Select Water Solutions, Inc. 2026 Q2 Earnings Call

Thank you operator. Good morning everyone. We appreciate you joining us for Select Water Solutions conference call and webcast to review our financial and operational results for the second quarter of 2026. With me today are John Schmitz, our Founder, Chairman, President, and Chief Executive Officer, Chris George, Executive Vice President and Chief Financial Officer, Michael C. Skarke, Executive Vice President and Chief Commercial Officer, and Mike Lyons, Executive Vice President and Chief Strategy and Technology Officer. Before I turn the call over to John, 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 selectwater.com. There will also be a recorded telephonic replay available until August 19th, 2026. 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, August 5th, 2026, and therefore, time-sensitive information may no longer be accurate at 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's management. However, various risks, uncertainties, and contingencies could cause our actual 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 10-Q, to understand those risks, uncertainties, and contingencies. Please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures.

Now, I'd like to turn the call over to John.

Thanks, Garrett. Good morning, and thank you for joining us. I am pleased to be discussing Select Water Solutions again with you today. The second quarter of 2026 was a very strong quarter for Select. I'd like to start with some of the key second quarter highlights and other strategic and market updates. Then I'll hand it over to Chris to discuss the second quarter financial results and the forward outlook in more detail. In the second quarter, Select delivered strong overall performance across all three operating segments with both our Water Infrastructure and our Chemical Technologies segments producing record revenue and gross profit in the quarter. During the second quarter, on a consolidated basis, we increased revenue by 8%, increased adjusted EBITDA by 19%, and more than doubled net income as compared to the first quarter of 2026.

Our Water Infrastructure segment outpaced our guidance for the period, delivering another quarter of revenue growth and margin improvement. Increased produced water volumes and improved skim oil recovery drove record quarterly revenue of $102 million for the segment in the second quarter. This results in 26% year-over-year growth in revenue for the segment relative to the second quarter of 2025, demonstrating the significant progress we've made with our Water Infrastructure growth strategy. We expect to see further growth in the third quarter, we are well on track to achieve the upper end of our 25%-30% full year growth guidance for the segment, setting the stage for additional run rate growth looking into 2027. While much has been accomplished, we continue to find new opportunities, both large and small, to further enhance the long-term potential value of our Northern Delaware network.

We added several MVCs, acreage dedications, and interruptible tie-in agreements during the quarter, while also executing a new mineral extraction agreement with a new strategic partner for iodine extraction across the portfolio. Importantly, during the second quarter, we executed a new seven-year agreement with a large public operator in the Northern Delaware Basin, supported by a sizable 128 million barrel MVC contract. This agreement also included the conveyance of a portfolio of underutilized but strategic SWDs across Eddy and Lea County, New Mexico. We intend to tie these SWDs into our existing Water Infrastructure network, the full project associated with the large MVC award is expected to cost approximately $25 million-$30 million and to be operational within the next 12 months.

The conveyance of these SWDs was largely enabled by the historical success of the full lifecycle water management solutions we've developed in collaboration with this operator, which increased their recycling volumes and decreased the utilization of their own operated disposal wells in the Northern Delaware. This reduced the operator's need for owning disposal wells in the region. This speaks to the value our integrated recycling and disposal infrastructure network brings to our customers, and more broadly to the Northern Delaware region. Ultimately, the customer views this disposal capacity as more valuable to them as part of Select's broader commercial platform than part of their own internal system.

Select's comprehensive water management framework allows us to take a basin-wide approach to produced water disposal, treatment, and supply to unlock value across the Northern Delaware Basin. I believe there will continue to be opportunities to acquire existing assets that are scalable and synergistic with Select's ongoing organic infrastructure build-out. Water management is mission-critical to the energy industry. Disposal remains an essential part of a comprehensive water management solution. We are proud of the increasing collaboration and commitment from our customers to grow our full lifecycle and cost-advantage solution in partnership together. Elsewhere, in our Chemical Technologies segment, we saw significant sequential and year-over-year improvement coming in well above our expectations. Our Chemical Technologies segment in basin manufacture, rapid new product development pace, and steady field execution has driven market share gains.

Furthermore, increased completion intensity and complexity and the growing interest in surfactant technology has driven increased demand for our higher spec and higher margin product offerings. This contributed to record-setting Chemical Technologies revenue in the second quarter. Despite increases to oil-based raw material input costs, we delivered margin gains in the quarter as well. Looking at our Water Services segment, we outperformed our expectations in the second quarter. We have been pleased with the year-to-date performance of our last-mile water logistics and delivery business. Looking at the macro outlook more broadly, the geopolitical and commodity price environment remains fluid. We believe the customer activity environment will remain supportive of a continued solid performance in the more direct activity correlated offerings within our Water Services and Chemical Technologies segments.

While our Water Infrastructure segment will continue to benefit from the strong secular tailwinds, a steady pace of new projects, and a growing portfolio of contracted future inventory in the core of the Permian Basin. Overall, I am very pleased with the performance of the business year-to-date. With the support of a healthy balance sheet, we are well-positioned to continue to invest in attractive growth opportunities in front of us in order to deliver long-term value to our customers, employees, and stakeholders as we look ahead. At this point, I'll hand it over to Chris to speak to our financial results and outlook in a bit more detail.

Chris? Thank you, John. Good morning, everyone.

Select made great strides in the second quarter, which included strong consolidated revenue, net income, and adjusted EBITDA growth. Another quarter of record-adjusted EBITDA and consolidated gross margins before D&A. Record Water Infrastructure and Chemical Technologies revenues. Ongoing strong performances in Water Services. Looking at our second quarter segment performance in more detail, we grew consolidated revenues to $396 million, net income to $23 million, and adjusted EBITDA to $93 million. As John mentioned earlier, the Water Infrastructure segment delivered another positive quarter marked by top-line revenue growth, margin expansion, and incremental contract awards. We increased our produced water volumes handled to 1.5 million barrels per day. We improved our skim oil capture alongside higher pricing, contributing to record revenues of $102 million and very strong 58% gross margins before D&A, outpacing our guided expectations.

This represents a 5% increase in revenue and a 9% increase in gross profit before D&A as compared to the first quarter of 2026. Importantly, this equates to year-over-year growth in revenue and gross profit before D&A of 26% and 27%, respectively, relative to Q2 of 2025. John noted in the second quarter, we bolstered the outlook for our Water Infrastructure business with the addition of several new infrastructure contracts, including a sizable MVC award and multiple dedications and interruptible tie-in opportunities across the Permian, Bakken, MidCon, and Northeast regions. In addition to the 14 SWDs conveyed as part of the larger contract John outlined, we also acquired two separate SWDs in the Delaware Basin during the second quarter for a total of 16 new active SWDs added in the region. Separately, we also closed on the previously announced strategic surface acquisition of the Black River Ranch during the quarter.