure acquisition improved water disposal operations in that region. These strategic acquisitions collectively position Select for future growth and operational efficiency in the water infrastructure segment.

Select is prioritizing investments in water infrastructure projects, which often bring a more predictable and steady revenue stream through long-term contracts and production-related operations. These investments typically produce higher gross margins and also foster stronger partnerships with customers, as Select becomes an integral partner in ensuring well productivity for ongoing customer production over the life of a well. Our focus is on integrated solutions that enhance contracted infrastructure projects with logistics services and chemical solutions, and expanding the value we provide to our customers. Our approach, historically and during the Current Period, has been to streamline operations and offer a more comprehensive and valuable overall package to customers that is built around optimizing the entire water lifecycle as such integrated solutions drive revenue growth and enhance overall value to clients.

The armed conflict between Ukraine and Russia continued into 2024, as well as the sustained conflict in Israel and elsewhere in the Middle East, including escalating tensions with Iran. As a result of the Russian invasion of the Ukraine, the U.S., the United Kingdom, the member states of the European Union and other public and private actors have imposed severe sanctions on Russian financial institutions, businesses and individuals. In October 2023, Hamas militants conducted attacks in Israel and an armed conflict has ensued between Israel and Hamas. The ensuing conflict has resulted in increased hostilities and instability in oil and gas producing regions in the Middle East as well as in key adjacent shipping lanes. In tandem with such conflict, the Houthi movement, which controls parts of Yemen, has targeted and launched numerous attacks on Israeli, American and international commercial marine vessels in the Red Sea, resulting in many shipping companies re-routing to avoid the region altogether and worsening existing supply chain issues, including delays in supplier deliveries, extended lead times and increased cost of freight, insurance and materials. Iran has also launched an attack on several targets in Israel in connection with the conflict. The escalating international conflict with Iran, a major oil producer, the Houthi movement in Yemen or the Hezbollah movement in Lebanon has been perceived by many to have increased due to continued increasing hostilities in the Middle East. To date, ceasefire negotiations in both the Russia-Ukraine conflict as well as the Israel-Gaza conflict have failed. In addition, following the May 2024 death of Iranian president Ebrahim Raisi, subsequent elections in Iran may increase instability in the region.

The Russia-Ukraine conflict, and the resulting sanctions and concerns regarding global energy security, has contributed to, and the conflict in the Israel-Gaza region and any heightened hostilities and political changes or instabilities in the Middle East may contribute to, increases and volatility in the prices for oil and natural gas. Such volatility, coupled with an increased cost of capital, due, in part to higher rates of inflation and interest rates, may lead to a more difficult investing and planning environment for us and our customers. The ultimate geopolitical and macroeconomic consequences of these conflicts and associated sanctions and/or international responses cannot be predicted, and such events, or any further hostilities elsewhere, could severely impact the world economy and may adversely affect our financial condition. An end to these conflicts and an easing or elimination of the related sanctions and/or international response could result in a significant fall in commodity prices as hydrocarbons become more readily accessible in global markets, which could have an adverse effect on our customers, and therefore adversely affect our customers’ demand for our services. An intensification of that conflict could also have an adverse effect on our customers and their demand for our services.

In addition, OPEC+ countries instituted an aggregate volume cut of 3.66 million barrels per day from 2021 to April 2023, and a number of other production cuts or extensions have since followed. Most recently, in June 2024, OPEC+ announced the extension of the 3.66 million barrels per day production cut through the end of 2025, as well as the extension of voluntary output cuts totaling approximately 2.2 million barrels per day through the third quarter of 2024. Although OPEC+ increased its output in December 2023 due to, among other things, the ongoing conflicts in the Middle East, OPEC+ may, at its discretion, continue to decrease, or increase, production, which will continue to impact crude oil and natural gas price volatility. The actions of OPEC+ countries with respect to oil production levels and announcements of potential changes in such levels, including agreement on and compliance with production targets, may result in volatility in the industry in which we and our customers operate. The average price of West Texas Intermediate (“WTI”) crude oil increased in the Current Quarter versus the Prior Quarter, potentially as a result of concern over supply, geopolitical risks and the extension of the OPEC+ production cuts. During the Current Quarter, the average spot price of WTI crude oil was $81.81 versus an average price of $73.54 for the Prior Quarter. The average Henry Hub natural gas spot price during the Current Quarter was $2.07 versus an average of $2.16 for the Prior Quarter. Henry Hub natural gas price levels in the Current Quarter have declined relative to the Prior Quarter and have negatively impacted activity levels in natural gas basins.

Additionally, increased inflation in recent years has resulted in higher interest rates and increased cost of capital for Select and for our customers. As costs of capital has increased, many of our customers have demonstrated their resolve to manage their capital spending within budgets and cash flow from operations and increase redemptions of debt and/or returns of capital to investors. Additionally, consolidation among our customers, such as the current consolidation of E&P companies in the Permian Basin, can disrupt our market in the near term and the resulting demand for our services. Overall however, the financial health of the oil and gas industry and many of our customers specifically, as reflected in revenues and earnings, debt metrics, recent capital raises, and equity valuations, is much healthier in 2024 as compared to prior periods.

When one customer acquires another, drilling and completions activity levels may decrease overall, but acquisitions can lead to larger blocks of consolidated development and production acreage, which can increase the demand for our longer-term integrated full water lifecycle solutions. This consolidation may streamline operations, as Select can offer integrated solutions to clients with larger water volumes to manage in certain areas. The Company's position in the market may strengthen, as it becomes an essential partner for long-term production integrity in larger, more comprehensive water projects. However, it also means Select must meet the changing needs and structures of these consolidated entities to maintain and grow these relationships. While customers involved in acquisitions may initially slow activity to focus on integration and portfolio management, we believe we are well-positioned to meet the increased responsibilities of overall water management, including water reuse, recycling, transmitting and balancing across customers and regions, and ultimately disposal, for these larger customers and blocks of contiguous acreage.

While the financial health of the broader oil and gas industry has shown improvement as compared to prior periods, central bank policy actions, bank failures and associated liquidity risks and other factors may negatively impact the value of our equity and that of our customers, and may reduce our and their ability to access liquidity in the bank and capital markets or result in capital being available on less favorable terms, which could negatively affect our financial condition and that of our customers.

From an operational standpoint, many of the recent trends still apply to ongoing unconventional oil and gas development. The continued trend towards multi-well pad development and simultaneous well completions, executed within a limited time frame, combined with service price inflation and elevated interest rates, has increased the overall intensity, complexity and cost of well completions, while increasing fracturing efficiency and the use of lower-cost in-basin sand has decreased total costs for our customers. However, we note the continued efficiency gains in the well completions process can limit the days we spend on the wellsite and, therefore, negatively impact the total revenue opportunity for certain of our services utilizing day-rate pricing models.

This multi-well pad development, combined with recent upstream acreage consolidation and corporate mergers as well as the growing trends around the recycling and reuse applications of produced water provides a significant opportunity for companies like us that can deliver increasingly complex solutions for our E&P customers across large swathes of acreage through our regional infrastructure networks, delivering solutions for the full completion and production lifecycle of wells. While these trends have advanced the most in the Permian Basin to date, they are emerging in other basins as well and Select has recently performed recycling projects in the Haynesville, Rockies and South Texas regions as well.

The increased reuse of produced water requires additional chemical treatment solutions. We have a dedicated team of specialists focused every day on developing and deploying innovative water treatment and reuse services for our customers. Our FluidMatch™ design solutions enable our customers to economically use these alternative sources to optimize their fluid systems by providing water profiling and fluid assessment services working towards real-time. This trend also supports more complex “on-the-fly” solutions that treat, proportion, and blend various streams of water and chemicals at the wellsite. This complexity favors service companies that are able to provide advanced technology solutions. Ultimately, we intend to play an important role in the advancement of water and chemical solutions that are designed to meet the sustainability goals of key stakeholders.

Our water logistics, treatment, and chemical application expertise, in combination with advanced technology solutions, are applicable to other industries beyond oil and gas. We are working to further commercialize our services in other businesses and industries through our industrial solutions group.

### Our Segments

Our services are offered through three reportable segments: (i) Water Services; (ii) Water Infrastructure; and (iii) Chemical Technologies.

- *Water Services.* The Water Services segment consists of the Company’s services businesses, including water sourcing, water transfer, flowback and well testing, fluids hauling, water monitoring, water containment and water network automation, primarily serving E&P companies. Additionally, this segment includes the operations of our accommodations and rentals business.
- *Water Infrastructure.* The Water Infrastructure segment consists of the Company’s fixed infrastructure assets, including operations associated with our water distribution pipeline infrastructure, our water recycling solutions, and our produced water gathering systems and SWDs, as well as solids management facilities, primarily serving E&P companies.
- *Chemical Technologies.* The Chemical Technologies segment provides technical solutions, products and expertise related to chemical applications in the oil and gas industry. We develop, manufacture, manage logistics and provide a full suite of chemicals used in hydraulic fracturing, stimulation, cementing and well completions for customers ranging from pressure pumpers to major integrated and independent oil and gas producers. This segment also utilizes its chemical experience and lab testing capabilities to customize tailored water treatment solutions designed to optimize the fracturing fluid system in conjunction with the quality of water used in well completions.

### How We Generate Revenue

We currently generate most of our revenue through our water-management services associated with well completions as well as ongoing produced water management, provided through our Water Services and Water Infrastructure segments. Most of this revenue is realized through customer agreements with fixed pricing terms and is recognized when delivery of services is provided, generally at our customers’ sites. While we have some long-term pricing arrangements, particularly in our Water Infrastructure segment, most of our water and water-related services are priced based on prevailing market conditions, giving due consideration to the customer’s specific requirements.

We also generate revenue by providing completion and specialty chemicals through our Chemical Technologies segment. We invoice the majority of our Chemical Technologies customers for services provided based on the quantity of chemicals used or pursuant to short-term contracts as customer needs arise.

### Costs of Conducting Our Business

The principal expenses involved in conducting our business are labor costs, vehicle and equipment costs (including depreciation, rental, repair and maintenance and leasing costs), raw materials and water sourcing costs and fuel costs. Our fixed costs are relatively low. Most of the costs of serving our customers are variable, i.e., they are incurred only when we provide water and water-related services, or chemicals and chemical-related services to our customers.

Labor costs associated with our employees and contract labor comprise the largest portion of our costs of doing business. We incurred labor and labor-related costs of $126.7 million, $140.2 million, $265.0 million and $278.4 million for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. The majority of our recurring labor costs are variable and dependent on the market environment and are incurred only while we are providing our operational services. We also incur costs to employ personnel to ensure safe operations, sell and supervise our services and perform maintenance on our assets, which is not as directly tied to our level of business activity. Additionally, we incur selling, general and administrative costs for compensation of our administrative personnel at our field sites and in our operational and corporate headquarters, as well as for third-party support, licensing and services.

We incur significant vehicle and equipment costs in connection with the services we provide, including depreciation, repairs and maintenance, rental and leasing costs. We incurred vehicle and equipment costs of $79.0 million, $77.9 million, $158.5 million and $156.1 million for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively.

We incur raw material costs in manufacturing our chemical products, as well as for water that we source for our customers. We incurred raw material costs of $63.2 million, $72.6 million, $124.9 million and $155.9 million for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively.

We incur variable transportation costs associated with our service lines, predominately fuel and freight. We incurred fuel and freight costs of $21.0 million, $28.3 million, $45.0 million and $60.9 million for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. Rising fuel prices impact our transportation costs, which affects the results of our operations.

### How We Evaluate Our Operations

We use a variety of operational and financial metrics to assess our performance. Among other measures, management considers each of the following:

- Revenue;
- Gross Profit;
- Gross Margins;
- EBITDA;
- Adjusted EBITDA;
- Cash Flows; and
- Free Cash Flow.

### Revenue

We analyze our revenue and assess our performance by comparing actual monthly revenue to our internal projections and across periods. We also assess incremental changes in revenue compared to incremental changes in direct operating costs, and selling, general and administrative expenses across our reportable segments to identify potential areas for improvement, as well as to determine whether segment performance is meeting management’s expectations.

### Gross Profit

To measure our financial performance, we analyze our gross profit, which we define as revenues less direct operating expenses (including depreciation, amortization and accretion expenses). We believe gross profit provides insight into profitability and the true operating performance of our assets. We also compare gross profit to prior periods and across segments to identify trends as well as underperforming segments.

### Gross Margins

Gross margins provide an important gauge of how effective we are at converting revenue into profits. This metric works in tandem with gross profit to ensure that we do not seek to increase gross profit at the expense of lower margins, nor pursue higher gross margins at the expense of declining gross profits. We track gross margins by segment and service line and compare them across prior periods and across segments and service lines to identify trends as well as underperforming segments.

### EBITDA and Adjusted EBITDA

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income/(loss), plus interest expense, income taxes, and depreciation, amortization and accretion. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment and abandonment charges or asset write-offs pursuant to accounting principles generally accepted in the U.S. (“GAAP”), plus non-cash losses on the sale of assets or subsidiaries, non-recurring compensation expense, non-cash compensation expense, and non-recurring or unusual expenses or charges, including severance expenses, transaction costs, or facilities-related exit and disposal-related expenditures, plus/(minus) foreign currency losses/(gains), plus/(minus) losses/(gains) on unconsolidated entities and plus tax receivable agreements expense less bargain purchase gains from business combinations. The adjustments to EBITDA are generally consistent with such adjustments described in our Sustainability-Linked Credit Facility. See “—Comparison of Non-GAAP Financial Measures—EBITDA and Adjusted EBITDA” for more information and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.

### Cash Flows and Free Cash Flow

We define free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment, plus proceeds received from sale of property and equipment. Our board of directors and executive management team use free cash flow to assess our liquidity and ability to repay maturing debt, fund operations and make additional investments. We believe free cash flow provides useful information to investors because it is an important indicator of our liquidity, including our ability to reduce net debt, make strategic investments, pay dividends and distributions and repurchase common stock. Our measure of free cash flow may not be directly comparable to similar measures reported by other companies. Furthermore, free cash flow is not a substitute for, or more meaningful than, net cash provided by (used in) operating activities nor any other measure prescribed by GAAP, and there are limitations to using non-GAAP measures such as free cash flow. Accordingly, free cash flow should not be considered a measure of the income generated by our business or discretionary cash available to it to invest in the growth of our business.

### Factors Affecting the Comparability of Our Results of Operations to Our Historical Results of Operations

Our future results of operations may not be comparable to our historical results of operations for the periods presented, primarily for the reasons described below and those described in “—Recent Developments” above.

### Acquisition Activity

As described above, we continuously evaluate potential investments, particularly in water infrastructure and other water-related services and technology. To the extent we consummate acquisitions, any incremental revenues or expenses from such transactions are not included in our historical results of operations.

During the Current Period, we completed six business combinations and three asset acquisitions. Our historical financial statements for periods prior to the respective date each acquisition was completed do not include the results of operations of that acquisition. See “—Recent Developments” and “Note 3—Acquisitions” for a description of these transactions.

### Results of Operations

The following tables set forth our results of operations for the periods presented, including revenue by segment.

### Current Quarter Compared to the Prior Quarter

*(in thousands)*

| ​ ​ ​ ​ Revenue | ​ ​ ​ | ​ ​ Three months ended June 30, 2024 ​ ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ | ​ ​ Change Dollars ​ ​ ​ | ​ ​ | ​ ​ Percentage ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- |
| Water Services | ​ | $230,008 | ​ | $264,597 | ​ | $(34,589) |  | (13.1)% | ​ |
| Water Infrastructure | ​ | ​ 68,564 | ​ | ​ 55,277 | ​ | ​ 13,287 | ​ | 24.0% | ​ |
| Chemical Technologies | ​ | ​ 66,559 | ​ | ​ 84,754 | ​ | (18,195) |  | (21.5)% | ​ |
| Total revenue | ​ | 365,131 | ​ | 404,628 | ​ | (39,497) |  | (9.8)% | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Costs of revenue | ​ |  | ​ |  | ​ | ​ |  | ​ ​ | ​ |
| Water Services | ​ | 178,308 | ​ | 206,576 | ​ | (28,268) |  | (13.7)% | ​ |
| Water Infrastructure | ​ | ​ 33,581 | ​ | ​ 34,392 | ​ | (811) |  | (2.4)% | ​ |
| Chemical Technologies | ​ | ​ 55,641 | ​ | ​ 67,303 | ​ | ​ (11,662) | ​ | (17.3)% | ​ |
| Depreciation, amortization and accretion | ​ | 37,445 | ​ | 35,183 | ​ | 2,262 |  | 6.4% | ​ |
| Total costs of revenue | ​ | 304,975 | ​ | 343,454 | ​ | (38,479) |  | (11.2)% | ​ |
| Gross profit | ​ | 60,156 | ​ | 61,174 | ​ | (1,018) |  | (1.7)% | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Operating expenses | ​ |  | ​ |  | ​ | ​ |  | ​ ​ | ​ |
| Selling, general and administrative | ​ | 38,981 | ​ | 34,335 | ​ | 4,646 |  | 13.5% | ​ |
| Depreciation and amortization | ​ | 748 | ​ | 739 | ​ | 9 |  | 1.2% | ​ |
| Impairments and abandonments | ​ | ​ 46 | ​ | ​ 356 | ​ | ​ (310) | ​ | NM ​ | ​ |
| Lease abandonment costs | ​ | 17 | ​ | 9 | ​ | 8 |  | NM ​ | ​ |
| Total operating expenses | ​ | 39,792 | ​ | 35,439 | ​ | 4,353 |  | 12.3% | ​ |
| Income from operations | ​ | 20,364 | ​ | 25,735 | ​ | (5,371) |  | (20.9)% | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Other income (expense) | ​ |  | ​ |  | ​ | ​ |  | ​ ​ | ​ |
| Gain (loss) on sales of property and equipment and divestitures, net | ​ | ​ 382 | ​ | ​ (1,246) | ​ | ​ 1,628 |  | NM ​ | ​ |
| Interest expense, net | ​ | (2,026) | ​ | (2,042) | ​ | 16 |  | (0.8)% | ​ |
| Other | ​ | 42 | ​ | 873 | ​ | (831) |  | NM ​ | ​ |
| Income before income tax expense and equity in gains (losses) of unconsolidated entities | ​ | 18,762 | ​ | 23,320 | ​ | (4,558) |  | (19.5)% | ​ |
| Income tax expense | ​ | (3,959) | ​ | (387) | ​ | (3,572) |  | 923.0% | ​ |
| Equity in gains (losses) of unconsolidated entities | ​ | 96 | ​ | (372) | ​ | 468 |  | NM ​ | ​ |
| Net income | ​ | $14,899 | ​ | $22,561 | ​ | $(7,662) |  | (34.0)% | ​ |

### Revenue

Our revenue decreased $39.5 million, or 9.8%, to $365.1 million for the Current Quarter compared to $404.6 million for the Prior Quarter. This decrease was composed of a $34.6 million decrease in Water Services revenue and an $18.2 million decrease in Chemical Technologies revenue partially offset by a $13.3 million increase in Water Infrastructure revenue. The net $39.5 million decrease was driven primarily by macroeconomic factors stemming from lower frac crew deployments and associated price reductions impacted by competitor price cuts. For the Current Quarter, our Water Services, Water Infrastructure and Chemical Technologies constituted 63.0%, 18.8% and 18.2% of our total revenue, respectively, compared to 65.4%, 13.7% and 20.9%, respectively, for the Prior Quarter. The revenue changes by reportable segment are as follows:

*Water Services*. Revenue decreased $34.6 million, or 13.1%, to $230.0 million for the Current Quarter compared to $264.6 million for the Prior Quarter. The decrease in revenues was primarily attributable to lower customer activity levels primarily driven by macroeconomic factors stemming from lower frac crew deployments and associated price reductions impacted by competitor price cuts.

*Water Infrastructure.* Revenue increased $13.3 million, or 24.0%, to $68.6 million for the Current Quarter compared to $55.3 million for the Prior Quarter. The increase was primarily driven by additional revenue from acquisitions completed during the Current Quarter and growth in our recycling business line, offsetting lower pipeline distribution volumes.

*Chemical Technologies*. Revenue decreased by $18.2 million, or 21.5%, to $66.6 million for the Current Quarter compared to $84.8 million for the Prior Quarter. The decrease in revenues was primarily driven by macroeconomic factors stemming from lower frac crew deployments and associated price reductions impacted by competitor price cuts.

### Costs of Revenue

Costs of revenue decreased $38.5 million, or 11.2%, to $305.0 million for the Current Quarter compared to $343.5 million for the Prior Quarter. The decrease was primarily composed of a $28.3 million decrease in Water Services costs, a $0.8 million decrease in Water Infrastructure costs and an $11.7 million decrease in Chemical Technologies costs primarily due to supporting the lower revenue-producing activity discussed above.

*Water Services*. Costs of revenue decreased $28.3 million, or 13.7%, to $178.3 million for the Current Quarter compared to $206.6 million for the Prior Quarter. Cost of revenue as a percentage of revenue decreased from 78.1% to 77.5%. The decrease was due to higher gross margins in our Water Transfer and Well Testing business lines due to effective cost controls and higher water sourcing margins impacted by higher revenue, partially offset by lower fluids hauling margins due to price reductions.

*Water Infrastructure*. Costs of revenue decreased $0.8 million, or 2.4%, to $33.6 million for the Current Quarter compared to $34.4 million for the Prior Quarter. Cost of revenue as a percentage of revenue decreased from 62.2% to 49.0% due primarily to an increase in disposal margin impacted by the margin accretive contributions of acquired disposal operations, improved operational throughput and execution, as well as higher skim oil sales. Additionally, growth in high-margin recycling revenue favorably impacted gross margin.

*Chemical Technologies*. Costs of revenue decreased $11.7 million, or 17.3%, to $55.6 million for the Current Quarter compared to $67.3 million for the Prior Quarter. Cost of revenue as a percentage of revenue increased from 79.4% to 83.6% primarily driven by higher absorption costs in our manufacturing facilities due to lower volumes as well as modest price reductions stemming from macroeconomic factors.

*Depreciation, amortization and accretion*. Depreciation, amortization and accretion expense increased $2.3 million, or 6.4%, to $37.4 million for the Current Quarter compared to $35.2 million for the Prior Quarter primarily due to a higher fixed asset base resulting from recent acquisitions as well as investments made into fixed infrastructure projects.

### Gross Profit

Gross profit was $60.2 million for the Current Quarter compared to $61.2 million for the Prior Quarter due primarily to lower revenue and gross profit in our Water Services and Chemical Technologies segments, partially offset by higher revenue and gross profit in our Water Infrastructure segment. Gross profit decreased by $6.3 million in our Water Services segment, increased by $14.1 million in our Water Infrastructure segment and decreased by $6.5 million in our Chemical Technologies segment. Also contributing to the decrease in gross profit was a $2.3 million increase in depreciation, amortization and accretion expense. Gross margin as a percentage of revenue was 16.5% and 15.1% in the Current Quarter and Prior Quarter, respectively.

### Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $4.6 million, or 13.5%, to $39.0 million for the Current Quarter compared to $34.3 million for the Prior Quarter. The increase was due primarily to a $1.6 million increase in incentive and equity-based compensation cost, $1.2 million in higher legal and professional fees, $0.7 million in higher wages, associated payroll taxes and employer 401(k) match contributions, an increase of $0.8 million in transaction and rebranding costs, and a $0.3 million increase from a combination of other expenses.

### Impairments and Abandonments

Prior Quarter impairment and abandonments were comprised of $0.4 million attributable to damaged property and equipment. Current Quarter impairments and abandonments were less than $0.1 million.

### Income Tax Expense

Income tax expense increased by $3.6 million, or 923.0%, to $4.0 million for the Current Quarter compared to $0.4 million in the Prior Quarter due to a release of a portion of the valuation allowance on our deferred tax assets at the end of 2023.

### Net Income

Net income decreased by $7.7 million, or 34.0%, to $14.9 million for the Current Quarter compared to $22.6 million for the Prior Quarter, driven primarily by higher selling, general and administrative expenses, including additional rebranding and transaction costs and higher income tax expense.

### Current Period Compared to the Prior Period

*(in thousands)*

| ​ ​ ​ ​ Revenue | ​ ​ ​ | ​ ​ Six months ended June 30, 2024 ​ ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ | ​ ​ Change Dollars ​ ​ ​ | ​ ​ | ​ ​ Percentage ​ ​ | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | --- | ---: | --- | ---: | --- |
| Water Services | ​ | $458,315 | ​ | $539,275 | ​ | $(80,960) |  | (15.0)% | ​ |
| Water Infrastructure | ​ | ​ 132,072 | ​ | ​ 110,743 | ​ | ​ 21,329 | ​ | 19.3% | ​ |
| Chemical Technologies | ​ | ​ 141,292 | ​ | ​ 171,202 | ​ | (29,910) |  | (17.5)% | ​ |
| Total revenue | ​ | 731,679 | ​ | 821,220 | ​ | (89,541) |  | (10.9)% | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Costs of revenue | ​ |  | ​ |  | ​ | ​ |  | ​ ​ | ​ |
| Water Services | ​ | 359,840 | ​ | 426,517 | ​ | (66,677) |  | (15.6)% | ​ |
| Water Infrastructure | ​ | ​ 67,273 | ​ | ​ 68,726 | ​ | (1,453) |  | (2.1)% | ​ |
| Chemical Technologies | ​ | ​ 117,396 | ​ | ​ 137,012 | ​ | ​ (19,616) | ​ | (14.3)% | ​ |
| Depreciation and amortization | ​ | 74,337 | ​ | 68,126 | ​ | 6,211 |  | 9.1% | ​ |
| Total costs of revenue | ​ | 618,846 | ​ | 700,381 | ​ | (81,535) |  | (11.6)% | ​ |
| Gross profit | ​ | 112,833 | ​ | 120,839 | ​ | (8,006) |  | (6.6)% | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Operating expenses | ​ |  | ​ |  | ​ | ​ |  | ​ ​ | ​ |
| Selling, general and administrative | ​ | 82,961 | ​ | ​ 70,164 | ​ | 12,797 |  | 18.2% | ​ |
| Depreciation and amortization | ​ | 2,006 | ​ | ​ 1,334 | ​ | 672 |  | 50.4% | ​ |
| Impairments and abandonments | ​ | ​ 91 | ​ | ​ 11,522 | ​ | ​ (11,431) | ​ | NM ​ | ​ |
| Lease abandonment costs | ​ | 406 | ​ | ​ 85 | ​ | 321 |  | NM ​ | ​ |
| Total operating expenses | ​ | 85,464 | ​ | 83,105 | ​ | 2,359 |  | 2.8% | ​ |
| Income from operations | ​ | 27,369 | ​ | 37,734 | ​ | (10,365) |  | (27.5)% | ​ |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Other income (expense) | ​ |  | ​ |  | ​ | ​ |  | ​ ​ | ​ |
| Gain on sales of property and equipment and divestitures, net | ​ | ​ 707 | ​ | ​ 1,665 | ​ | ​ (958) |  | NM ​ | ​ |
| Interest expense, net | ​ | (3,298) | ​ | ​ (3,525) | ​ | 227 |  | (6.4)% | ​ |
| Other | ​ | (240) | ​ | ​ 1,715 | ​ | (1,955) |  | NM ​ | ​ |
| Income before income tax expense and equity in losses of unconsolidated entities | ​ | 24,538 | ​ | 37,589 | ​ | (13,051) |  | (34.7)% | ​ |
| Income tax expense | ​ | (5,411) | ​ | (585) | ​ | (4,826) |  | 825.0% | ​ |
| Equity in losses of unconsolidated entities | ​ | ​ (353) | ​ | (738) | ​ | 385 |  | NM ​ | ​ |
| Net income | ​ | $18,774 | ​ | $36,266 | ​ | $(17,492) |  | (48.2)% | ​ |

### Revenue

Our revenue decreased $89.5 million, or 10.9%, to $731.7 million for the Current Period compared to $821.2 million for the Prior Period. This decrease was composed of an $81.0 million decrease in Water Services revenue and a $29.9 million decrease in Chemical Technologies revenue partially offset by a $21.3 million increase in Water Infrastructure revenue. The net $89.5 million decrease was driven primarily by macroeconomic factors stemming from lower frac crew deployments and associated price reductions impacted by competitor price cuts. For the Current Period, our Water Services, Water Infrastructure and Chemical Technologies constituted 62.6%, 18.1% and 19.3% of our total revenue, respectively, compared to 65.7%, 13.5% and 20.8%, respectively, for the Prior Period. The revenue changes by reportable segment are as follows:

*Water Services*. Revenue decreased $81.0 million, or 15.0%, to $458.3 million for the Current Period compared to $539.3 million for the Prior Period. The decrease in revenues was primarily attributable to lower customer activity levels primarily driven by macroeconomic factors stemming from lower frac crew deployments and associated price reductions impacted by competitor price cuts.

*Water Infrastructure.* Revenue increased $21.3 million, or 19.3%, to $132.1 million for the Current Period compared to $110.7 million for the Prior Period. The increase was primarily driven by additional revenue from acquisitions completed during the Current Period and growth in our recycling business line, offsetting lower pipeline distribution volumes.

*Chemical Technologies*. Revenue decreased by $29.9 million, or 17.5%, to $141.3 million for the Current Period compared to $171.2 million for the Prior Period. The decrease in revenues was primarily driven by macroeconomic factors stemming from lower frac crew deployments and associated price reductions impacted by competitor price cuts.

### Costs of Revenue

Costs of revenue decreased $81.5 million, or 11.6%, to $618.8 million for the Current Period compared to $700.4 million for the Prior Period. The decrease was primarily composed of a $66.7 million decrease in Water Services costs, a $1.5 million decrease in Water Infrastructure costs and a $19.6 million decrease in Chemical Technologies costs primarily due to supporting the lower revenue-producing activity discussed above.

*Water Services*. Costs of revenue decreased $66.7 million, or 15.6%, to $359.8 million for the Current Period compared to $426.5 million for the Prior Period. Cost of revenue as a percentage of revenue decreased from 79.1% to 78.5%. The decrease was due to higher gross margins in our Water Transfer and Well Testing business lines due to effective cost controls and higher water sourcing margins impacted by higher revenue, partially offset by lower fluids hauling margins due to price reductions.

*Water Infrastructure*. Costs of revenue decreased $1.5 million, or 2.1%, to $67.3 million for the Current Period compared to $68.7 million for the Prior Period. Cost of revenue as a percentage of revenue decreased from 62.1% to 50.9% due primarily to an increase in disposal margin impacted by the margin accretive contributions of acquired disposal operations, improved operational throughput and execution, as well as higher skim oil sales. Additionally, growth in high-margin recycling revenue favorably impacted gross margin.

*Chemical Technologies*. Costs of revenue decreased $19.6 million, or 14.3%, to $117.4 million for the Current Period compared to $137.0 million for the Prior Period. Cost of revenue as a percentage of revenue increased from 80.0% to 83.1% primarily driven by higher absorption costs in our manufacturing facilities due to lower volumes as well as modest price reductions stemming from macroeconomic factors.

*Depreciation, amortization and accretion*. Depreciation, amortization and accretion expense increased $6.2 million, or 9.1%, to $74.3 million for the Current Period compared to $68.1 million for the Prior Period primarily due to a higher fixed asset base resulting from recent acquisitions as well as investments made into fixed infrastructure projects.

### Gross Profit

Gross profit was $112.8 million for the Current Period compared to $120.8 million for the Prior Period due primarily to lower revenue and gross profit in our Water Services and Chemical Technologies segments, partially offset by higher revenue and gross profit in our Water Infrastructure segment. Gross profit decreased by $14.3 million in our Water Services segment, increased by $22.8 million in our Water Infrastructure segment and decreased by $10.3 million in our Chemical Technologies segment. Also contributing to the decrease in gross profit was a $6.2 million increase in depreciation, amortization and accretion expense. Gross margin as a percentage of revenue was 15.4% and 14.7% in the Current Period and Prior Period, respectively.

### Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $12.8 million, or 18.2%, to $83.0 million for the Current Period compared to $70.2 million for the Prior Period. The increase was due primarily to a $5.8 million increase in incentive and equity-based compensation cost, $2.9 million in higher wages, associated payroll taxes and employer 401(k) match contributions, an increase of $2.9 million in transaction and rebranding costs, $1.4 million in higher legal and professional fees, $1.3 million in higher contract labor and $0.6 million in severance expense partially offset by a $1.5 million decrease in bad debt expense and a $0.6 million decrease from a combination of other expenses.

### Impairments and Abandonments

Prior Period impairment and abandonments were comprised of an $11.1 million trademark abandonment in the Chemical Technologies segment. Also, $0.4 million of abandonment was attributable to damaged property and equipment and $0.1 million to impair the remaining value of a cost-method investment in our Water Services segment. Current Period impairments and abandonments were less than $0.1 million.

### Net Interest Expense

Net interest expense decreased by $0.2 million, or 6.4%, to $3.3 million for the Current Period compared to $3.5 million in the Prior Period due primarily to higher interest income on cash balances.

### Income Tax Expense

Income tax expense increased by $4.8 million, or 825.0%, to $5.4 million for the Current Period compared to $0.6 million in the Prior Period due to a release of a portion of the valuation allowance on our deferred tax assets at the end of 2023.

### Net Income

Net income decreased by $17.5 million, or 48.2%, to $18.8 million for the Current Period compared to $36.3 million for the Prior Period, driven primarily by decreased gross profit, higher selling, general and administrative expenses, including additional rebranding and transaction costs and higher income tax expense, partially offset by the trademark abandonment in the Prior Period.

### Comparison of Non-GAAP Financial Measures

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income (loss), plus interest expense, income taxes, and depreciation, amortization and accretion. We define Adjusted EBITDA as EBITDA plus/(minus) loss/(income) from discontinued operations, plus any impairment and abandonment charges or asset write-offs pursuant to GAAP, plus non-cash losses on the sale of assets or subsidiaries, non-recurring compensation expense, non-cash compensation expense, and non-recurring or unusual expenses or charges, including severance expenses, transaction costs, or facilities-related exit and disposal-related expenditures, plus/(minus) foreign currency losses/(gains), plus/(minus) losses/(gains) on unconsolidated entities and plus tax receivable agreements expense less bargain purchase gains from business combinations. The adjustments to EBITDA are generally consistent with such adjustments described in our Sustainability-Linked Credit Facility. See “—Comparison of Non-GAAP Financial Measures” for more information and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.

Our board of directors, management and investors use EBITDA and Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation, amortization and accretion) and items outside the control of our management team. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.

### Note Regarding Non-GAAP Financial Measures

### EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to the exclusion of some but not all items that affect the most directly comparable GAAP financial measures. One should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following table sets forth our reconciliation of EBITDA and Adjusted EBITDA to our net income, which is the most directly comparable GAAP measure for the periods presented:

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three months ended June 30, 2024 | ​ | ​ ​ 2023 | ​ ​ ​ | ​ ​ Six months ended June 30, 2024 | ​ | ​ ​ 2023 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net income | ​ | $14,899 | ​ | $22,561 | ​ | $18,774 | ​ | $36,266 |
| Interest expense, net | ​ | ​ 2,026 | ​ | ​ 2,042 | ​ | ​ 3,298 | ​ | ​ 3,525 |
| Income tax expense | ​ | ​ 3,959 | ​ | ​ 387 | ​ | ​ 5,411 | ​ | ​ 585 |
| Depreciation, amortization and accretion | ​ | ​ 38,193 | ​ | ​ 35,922 | ​ | ​ 76,343 | ​ | ​ 69,460 |
| EBITDA | ​ | ​ 59,077 | ​ | ​ 60,912 | ​ | ​ 103,826 | ​ | ​ 109,836 |
| Non-cash compensation expenses | ​ | ​ 6,201 | ​ | ​ 4,809 | ​ | ​ 12,560 | ​ | ​ 7,773 |
| Non-recurring severance expenses(1) | ​ | ​ — | ​ | ​ — | ​ | ​ 648 | ​ | ​ — |
| Non-cash loss on sale of assets or subsidiaries(2) | ​ | ​ 1,432 | ​ | ​ 1,426 | ​ | ​ 3,180 | ​ | ​ 2,249 |
| Transaction and rebranding costs(3) | ​ | ​ 2,866 | ​ | ​ 1,963 | ​ | ​ 7,795 | ​ | ​ 4,844 |
| Lease abandonment costs | ​ | ​ 17 | ​ | ​ 9 | ​ | ​ 406 | ​ | ​ 85 |
| Impairments and abandonments | ​ | ​ 46 | ​ | ​ 356 | ​ | ​ 91 | ​ | ​ 11,522 |
| Equity in losses of unconsolidated entities | ​ | ​ (96) | ​ | ​ 372 | ​ | ​ 353 | ​ | ​ 738 |
| Other | ​ | ​ 104 | ​ | ​ (1) | ​ | ​ 546 | ​ | ​ 3 |
| Adjusted EBITDA | ​ | $69,647 | ​ | $69,846 | ​ | $129,405 | ​ | $137,050 |

(1) For the Current Quarter and Current Period, these costs related to severance costs associated with our former CFO.

(2) For all periods presented, the losses were due primarily to sales of real estate and underutilized or obsolete property and equipment.

(3) For all periods presented, these costs were due primarily to legal-related due diligence costs and rebranding costs as well as costs related to certain acquired subsidiaries.

EBITDA was $59.1 million for the Current Quarter compared to $60.9 million for the Prior Quarter. The $1.8 million decrease in EBITDA was driven primarily by a $1.2 million increase in gross profit and a $1.6 million increase in gains on asset sales offset by a $4.6 million increase in selling, general and administrative expense. Adjusted EBITDA was $69.6 million for the Current Quarter compared to $69.8 million for the Prior Quarter.

EBITDA was $103.8 million for the Current Period compared to $109.8 million for the Prior Period. The $6.0 million decrease in EBITDA was driven primarily by a $1.8 million decrease in gross profit, a $12.8 million increase in selling, general and administrative expense and a $1.0 million decrease in gains on asset sales partially offset by an $11.4 million decrease in impairments and abandonments. Adjusted EBITDA was $129.4 million for the Current Period compared to $137.1 million for the Prior Period.

### Liquidity and Capital Resources

### Overview

Our primary sources of liquidity are cash on hand, borrowing capacity under the Sustainability-Linked Credit Facility, cash flows from operations and proceeds from the sale of excess property and equipment. Our primary uses of capital have been to fund current operations, maintain our asset base, implement technological advancements, make capital expenditures to support organic growth, fund acquisitions and minority investments, pay dividends and distributions, and when appropriate, repurchase shares of Class A common stock in the open market. Depending on available opportunities, market conditions and other factors, we may also issue debt and equity securities in the future, if needed.

We prioritize sustained positive free cash flow and a strong balance sheet and evaluate potential acquisitions and investments in the context of those priorities, in addition to the economics of the opportunity. We believe this approach provides us with additional flexibility to evaluate larger investments as well as improved resilience in a sustained downturn versus many of our peers.

Based on our current cash and cash equivalents balance, operating cash flow, available borrowings under our Sustainability-Linked Credit Facility and the ongoing actions discussed above, we believe that we will be able to maintain sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants through the next twelve months and beyond, prior to giving effect to any future financing that may occur.

We intend to finance most of our capital expenditures, contractual obligations and working capital needs with cash on hand, cash generated from operations and borrowings under our Sustainability-Linked Credit Facility. For a discussion of the Sustainability-Linked Credit Facility, see “—Sustainability-Linked Credit Facility” below. Although we cannot provide any assurance, we believe that our current cash balance, operating cash flow and available borrowings under our Sustainability-Linked Credit Facility will be sufficient to fund our operations for at least the next twelve months.

During the fourth quarter of 2022, we initiated a quarterly dividend and distribution program of $0.05 per share and $0.05 per unit for holders of Class A and Class B shares, respectively. We paid quarterly dividends at the same rate through the third quarter of 2023, then the board of directors increased the quarterly dividend paid on November 17, 2023 to $0.06 per share and $0.06 per unit for holders of Class A and Class B shares, respectively. This resulted in a financing outflow of $14.5 million in the Current Period, and this quarterly dividend program is expected to continue. All future dividend payments are subject to quarterly review and approval by our board of directors.

As of June 30, 2024 cash and cash equivalents totaled $16.4 million, and we had approximately $113.4 million of available borrowing capacity under our Sustainability-Linked Credit Facility. As of June 30, 2024, the borrowing base under the Sustainability-Linked Credit Facility was $220.4 million, we had $90.0 million in outstanding borrowings and outstanding letters of credit totaling $17.0 million. As of July 29, 2024, we had $90.0 million in outstanding borrowings, the borrowing base under the Sustainability-Linked Credit Facility was $227.4 million, the outstanding letters of credit totaled $21.7 million, and the available borrowing capacity under the Sustainability-Linked Credit Facility was $115.7 million.

### Note Regarding Non-GAAP Financial Measures

We define free cash flow as net cash provided by (used in) operating activities less purchases of property and equipment, plus proceeds received from sale of property and equipment. Our board of directors and executive management team use free cash flow to assess our liquidity and ability to repay maturing debt, fund operations and make additional investments. We believe free cash flow provides useful information to investors because it is an important indicator of our liquidity, including our ability to reduce net debt, make strategic investments, pay dividends and distributions and repurchase common stock. Our measure of free cash flow may not be directly comparable to similar measures reported by other companies. Furthermore, free cash flow is not a substitute for, or more meaningful than, net cash provided by (used in) operating activities nor any other measure prescribed by GAAP, and there are limitations to using non-GAAP measures such as free cash flow. Accordingly, free cash flow should not be considered a measure of the income generated by our business or discretionary cash available to it to invest in the growth of our business.

### Cash Flows

The following table summarizes our cash flows for the periods indicated:

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Six months ended June 30, 2024 | ​ | ​ ​ 2023 | ​ ​ ​ | ​ ​ Change Dollars ​ ​ | ​ ​ | ​ ​ ​ Percentage ​ ​ ​ |
| --- | --- | --- | --- | --- | --- | --- | --- | ---: |
| Net cash provided by operating activities | ​ | $115,243 | ​ | $83,949 | ​ | $31,294 | ​ | (37.3)% |
| Net cash used in investing activities | ​ | ​ (224,119) | ​ | ​ (71,352) | ​ | ​ (152,767) | ​ | (214.1)% |
| Net cash provided by (used in) financing activities | ​ | ​ 68,213 | ​ | ​ (9,356) | ​ | ​ 77,569 | ​ | (829.1)% |
| Subtotal | ​ | ​ (40,663) | ​ | ​ 3,241 | ​ | ​ ​ | ​ | ​ ​ |
| Effect of exchange rate changes on cash and cash equivalents | ​ | ​ (3) | ​ | ​ (1) | ​ | ​ (2) | ​ | NM ​ |
| Net (decrease) increase in cash and cash equivalents | ​ | $(40,666) | ​ | $3,240 | ​ | ​ ​ | **​** | **​** **​** |

#### Analysis of Cash Flow Changes between the six months ended June 30, 2024 and 2023

*Operating Activities*. Net cash provided by operating activities was $115.2 million for the Current Period, compared to $83.9 million for the Prior Period. The $31.3 million improvement is comprised of $43.8 million of decreased working capital primarily due to collecting trade receivables impacted by improvements in the billing and collection process offset by a decrease of $12.5 million of net income combined with non-cash adjustments.

*Investing Activities*. Net cash used in investing activities was $224.1 million for the Current Period, compared to $71.4 million for the Prior Period. The $152.8 million increase in net cash used in investing activities was due primarily to an increase of $136.4 million spent for acquisitions net of cash received, a $15.6 million increase in purchases of property and equipment, and a $1.3 million decrease in proceeds received from sales of property and equipment.

*Financing Activities*. Net cash provided by financing activities was $68.2 million for the Current Period, compared to net cash used in financing activities of $9.4 million for the Prior Period. The $77.6 million increase in net cash provided by financing activities was due primarily to a $42.5 million decrease in repurchases of shares of Class A common stock and borrowings net of debt repayments increasing $41.0 million partially offset by $3.4 million of cash received from noncontrolling interest holders net of payments in the Prior Period and a $2.4 million increase in dividends and distributions paid.

### Free Cash Flow

The following table summarizes our free cash flow for the periods indicated:

*(in thousands)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Six months ended June 30, 2024 | ​ | ​ ​ 2023 |
| --- | --- | ---: | --- | ---: |
| Net cash provided by operating activities | ​ | $115,243 | ​ | $83,949 |
| Purchase of property and equipment | ​ | ​ (82,876) | ​ | ​ (67,235) |
| Proceeds received from sale of property and equipment | ​ | ​ 8,545 | ​ | ​ 9,801 |
| Free cash flow | ​ | $40,912 | ​ | $26,515 |

56

### Sustainability-Linked Credit Facility

On March 17, 2022 (the “Restatement Date”), SES Holdings and Select Water Solutions, LLC (“Select LLC”), formerly Select Energy Services, LLC and a wholly-owned subsidiary of SES Holdings, entered into a $270.0 million amended and restated senior secured sustainability-linked revolving credit facility (the “Sustainability-Linked Credit Facility”), by and among SES Holdings, as parent, Select LLC, as borrower and certain of SES Holdings’ subsidiaries, as guarantors, each of the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent, issuing lender and swingline lender (the “Administrative Agent”) (which amended and restated the Prior Credit Agreement dated November 1, 2017). The Sustainability-Linked Credit Facility also has a sublimit of $40.0 million for letters of credit and a sublimit of $27.0 million for swingline loans. Subject to obtaining commitments from existing or new lenders, Select LLC has the option to increase the maximum amount under the senior secured credit facility by $135.0 million during the first three years following the Restatement Date.

Refer to “Note 8—Debt” for further discussion of the Sustainability-Linked Credit Facility.

### Contractual Obligations

Our contractual obligations include, among other things, our Sustainability-Linked Credit Facility and operating leases. Refer to “Note 6—Leases” in our 2023 Form 10-K for operating lease obligations as of December 31, 2023 and “Note 8—Debt” in Part I, Item 1 of this Quarterly Report for an update to our Sustainability-Linked Credit Facility as of June 30, 2024.

### Critical Accounting Policies and Estimates

There were no changes to our critical accounting policies from those disclosed in our 2023 Form 10-K.

### Recent Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. ASU 2023-07 will be effective for our fiscal year ending December 31, 2024, and for interim periods starting in our first quarter of 2025. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. We are currently reviewing the impact that the adoption of ASU 2023-07 may have on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. ASU 2023-09 will be effective for our fiscal year ending December 31, 2025, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating ASU 2023-09 to determine its impact on the Company’s disclosures.

### Off-Balance-Sheet Arrangements

As of June 30, 2024, we had no material off-balance-sheet arrangements. As such, we are not exposed to any material financing, liquidity, market or credit risk that could arise if we had engaged in such financing arrangements.

## Market risk

As filed, 2,733 characters.

The demand, pricing and terms for oilfield services provided by us are largely dependent upon the level of drilling and completion activity in the U.S. oil and gas industry as well as the level of oil and gas production. The level of drilling and completion activity is influenced by numerous factors over which we have no control, including, but not limited to: the supply of and demand for oil and gas; war, armed conflicts, economic sanctions and other constraints to global trade and economic growth; current price levels as well as expectations about future prices of oil and gas, including announcements and actions taken by the members of OPEC+ with respect to oil production levels; the magnitude and timing of capital spending by our customers; the cost of exploring for, developing, producing and delivering oil and gas; the extent to which our E&P customers choose to drill and complete new wells to offset decline from their existing wells; the extent to which our E&P customers choose to invest to grow production; discoveries of new oil and gas reserves; available storage capacity and pipeline and other transportation capacity; weather conditions; domestic and worldwide economic conditions; instability in oil-producing countries; environmental regulations; technical advances in alternative forms of energy (e.g., wind and solar electricity, electric vehicles) that encourage substitution for or displacement of oil and gas consumption in end-use markets; the price and availability of alternative fuels; the ability of oil and gas producers to raise equity capital and debt financing; global health events; merger and acquisition activity and consolidation in our industry, and other factors.

Any combination of these factors that results in sustained low oil and gas prices and, therefore, lower capital spending and / or reduced drilling and completion activity by our customers, would likely have a material adverse effect on our business, financial condition, results of operations and cash flows.

### Interest Rate Risk

As of June 30, 2024, we had $90.0 million in outstanding borrowings under our Sustainability-Linked Credit Facility. As of July 29, 2024, we had $90.0 million in outstanding borrowings and $115.7 million of available borrowing capacity under our Sustainability-Linked Credit Facility. Interest is calculated under the terms of our Sustainability-Linked Credit Facility based on our selection, from time to time, of one of the index rates available to us plus an applicable margin that varies based on certain factors. We do not currently have or intend to enter into any derivative arrangements to protect against fluctuations in interest rates applicable to our outstanding indebtedness.

## Controls and procedures

As filed, 1,591 characters.

### Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2024.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 514 characters.

There are a number of risks that we believe are applicable to our business and the industry in which we operate. These risks are described elsewhere in this report or our other filings with the SEC, including the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K. If any of the risks and uncertainties described within our Annual Report on Form 10-K or this Quarterly Report actually occur, our business, financial condition or results of operations could be materially adversely affected.

Filed Jul 31, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-010486. Last ingested by Listed: Nov 2, 2026, 18:36 ET. No prices; not investment advice.