Select Water Solutions, Inc. (WTTR) Q3 2021 Earnings Report, Transcript and Summary

Greetings, and welcome to the Select Energy Services Third Quarter Earnings Conference Call. [Operator Instructions]. 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 Swyka, Senior Vice President and Chief Financial Officer; and Michael Skarke, 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 Select's 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 8-K as well as our quarterly reports on Form 10-Q 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 3 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 UltRecovery during the third quarter and Agua Libre 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 revenue 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 an 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 FluidMatch 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 Suzi Colbert as our -- to our leadership team as Select's first Chief Technology Officer. Suzi brings over 20 years of experience in a number of technology and financial operational leadership positions at Marathon, BP, Noble Drilling and Anadarko. Suzi 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 our -- and grow our position as a technology leader in the sector. Additionally, while the E in ESG is often top of mind in our business, we believe the other areas are equally as important. Accordingly, Suzi 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 Emission Rx 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 5 additional units on order that we expect to receive and deploy during the fourth quarter. To remind everyone, these Emission Rx 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 3 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 3-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, Agua Libre Midstream and UltRecovery. 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 2 larger transactions in more detail. The acquisitions of Complete Energy closed on July 9, thereby contributing for a majority of the third quarter. However, the acquisition of Agua Libre from Basic closed on October 1 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 Agua Libre provides similar financial, strategic and operational advantages. Overall, with Agua Libre, we believe we've added $70 million to $80 million of annualized current run rate revenue and $6 million 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 Agua 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 Agua 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-life cycle 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% Agua Libre's revenue coming from production-related services and infrastructure, we've added further revenue stability to our core completions-oriented base business. Combined, these 2 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 cyclical production and industry-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 shareholder 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 3 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 expected 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 margin before D&A 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 frac 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 start-ups 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 material 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 cost for shipments to the MidCon, Haynesville 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 material 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 gain 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 nonrecurring 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 did. 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 in 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 a 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 cost 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 million to $40 million. Depreciation expense is projected to be around $85 million 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 book. Our M&A strategy has furthered industry consolidation at attractive 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 3 key strategic aims. With that, I'll turn it over to the operator for some Q&A. Operator?

[Operator Instructions]. Our first question is from Ian MacPherson from Piper Sandler.

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 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 is 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 in pricing. Where do you think that relationship might break down? And what do you think the opportunities for bigger pricing or the threats with more constrained activity might surface?

Yes. 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 6 months ago. So that comes in the equation as well, but as Nick said and as I said, it's 20% plus. So we think the market growth, whether it's through pricing or through activity, is bigger than that. And 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 in the ticket size, but the efficiency kind of equalizes that and brings it back more 50-50 because, 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. 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? Are there -- 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?

Yes. 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, 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 really repurpose the water recycling and redistributing for frac purposes. So we think we've got a lot of opportunity, but we don't believe that the current footprint will be the last footprint you see.

Our next question is from Tom Curran with Seaport Research Partners.

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?

Tom, the asset base is pretty underutilized as far as its capacity and its position in the market again because of capital constraints. So it's a matter of capturing 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 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? Certainly, it sounds like just on the utilization side alone, as you ramp closer to which should be full effective utilization, there would be meaningful upside.

Yes. We believe that in not only Agua Libre but the transactions that you're seeing us do, that the operational work or addition of ability to create a profit and 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.

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

Sure. Thank you, Tom. So 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 on organic opportunity and 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 subsegments of the market we want to go after.

Got it. 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, what your plan is or the potential you see for introducing additional pricing increases?

Sure, Tom. So you saw the margins double there and, 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 is activity-driven, part of that is pricing-driven. We're still having additional pricing increases that will 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% to which period?

Full year basis, sorry, not just a 3Q quarter-over-quarter basis. But I believe if your question was on the full year, that's about where we are on a -- basis there.

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

Our next question is from Daniel Burke with Johnson Rice.

If I look at Water Services and Water Infrastructure in Q4, think about the guidance and the addition 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 mean 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 that -- 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 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 will certainly be significant. It will be well north of $1 million for Q4 and, expect the next couple of 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.

Our next question is from J.B. Lowe with Citi.

Sorry, I was on mute. I just had 2 quick ones. First was on looking out into 2022. 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 like baseline incremental expectations should we kind of consider for 2022?

Historically, that's been 30%, 35%. We saw that -- 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 outside of that is a wildcard 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 basis that you still feel that you're kind of underrepresented, that you want to grow a little bit more into?

Yes. This is John. The footprint is pretty robust if you look across the company. We do keep our eye on activity in the Powder River as we think about it. But we had a very solid footprint with Select. The 2 pieces we added with Complete in the DJ and MidCon was very, very strong. Agua Libre definitely added to our opportunity for recycling and fixed gathering in the Permian Basin. And it added to our opportunity both in MidCon and in 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. And if you step back and look at the dollars and our position across gas 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.

Our next question is from John Daniel with Daniel Energy Partners.

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 PRB? And then just the views on sort of an industrial desire to expand that versus sort of oil and gas.. Just walk us through a little bit more on the strategy.

Sure. When you think about M&A, our 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 going forward. We have a presence across the United States that's very solid. So I would say it's more driven by a direct asset that somebody has developed in another company, much like Agua Libre or Complete disposal assets they had across the MidCon. We are very -- 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 got a very interesting position between water and chemistry in the oil and gas space. We believe that completely fits over in the industrial space. But -- so our efforts and our attention are strong. Our Complete business plan isn't complete yet. We're still honing in on exactly what we want to do, John.

Okay. And then just one final one on the labor markets. We keep hearing from everyone how tough it is. Is it -- when you consolidate these enterprises, Complete and Agua Libre, from the people perspective, are they -- is it a breath of fresh air? Were they excited to have you guys take them out of what might have 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.

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

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 3 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.