Select Water Solutions, Inc.

Greetings and welcome to the Select Energy Services Fourth 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, Mr. Chris George, Vice President of Investor Relations and Treasurer. Thank you, Mr. Chris George. 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 fourth quarter of 2021. With me today are John Schmitz, our founder, chairman, president and CEO, Nick Swyka, senior vice president and chief financial officer, and Michael Starkey, 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 March 9, 2022. 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, February 23, 2022, 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 select 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, our current reports on Form 8-K, 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. Overall, 2021 was very exciting for Select. Having been back in the CEO seat for a little over a year now, I'm pleased with the progress we've made on executing our strategy of improving and bolstering our base business, advancing our technology, ESG and diversification efforts, and executing on our strategic M&A. I'd like to start by highlighting some of our 2021 achievements. We finished the year with total revenues of $765 million, and adjusted EBITDA of $50 million, while seeing revenue, margins, and adjusted EBITDA grow every quarter throughout the year. On the technology and sustainability front, we continue to advance our water recycling efforts. We've invested in six facilities during 2021 backed by long-term contracts. This sets the stage for significant growth in our recycle volumes for 2022. We are also having constructive conversations with our customers every day, and I believe we will continue to build on our recent success with more long-term contracted development opportunities in 2022. We are also very active on the M&A front during 2021. As I've stated many times, I believe consolidation is very important for this industry. Through a combination of cash and stock consideration, we closed on the acquisitions of Complete Energy Services, Aqua Libra Midstream, HB Rentals, and Nolte Recovery during 2021. Additionally, we are set to close on the acquisition of Nevera Environmental Solutions. In doing so, we've added nearly $300 million of run rate revenues to an already growing base business and acquired strategic portfolio of infrastructure assets including gathering and distribution pipelines, disposal facilities, and landfill operations. Importantly, we have also welcomed more than 1,200 new skilled employees to the Select family. In a challenging economic environment and a tight labor market, these new team members will be critical to drive our continued success in 2022. Through these consolidation opportunities, we have meaningfully improved and expanded our operation capabilities and geographic breadth. I also believe we have a tremendous opportunity to create revenue synergies and capture cost savings while improving our margin profile through increased efficiency and pricing gains across the business. During 2021, We have also executed a number of strategic investments and partnerships with unique emerging technologies and energy transition platforms, including ice thermal harvesting, deep imaging technologies, ESG solutions, and EmissionsRx. As we look forward, we will continue to look for unique opportunities to invest in and advance our technology, sustainability, and diversification initiatives. While the fourth quarter was relatively stable from an industry activity standpoint, our revenue growth well exceeded the industry activity growth. We continue to see the benefits of a strong commodity price backdrop overall, with oil prices around $90 and natural gas prices of more than $4. I believe 2022 will be a strong year for the industry. with North America onshore E&P budgets expected to be up 25 to 35% year over year. Supported by our continued investment in technology, our recent acquisitions, and our strong balance sheet, Select is well positioned to grow and succeed in 2022. Select's leadership in water and chemical solutions is driven by our operation reliability, our committed focus on safety and sustainability, our leading technology platform, and our highly skilled and dedicated employee base that's now more than 3,500 strong. Our unique, integrated platform of water and chemical solutions provides a truly differentiated value proposition for our customers, and I look forward to continue to provide them with the operational excellence they have come to rely on from Select. Speaking directly to the fourth quarter, we wrapped up the year with another strong showing with revenues increasing 25% quarter over quarter and adjusted EBITDA growing by more than 70% to 26 million. In addition to the growth we've seen in the base business, we've already seen strong contributions from our recent acquisitions. However, we still have much room for improvement as our operation Integration strategy advances in the coming quarters. I'll let Nick speak to our first quarter and 2022 financial outlook in more detail, but I feel very good about our continued ability to grow the business, meaningfully improve our pricing, achieve cost synergies, capture market share, and generate free cash flow during 2022. With the sizable portfolio of infrastructure assets we recently acquired, we are well positioned to continue to build around these assets and further develop unique, sustainable solutions, including gathering pipelines and our water recycling and integrated fluid match solutions. We remain very focused on growing our less technical production and industrial-related revenues and adding contracted revenues through our recycling and pipeline infrastructure. Ultimately, this will further stabilize and enhance our cash flow generation capabilities, differentiate Select from its competitors, and provide incremental capital allocation opportunities. Again, I am very pleased with our recent acquisitions, our technology strategy, our recycling projects, and our other strategic investments. With growing activity, strong commodity prices, and improved operations and financial performance, 2022 is setting up to be a very exciting year for Select. With that, I'll hand it over to Nick to discuss the financial performance and outlook in more detail.