Select Water Solutions, Inc.

Greetings, and welcome to the Select Energy Services Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris George. Thank you, Chris. You may begin.

Thank you, Operator, and good morning, everyone. We appreciate you joining us for the Select Energy conference call and webcast to review our financial and operational results for the third quarter of 2021. With me today are John Schmitz, our founder, chairman, president, and CEO, Nick Zweika, senior vice president and chief financial officer, and Michael Skarkey, executive vice president and chief operating officer. Before I turn the call over, I have a few housekeeping items to cover. A replay of today's call will be available by webcast and accessible from our website at selectenergy.com. There will also be a recorded telephonic replay available until November 17, 2021. The access information for this replay was also included in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, November 3, 2021, and therefore time-sensitive information may no longer be accurate as of the time of the replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of SELEX management. However, various risks, uncertainties, and contingencies could cause our actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read our annual report on Form 10-K for the year ended December 31, 2020, our current reports on Form 8K, as well as our quarterly reports on Form 10Q to understand those risks, uncertainties, and contingencies. Also, please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures. And now I'd like to turn the call over to our founder, chairman, president, and CEO, John Schmitz.

Thanks, Chris. Good morning, and thank you for joining us. I'm excited to be discussing Select Energy again with you today. As I've outlined on each of our recent calls, we continue to focus on three primary strategic areas, which are, first, improving and bolstering the base business, second, advancing our technology, ESG initiatives, and diversification efforts, and third, executing on strategic M&A. I am very pleased with the progress we have made across each of these areas during the third quarter. We continue to see the benefits of a strong commodity price backdrop, which has supported steady activity growth and productive pricing conversations with our customers. This has driven revenue and earnings higher during the third quarter. On technology and sustainability front, we continue to add new recycling facility, advance our emissions reduction efforts, and have expanded our leadership team with the addition of a chief technology officer to further advance our technology strategy. And lastly, we continue to execute our M&A strategy, having closed on the acquisitions of both complete energy services and old recovery during the third quarter and Aqua Libra midstream at the beginning of the fourth quarter. Looking at our operational and financial performance during the third quarter in more detail, we generated strong overall revenue growth of 27%. Additionally, we saw adjusted EBITDA double, supported by both our base business and the complete acquisition. Setting aside the growth contributions of our recent M&A activity, we still saw the base business grow revenues sequentially by 9%, generating incremental margins of more than 30%. This continued growth was driven by a combination of modest activity and market share increases, and more importantly, continued pricing improvements. Additionally, we saw good momentum throughout the quarter, with September representing our strongest month of the year to date. I'll let Nick speak to our fourth quarter financial outlook in more detail But looking a bit further, I feel very good about our continuing ability to grow the business, meaningfully improve our pricing, and capture market share heading into 2022. With oil above $80 and natural gas above $5, we expect to see capital budgets for our customers increasing next year by 20% or more. That said, we still expect to serve a disciplined marketplace with much of the E&P CapEx growth directed at increased service pricing. Even with the service pricing growth, our customers are still very well positioned to generate meaningful cash flows, improve their balance sheet, and return capital to shareholders. All of these point to select maintaining a positive momentum over the coming quarters. Looking beyond the macro-driven tailwinds and thinking about additional ways we can support our business improvements, we continue to make investments to support our technology, ESG, and diversification efforts. I believe Select is already a technology leader in the water solutions marketplace. But continued investments in our automation, data analytics, emission reduction, and fluid match solutions will be critical to provide our customers with lower cost and improved performance. To that end, I am pleased to announce the addition of Susie Colbert to our leadership team as Select's first Chief Technology Officer. Susie brings over 20 years of experience in a number of technology and financial operation leadership positions at Marathon, BP, Noble Drilling, and Anadarko. Susie will oversee the integration and development of our R&D, operational technology, and IT efforts across the organization to ensure that we continue to advance and grow our position as a technology leader in the sector. Additionally, while the E and ESG is often top of mind in our business, we believe the other areas are equally as important. Accordingly, SUSE will be focused on reviewing, accessing, and enhancing our cyber strategy and data protection. This is especially important given the critical investments we are making in technology, machine learning, real-time data collection, and cloud-based analytics. Shifting back to our environmental efforts, we continue to execute our emissions reduction, recycling, and infrastructure strategies. On the emissions reduction side, since signing our exclusive distribution partnership with EmissionsRx during the second quarter, we recently received our first delivered methane combustor unit during the third quarter. We quickly deployed this to our first customer, and we have five additional units on order that we expect to receive and deploy during the fourth quarter. To remind everyone, these EmissionRx solutions are designed to help control, reduce, and ultimately eliminate methane and other waste gas emissions during the flowback and production phase of a well. This removes the need for open flaring on location and at the production facilities. We believe there is a significant demand for this new technology and we are excited about the prospect of partnering with more customers in the coming months to further their emissions reduction strategies. On the water sustainability side, during the third quarter we completed the expansion of our largest recycling facility located in Martin County. We also completed our three newest Permian Basin facilities late in September. This brings our total combined fixed and mobile water recycling capacity in the Permian Basin to approximately 525,000 barrels per day. What's also exciting to me is that we've seen recent success in advancing our recycling efforts outside the Permian Basin as well. We were recently awarded a three-year take or pay contract to build, own, and operate a produced water recycling facility for a major integrated oil and gas company in the Rockies region. We commenced construction on this produced water recycling facility late in the third quarter of 2021 and expect it to be fully operational in the first quarter of 2022. This facility will support the recycling of up to 15,000 barrels of water per day with the ability to expand up to 30,000 barrels of water per day. This facility will be connected by pipeline to an existing saltwater disposal well owned and operated by Select. We believe this connection to our existing disposal infrastructure provides meaningful optionality and flexibility for our customer. In general, these fixed infrastructure recycling facilities streamline our customers' water logistics, reduce their costs, and improve their results. In addition to meeting our customers' business needs, these facilities will also be critical in advancing our ESG goals and those of our customers through decreasing both freshwater usage and waste disposal. Now switching to M&A. We continue to be active in the marketplace with the recent acquisition of Complete Energy, Aqua Libre Midstream, and Old Recovery. We saw the benefit of this activity during the third quarter, with more benefits still to come in the fourth quarter and beyond. Looking at the two larger transactions in more detail, the acquisitions of Complete Energy closed on July 9th, thereby contributing for a majority of the third quarter. However, the acquisition of Aqua Libra from BASIC closed on October 1st, and therefore did not contribute to the third quarter. I spoke to the benefits of complete acquisition in detail on our last call, and I believe the acquisition of Aqua Libre provides similar financial, strategic, and operational advantages. Overall, with Aqua Libre, we believe we've added $70 to $80 million of annualized current run rate revenue and $6 to $8 million of annualized current run rate adjusted EBITDA with meaningful room for operational improvements, cost synergies, and high ROA growth. While we anticipate cost synergies resulting from each of these transactions over the course of the coming quarters, we expect these to largely take hold in 2022 as we consolidate operation locations, remove excess capacity, and sell underutilized assets. Operationally, with Aqua Libre, we are getting a solid production service presence in Texas, New Mexico, Oklahoma, and North Dakota, as well as more than 550,000 barrels per day of permitted disposal capacity, approximately half of which is in the Permian Basin. Additionally, more than half of Aqua Libre's current produced water volumes are delivered by pipelines, supported by a number of long-term contracts. Ultimately, we believe these assets are very well positioned for subsequent development opportunities, such as recycling solutions. We view this captive supply of produced water as an alternative, sustainable water source and we will continue to invest in technology and infrastructure needed to provide these solutions to our customers. As you've seen in our recent take-or-pay agreements in the Rockies, we believe that we have a very unique opportunity to build sustainable, full lifecycle recycling solutions around our existing and recently acquired infrastructure footprint. and more importantly, have the ability to do it through long-term contractual commitments around these assets. In addition, with nearly 100% of Aqua Libra's revenue coming from production-related services and infrastructure, we've added further revenue stability to our core completions-oriented base business. Combined, these two deals have increased our production-related revenue from about 10% of our total revenue during the first half of 2021 to about 25% on a pro forma basis. As we look forward, I believe that continuing to grow our less technical production and industrial related revenues and adding contracted revenues through our recycling and pipeline infrastructure will further stabilize and enhance our cash flow generation capabilities and further separate Select from its competitors. Ultimately, I believe the continuing execution of this strategy will position us to reassess a more formal long-term shareholders return program over the course of 2022. Again, I am very excited about our recent M&A execution, our technology strategy, our recycling projects, and our other ESG-focused investments. I firmly believe the market needs additional consolidation and we are well positioned to execute on additional opportunities ahead. With growing activity, strong commodity prices, and improved operational and financial performance in the third quarter and into next year, the future is exciting. With that, I'll hand it over to Nick to discuss the financial performance and outlook in more detail.

Thank you, John, and good morning, everyone. In the third quarter, select grew revenues by 27%, and gross margins by 3.5 percentage points, and successfully integrated complete energy services while doubling adjusted EBITDA quarter over quarter. And as John discussed, we executed across all three pillars of our strategy through improving the base business, advancing our technology ESG initiatives and diversification efforts, and further executing on strategic M&A. Overall revenue growth of $44 million to $204 million was supported by $29 million from the Complete businesses and a $15 million increase from the Legacy Select businesses. We believe Complete brought some attractive infrastructure assets into the water infrastructure segment with meaningful future development opportunity, though the majority of the current revenue from Complete now resides in water services. We don't intend to report Legacy Complete operations separately going forward, but hopefully that provides some context on how to think about that current revenue contribution and growth opportunities. The complete integration has proceeded smoothly to date, and the performance of these business lines has met and in many ways already exceeded our targets. We're very pleased with this acquisition and expect it to make notable contributions going forward. On a similar note, while the Agua Libre integration is still in its early stages, we foresee highly accretive financial performance there as well. Looking at the segments individually, the water services segment grew its revenues by 47%, and doubled its gross margins before DNA from 8% to around 16%. While the addition of complete drove most of the revenue growth and was accretive to the overall segment gross margin, the legacy select businesses all improved revenue and margins as well. With a flat internal forecast for lower 48 active frat crews during the fourth quarter, we expect low double-digit to mid-teen percentage revenue growth in the fourth quarter, supported by contributions from the basic assets, with slightly higher margins driven by continued pricing recoveries. Water infrastructure revenue improved by 10% to $37 million, driven primarily by the acquired complete assets, as well as additional Permian volumes. While this revenue growth was accompanied by an additional point of gross margin improvement, the overall results here fell short of our expectations. The projected recovery in Bakken pipeline activity is pushed into early 2022, with some modifications to key customer schedules. However, the completion and startups of our latest water recycling projects should progress the segment's revenue forward by high single-digit to low double-digit percentage growth in the fourth quarter, with projected margins in the low to mid-20s. We are engaged in active customer conversations around much of our newly acquired infrastructure assets in regards to adding additional gathering pipelines and recycling capabilities to existing assets, and we hope to be in a position to detail some of the 2022 opportunities for this segment on our next call. The oilfield chemicals segment expanded revenue by 8% to $55 million, though challenges with the raw materials supply chain, along with costs associated with restarting the Tyler production facility, compressed margins by 2% quarter over quarter. The Tyler facility is now producing volumes and will benefit the company both through increased production capacity and revenue potential, as well as through decreased freight costs for shipments to the MidCon, Hainesville, and Gulf Coast regions. This also allows our primary manufacturing facility in Midland to gain further share in the Permian. We expect low to mid-teens percentage revenue growth with Q4 margins returning to around Q2's 12.5% level. Raw materials supply chain issues are not fully resolved. but we have seen more relative stability so far in Q4 for our key polymers than has been the case through much of 2021. As Tyler ramps up production and gains scale efficiencies, we expect further gains for this segment in the quarters to come. On the SG&A side, about $2.5 million of the non-recurring transaction costs impacted our SG&A of $22 million for the third quarter. The addition of complete also added a little over $2 million to ongoing quarterly SG&A as well. Likewise, the successful acquisition of Agua Libre will result in some transaction costs in Q4, but I believe this number should be lower than Q3 deal costs, and the addition of certain Agua Libre personnel and systems should add a smaller incremental run rate than the addition of complete debt. Higher revenue, combined with the usual systems integration timing challenges of an acquisition, resulted in a use of cash from net working capital of $14 million which combined with our targeted investments and recycling infrastructure led to free cash flow of negative 18 million for the third quarter. We finished the quarter with 107 million of cash on hand, 232 million of overall liquidity, and no debt. For the Agua Libre acquisition that just closed just after the end of the third quarter, we used a combination of cash and equity with approximately 15 million of cash consideration paired with a little less than $5 million worth of select stock. Our strong balance sheet has allowed us to take advantage of a window of opportunity to execute accretive value creating transactions and further to deploy cash into high return opportunities around our infrastructure. Our commercialization of a water recycling facility in Colorado with dedicated volumes from blue chip customer demonstrates the potential to expand our recycling operations beyond the Permian into other basins. With the addition of the recently acquired assets, we can make further advancements on this strategy and invest in networking infrastructure into recycling facilities for much lower costs than greenfield development. As anticipated with the construction of our new recycling facilities, third quarter net capex stepped up to $15 million. With first half total net capex of just $8 million, however, our 2021 net capex guidance remains unchanged at $30 to $40 million. Depreciation expense is projected to be around $85 to $90 million for the year. with no changes to the minimal interest expense consistent with our current quarter and no material tax expense. Notwithstanding certain cost challenges, our base business continues to improve as we gain market share and recover pricing. Crude and natural gas prices are certainly supportive, and early reports on customer budgets for 2022 reflect a continuation of the positive trend, as well as being supported by a robust forward strip and hedge books. Our M&A strategy has furthered industry consolidation that attracted valuations with ample future upside. These transactions have also diversified Select into more production-levered revenue streams and accelerated our environmentally-friendly investment pathway. Whether organic or through M&A, every dollar we put to work will have to meet high standards in terms of delivering a superior return on equity to our shareholders, as well as furthering our three key strategic aims. With that, I'll turn it over to the operator for some Q&A. Operator?

Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is from Ian McPherson from Piper Sandler. Please proceed with your question.

Thanks. Good morning, John and team. Congratulations on the positive strategic directions here. Just high level, John, it feels to me like our scenario planning for 2022 has a broken relationship. You referenced, you know, 20% spending growth for next year, which is pretty consistent with what we've heard from others. Service pricing is increasing. I think you said you think service pricing could represent the lion's share of that. And yet everyone's expecting drilling activity and crew counts to be up like 20 or 25% next year. So 20% spending growth doesn't pay for all of that activity and pricing. Where do you think that relationship might break down? And what do you think the opportunities are for bigger pricing or the threats with more constrained activity might surface?

Yeah, a very good question. Thanks. I think one of the things you got to always think about in the world of drilling and completion and where we deliver our services is there's still an efficiency that's being gained. So we simply get more work done in a 24-hour period than we did 12 months ago or or six months ago. So that comes in the equation as well. But, uh, as, as Nick said, and as I said, it's, it's 20% plus. So we think the market, uh, growth, whether it's through pricing or through activity is bigger than that. And, you know, if we sat here today and said what comes out of pricing and what comes out of growth, we would probably say that it probably leans more to pricing for us, uh, you know, in the ticket size, but the efficiency kind of equalizes that and brings it back more 50-50 because, you know, again, they're going to get more done in a 24-hour period with the same people and asset base as we've seen in the past, and we continue to see that improvement in the field every day.

Okay. That's helpful. Thanks. When you look at your ambitions to grow the production-related side of the business, What do you think the next few quarters look like for Select with regard to inorganic activity to fill in the infrastructure that you've already begun to build out? Is there a lot more out there that you can consolidate, or should we expect you to be more focused on integrating what you've recently acquired and building out from today's base?

Yeah, as we said, we do believe there's more M&A opportunity and there is more consolidation needed in the space. And we continue to say that given our balance sheet and our position in the market that we will be a leader as it comes to further M&A and consolidation. But To get to the base question, you know, we have picked up a very good position in disposal wells in Oklahoma, across the Permian, across the Bakken. These assets have came out of companies that were very capital constrained. And there is good opportunity, whether it's through an ability to lay pipe, extend the reach of that disposal well, take trucks off the road, or, you know, really repurpose the water with the recycling and redistributing for, you know, crack purposes. So, you know, we think we got a lot of opportunity, but we don't believe that the current footprint will be the last footprint you see.

All right. Well, looking forward to next steps. Thanks, John.

Thank you.

Thank you. Our next question is from Tom Curan with Seaport Research Partners. Please proceed with your question.

Good morning. Good morning. So for ALM, Agua Libre, you're expecting an initial EBITDA margin range of 8.6% to 10% with a midpoint of 9.3%. How much potential do you see to raise that range, and what are the key levers you've identified for improving it?

Well, Tom, the asset base is pretty underutilized as far as its capacity and its – You know, it's positioned in the market, again, because of capital constraints. So, you know, it's a matter of capture and a matter of using the asset base either as a source of produced water for recycling purposes or use the asset base for disposal. But the matter of fact is that the utilization of these assets are very low, and the reason they're very low is because they lacked the capital needed to take the next step, which is really pipeline-related and recycling-related. So I think that's where the operational torque is, Tom.

I think secondary lever there, Tom, will probably be a little bit of an addition through subtraction as we consolidate the operational footprint and sell off some excess equipment.

But fair to say, then, that you do see expansion potential for that EBITDA margin. It certainly sounds like just on the utilization side alone, as you ramp closer to what should be full effective utilization, you know, there would be meaningful upside.

Yes, we believe that in not only Aqua Libra, but the transactions that you're seeing us do, that the operational torque or addition of ability to create a profit and a revenue out of it is very meaningful, Tom.

Great. And then John or Walt, if he's on the call, could you give us an update on how the Industrial Solutions Group's opportunity set has evolved? I recall that as of our conference, I know that Walt, Nick, and Chris were chasing a new project that sounded promising.

Yeah, I'm going to let Michael Skarkey take that one. He's in the room with us here, and he can speak to our efforts toward industrial.

Sure. Thank you, Tom. We're still evaluating the industrial market. It's obviously a very large market, and water and chemicals are a big part of it. We're narrowing in on where we think we're going to be particularly competitive and have an inherent advantage based on the background we've got in oil and gas. And I'd say that we're increasingly narrowing that scope and getting closer, but we really haven't completed our assessment yet. So we're looking at it from an organic opportunity, an inorganic opportunity, but before we really dive into how we want to approach the market. We want to be very strategic in which segments or sub-segments of the market we want to go after.

Got it. Thanks for that, Michael. And then just returning to pricing, Nick, for water services, that specific division, can you give us an idea of how much pricing is up year to date? And from here, you know, what your plan is or the potential you see for introducing additional pricing increases?

Sure, Tom. So you saw the margins double there and, you know, again, driven both by the acquired businesses as well as the legacy select business. That legacy select improvement there in the margin, part of that's activity driven, part of that's pricing driven. We're still having additional pricing increases that'll be accretive to the fourth quarter. It's still ongoing discussions with almost every customer here. But I'd say probably on the entire water services revenue base, it's going to be a little less than 10% as far as what we've achieved in these third quarter numbers here.

And just a little less than 10%?

That would be on a full year basis. Sorry, not just a 3Q quarter over quarter basis. But if your question was on the full year, that's about where we are on it.

basis there. And Tom, this is Michael Scarkey again. The one thing I'd say is we have experienced the price increases, but we also have inflation costs as well on labor and fuel, and it fuels up 40% year-to-date. And so that's going to damper some of the price increases that we've had on the financial performance. But as John mentioned, we do see the pricing improvements continuing in the next year and are seeing signs of some of our inflationary costs stabilizing, whether it's labor, raw materials, or fuel prices.

Got it. Thanks for taking my questions. Thank you.

Thank you. Our next question is from Daniel Burke with Johnson and Rice. Please proceed with your question.

Yeah, good morning, guys. Good morning. If I look at water services and water infrastructure in Q4, think about the guidance and the addition of of Agua Libre and I guess an incremental week of complete. It looks like the base case is that the organic business is pretty flat from Q3 to Q4. Is that fair? I think that's a reasonable place to put guidance, but I wanted to calibrate that.

No, I think there is some growth in there driven by the organic business coming primarily from pricing versus activity growth, which we don't see much of in Q4.

Okay, fair enough. I'll take a closer look at the numbers, I guess. And to be clear, the comments on basic current annualized run rates for revenue and EBITDA, those should be capturable in this first quarter of ownership of the assets, or does it take a little bit of repair to get even to those initial forecasts?

We may be a little short here in Q4, still obviously very early in the integration process there with an October 1 close date. But we don't think it takes incremental investment or new business development to reach those numbers.

Okay, got it. And then maybe it falls short of material, but any initial thoughts after this year's acquisitions, most primarily of the complete acquisition? assets and the basic assets on the potential for asset sale proceeds as you rationalize those asset bases?

Sure. We'll see a pretty good chunk here in the fourth quarter of asset sale proceeds. We're still evaluating what's the total potential for that, but it'll certainly be significant. It'll be well north of a million dollars for Q4 and expect the next couple quarters after that to be more or less around the same pace here. Obviously, we'll provide a lot more detail on our 2022 outlook in our next call with our full budget and work through some of the capex and net capex factors there, but certainly it's significant, and we'll see action on that in Q4 in the numbers.

Got it. All right, guys. I'll leave it there for now. Thank you for the time. Thank you.

Thank you. Our next question is from JB Lowe with Citi. Please proceed with your question.

JB, your line is now open.

Oh, sorry. I was on mute. I just had two quick ones. First was on, you know, looking on to 2022, you know, there's a lot of moving pieces. There's a lot of integration. But if we kind of take a step back, and think about with spending up 20% plus, plus all the integration that you're doing, let's back out kind of the restructuring charges. What types of incrementals do you think your now combined businesses can do in a 20% plus spending growth environment with whatever pricing that you want to throw in there? What kind of baseline incremental expectations should we kind of consider for 2022?

Historically, that's been 30%, 35%. We saw those numbers in water services and water infrastructure this quarter. I'd say those are still valid for the base business here as we look across 2022, but we do have additional potential for upside around the investments that John referenced where we have existing assets that have low utilization. There's opportunity to develop more recycling capacity around many of them. We'll be making those investments, and those should be overall accretive even compared to those incrementals there. And pricing upside of that is a wild card there if it's beyond what we're currently looking at.

Okay, great. My other question was, you're expanding your geographical footprint in some of these acquisitions. Are there any basins that you still feel that you're kind of underrepresented that you want to grow a little bit more into? Yeah, this is John.

The footprint is pretty robust if you look across the company. We do keep our eye on the activity in the Powder River as we think about it, but we had a very solid footprint with Select. The two pieces we added with Complete and the DJ and MidCon was very strong. Aqua Libra definitely added to our opportunity for recycling and fixed gathering in the Permian Basin and it added to our opportunity both in MidCon and the Bakken to do the same. But we feel very strong about our position today. We do think these acquisitions we're doing and the ones we still think potentially are out there can strengthen us. We do always think about our exposure to gas as well as oil. If you step back and look at the dollars in our position across the gassy areas too, it has added to that, but we have a good strong position in gas as well as far as the separation between oil and gas and activity goes.

All right, thanks so much. Thank you.

Our next question is from John Daniel with Daniel Energy Partners. Please proceed with your question.

Hey, guys. Thanks for including me. John, I just want to follow on a little bit to JB's question on geography. As you evaluate and prosecute M&A strategy going forward, is it more about consolidating core markets or continuing to build up sort of that bigger presence in PRBs? and then just the views on sort of an industrial desire to expand that versus sort of just walk us through a little bit more on the strategy.

Sure. When you think about M&A or the way we look at it, John, is it's not necessarily a region or maybe even a service line. It's more of an asset base. So if you think of a disposal well or a position through an asset base that we're gaining through these transactions and what we have to add to that or harvest out of that, that's probably more directive of what we have been getting with these M&A deals and continue to focus on, go forward. We have a presence across the United States that's very solid. So I would say it's more driven by direct asset that somebody has developed in another company, much like Aqua Libre. or complete disposal assets they had across the MEDCON. On the industrial side, we are very serious about it. We think we got a great guy in Walt to lead the effort. As Michael said, we want to make sure we have defined and made the right choice about what that execution area is. We're going to be disciplined about that. We do think we've got a very interesting position between water and chemistry in the oil and gas space. We believe that completely fits over into the industrial space. So our efforts and our attention are strong. Our complete business plan is incomplete yet. We're still honing in on exactly what we want to do, John.

And then just one final one on the labor markets. Uh, you know, we keep hearing from everyone how tough it is. Is it when you consolidate these enterprises complete and Aqua Libre from the people perspective, are they, is it a breath of fresh air where they're excited to have you guys take them out of what might've been misery or do they all kind of move on to other things? Just can you give us your experience with these two deals from a people perspective?

Yeah. So, uh, It's a breath of fresh air, John, as you can imagine. I mean, I've got a lot of history with the complete guys, and I guess you'd say we're glad to be holding hands again. Okay. And I was, you know, on the basic side, very much glad to be in a position that, you know, there seems to be a defined future, and they were very relieved. So I would definitely say it. been strong in retention as well as strong in the aggressiveness of excitement. Okay.

Thank you for letting me ask some questions. You bet. Thank you.

Mr. Schmitz, there are no further questions at this time. I would like to turn the floor back over to you for closing remarks.

Just want to thank everybody for taking the time out of their day and giving select the attention. and the questions that was asked of the company. And as we say, we're excited to go forward. So looking forward to talking to you in three months. Thank you.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.