Water handling and recycling company Aris Water (NYSE:ARIS) reported Q1 CY2025 results topping the market’s revenue expectations , with sales up 16.5% year on year to $120.5 million. Its non-GAAP profit of $0.24 per share was 16.6% below analysts’ consensus estimates.
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Revenue: $120.5 million vs analyst estimates of $113.1 million (16.5% year-on-year growth, 6.5% beat)
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Adjusted EPS: $0.24 vs analyst expectations of $0.28 (16.6% miss)
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Adjusted EBITDA: $56.54 million vs analyst estimates of $52.54 million (46.9% margin, 7.6% beat)
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EBITDA guidance for Q2 CY2025 is $52.5 million at the midpoint, below analyst estimates of $56.59 million
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Operating Margin: 23.1%, down from 26.9% in the same quarter last year
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Free Cash Flow was -$27.23 million, down from $24.23 million in the same quarter last year
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Sales Volumes rose 3% year on year (6% in the same quarter last year)
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Market Capitalization: $703.1 million
Aris Water reported first quarter results driven by higher-than-expected customer activity and record produced water and water supply volumes, which management attributed to robust completion activity and strong demand for water takeaway services. CEO Amanda Brock highlighted the successful integration of the McNeill Ranch acquisition and cited the company’s ability to accelerate growth as land values rise in key production regions. Management also discussed ongoing efforts to commercialize new revenue streams, including solar and surface royalty projects at the Ranch, and progress in large-scale water recycling and beneficial reuse partnerships.
Looking ahead, management emphasized uncertainty in the second half of the year due to commodity price fluctuations and potential tariff impacts. CFO Stephan Tompsett described the company’s capital allocation flexibility, noting that Aris Water can adjust investment in response to customer activity levels. The company remains focused on maintaining a strong balance sheet and delivering free cash flow, with Brock stating, “We are positioned to moderate our capital investments alongside our customers if and as needed.”
Aris Water’s latest quarter was shaped by elevated water handling volumes, successful integration of new assets, and early contributions from strategic initiatives beyond its core business. Margin pressures and capital investment discipline were recurring themes throughout management’s remarks.
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Record water volumes: Management credited higher-than-expected customer activity and increased spot (interruptible) volume demand for producing record sequential growth in both produced water handling and water supply.
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McNeill Ranch progress: The first full quarter of integrating McNeill Ranch exceeded expectations, with management reporting strong inbound interest from potential partners for solar and other surface projects, as well as new disposal permits already secured.
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Beneficial reuse acceleration: The company advanced its initiatives in large-scale desalination and water recycling, partnering with operators to reduce desalination costs and progressing on permitting for reservoir replenishment and industrial use.
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Industrial water treatment expansion: Aris Water further integrated a recently acquired team focused on industrial water treatment, aiming to expand beyond oilfield services and diversify revenue streams.
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Cost management and capital flexibility: Management stressed the company’s ability to reduce capital spending by 25%-30% if customer activity slows, and highlighted maintaining balance sheet strength as a top priority amid ongoing volatility in oil prices and tariffs.
Management’s outlook for the remainder of the year centers on adapting to customer activity trends, commodity price movements, and the continued commercialization of new business lines.
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Customer activity and oil prices: The company’s growth is closely tied to customer drilling and completion levels, which could be affected by changing oil prices. Aris Water’s long-term contracts with large operators provide some revenue stability, but management remains alert to possible reductions in customer activity.
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Expansion of new revenue streams: Strategic efforts to monetize McNeill Ranch through surface projects and to commercialize beneficial reuse and mineral extraction (such as iodine and potentially magnesium) are expected to drive incremental revenue and margin opportunities over time.
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Operational flexibility amid uncertainty: Management cited the ability to scale down capital investments quickly as a key mitigant to potential downturns, aiming to protect free cash flow and maintain dividends even if market conditions worsen.
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Wade Suki (Capital One): Asked how Aris Water would respond if its customers shifted to maintenance mode; management explained it could reduce capital expenditures by 25%-30% and expects water cuts to remain stable.
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Jackie Koletas (Goldman Sachs): Queried about strong Q1 volumes and the sustainability of spot volume contributions; management noted some wells outperformed and that spot volumes are difficult to forecast, viewed as incremental rather than core.
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Spiro Dounis (Citi): Requested color on the timeline and commercial potential of McNeill Ranch; management described strong inbound interest and ongoing permitting progress, but said they are “in early innings” on full monetization.
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Jeremy Tonet (JPMorgan): Investigated competitive positioning versus other midstreamers expanding in water; management said its geographic footprint and long-term contracts provide insulation, and it continues to pursue its own pipeline development.
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Derrick Whitfield (Texas Capital): Sought insight on the cost structure of desalination and potential for beneficial reuse to become cost-competitive; management stated that operational expenses are trending below $1 per barrel, though commercial scale remains in development.
In upcoming quarters, the StockStory team will be monitoring (1) the sustainability of elevated water volumes and the cadence of customer drilling and completion activity, (2) progress and commercial traction at McNeill Ranch, including new surface or mineral projects, and (3) the company’s ability to scale beneficial reuse and industrial water treatment initiatives. We will also watch for updates on capital allocation and any changes in customer behavior in response to commodity price or tariff shifts.
Aris Water currently trades at a forward P/E ratio of 14.6×. Should you load up, cash out, or stay put? The answer lies in our free research report.
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