Core Insights - KLX Energy Services Holdings, Inc. has announced the refinancing of its existing 2025 senior secured notes by issuing approximately $232 million of new senior secured notes due March 2030 [1] - The company has also entered into a new ABL credit facility with a commitment of $125 million, which is due March 2028 [1] - The refinancing is expected to close around March 11, 2025, subject to certain conditions [1] Financial Performance - KLX anticipates that its 2024 fourth quarter revenue will align with the midpoint of previously disclosed guidance, while the Adjusted EBITDA margin is expected to exceed the high-end of prior guidance [2] - The company reported a strong finish to the year despite typical seasonal challenges, attributing this to cost controls and favorable shifts in product service line contributions [2] - The U.S. rig count has decreased by approximately 5% over the same period, yet KLX's focus on completion and production business lines has sustained its performance [2] Strategic Initiatives - The refinancing of bonds and ABL is seen as a significant milestone in strengthening KLX's financial position, extending debt maturity and enhancing financial flexibility for strategic initiatives [2][3] - The company aims to capitalize on opportunities for deleveraging and growth while delivering value to shareholders with the improved capital structure [3] Upcoming Events - KLX will report its 2024 fourth quarter and year-end financial results on March 14, 2025, with a live conference call scheduled for 9:30 a.m. Eastern Time [4]

Company Overview - KLX Energy Services (KLXE) shares increased by 7.4% to close at $5.63, with trading volume significantly higher than usual, reflecting a 17.2% gain over the past four weeks [1][2] Market Demand and Positioning - The rise in KLX Energy's stock is attributed to increased demand for its oilfield services, driven by favorable oil and gas prices [2] - The company offers a wide range of downhole tools and services that cater to various well phases, which helps reduce costs and strengthens its competitive position in the oilfield services market [2] - KLX Energy's capability to address land-based, offshore, and international well control challenges has led to securing lucrative projects, enhancing its financial performance and profitability [2] Financial Performance Expectations - KLX Energy is projected to report a quarterly loss of $0.72 per share, reflecting a year-over-year decline of 33.3%, with expected revenues of $168.9 million, down 13% from the previous year [3] - The consensus EPS estimate for KLX Energy has remained unchanged over the last 30 days, indicating that stock price movements may not sustain without trends in earnings estimate revisions [4] Industry Context - KLX Energy Services operates within the Zacks Oil and Gas - Field Services industry, where Kinetik Holdings Inc. (KNTK) also operates, having closed 2.2% higher at $61.92, with a 7.4% return in the past month [4]

Financial Data and Key Metrics Changes - The company reported Q3 revenue of $189 million, representing a 5% sequential increase from Q2 [14] - Adjusted EBITDA for Q3 was $27.8 million, up 3% sequentially, with an adjusted EBITDA margin of 15%, consistent with Q2 [14][15] - The average revenue generated per operated U.S. land rig was approximately $334,000, marking the third highest since tracking began post-merger [9] Business Line Data and Key Metrics Changes - Completion-focused activity accounted for 54% of Q3 revenue, up from 51% in Q2, while production and intervention dropped to 25% from 28% [12] - Revenue from the Rocky Mountain segment was $67.9 million, a 10.6% sequential increase, while the Southwest segment saw a slight 2% decrease in revenue to $68.6 million [18][20] - The Northeast Mid-Con segment experienced a 7% sequential revenue increase to $52.4 million, driven by higher completions activity [22] Market Data and Key Metrics Changes - The Southwest region contributed 36% of Q3 revenue, down from 39% in Q2, while the Northeast Mid-Con increased to 28% from 27% [11] - The Rockies segment maintained a steady contribution of 36% to revenue, reflecting strong performance despite a mix shift [11][16] Company Strategy and Development Direction - The company aims to maximize margins, generate free cash flow, and maintain financial flexibility to execute its strategy effectively [29] - KLX is focused on leveraging its geographic diversification and strong customer relationships to navigate market challenges and capture market share [10][30] - The company is considering refinancing options for its capital structure due to strong operating performance and optimism for 2025 [26] Management Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2025, anticipating a sequential revenue decline of 10% to 14% in Q4 due to seasonal factors [36] - The company expects 2025 revenue to increase by 5% to 10%, supported by positive customer feedback and ongoing discussions for future plans [52] - Management highlighted the potential for growth in gas-directed activity driven by LNG exports and data center demand [35] Other Important Information - The company ended Q3 with a cash balance of $83 million and liquidity of $126 million [25] - Q3 capital expenditures were $21 million, with expectations for normalized spending in Q4 [27][28] Q&A Session Summary Question: Strength in Northeast Mid-Con - Management noted that the 7% revenue increase was driven by pressure pumping and frac rentals, with improved margins due to right-sizing operations earlier in the year [43] Question: Shift in Rockies Segment - Management explained that the Rockies segment's revenue was flat due to a mix shift towards lower-margin product lines, despite strong performance in tech services and rentals [44] Question: Cash Flow Expectations - Management indicated that Q4 cash flow could approach breakeven, depending on weather conditions and holiday impacts on operations [45][46] Question: 2025 Planning Amidst Market Challenges - Management discussed the importance of strategic positioning and customer engagement for 2025, with expectations for constructive growth [49][52] Question: D&C Efficiency Gains - Management acknowledged that efficiency gains are plateauing, but KLX is well-positioned to capitalize on these trends through strategic pricing discussions [56] Question: Opportunities for Consolidation - Management highlighted KLX's strong positioning to capture market share amid consolidation trends in the industry, focusing on technology and safety as key differentiators [60][61]

Core Viewpoint - KLX Energy Services reported a quarterly loss of $0.40 per share, which was better than the Zacks Consensus Estimate of a loss of $0.48, representing an earnings surprise of 16.67% [1]. Financial Performance - The company posted revenues of $188.9 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 4.02%, but down from $220.6 million in the same quarter last year [2]. - Over the last four quarters, KLX Energy Services has exceeded consensus EPS estimates two times and topped consensus revenue estimates three times [2]. Stock Performance - KLX Energy Services shares have declined approximately 60% since the beginning of the year, contrasting with the S&P 500's gain of 21.9% [3]. - The current consensus EPS estimate for the upcoming quarter is -$0.75 on revenues of $174.25 million, and for the current fiscal year, it is -$2.98 on revenues of $710.75 million [7]. Industry Outlook - The Oil and Gas - Field Services industry, to which KLX Energy Services belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, indicating a challenging environment [8]. - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact KLX Energy Services' stock performance [5]. Future Expectations - The estimate revisions trend for KLX Energy Services is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expectations of underperformance in the near future [6]. - The upcoming earnings call will be crucial for assessing the sustainability of the stock's price movement based on management's commentary [3].

Revenue Performance - For the three months ended September 30, 2024, total revenue was $188.9 million, a decrease of $31.7 million or 14.4% compared to $220.6 million in the same period of 2023[95]. - Revenue from the Rocky Mountains segment decreased by $9.1 million or 11.8%, while the Southwest segment also saw a decrease of $9.2 million or 11.8%[95]. - The Northeast/Mid-Con segment experienced a revenue decline of $13.4 million or 20.4%, driven entirely by a decrease in weighted average price[95]. - For the quarter ended September 30, 2024, total revenue was $543.8 million, a decrease of $150.4 million or 21.7% compared to $694.2 million in the prior year period[105]. - For the nine months ended September 30, 2024, total revenue was $543.8 million, a decrease of 21.7% compared to the prior year[105]. Operating Performance - Operating income for the quarter was $1.1 million, down 93.3% from $16.4 million in the prior year, primarily due to reduced activity and pricing[100]. - Operating loss for the nine months was $10.6 million, compared to operating income of $54.9 million in the prior year[110]. Net Income and Loss - Net loss for the quarter was $8.2 million, compared to net income of $7.6 million in the prior year period, driven by lower revenues[103]. Costs and Expenses - Cost of sales for the quarter was $142.3 million, maintaining 75.3% of sales, with labor costs per employee decreasing by 2.4%[97]. - Selling, general and administrative expenses (SG&A) were $21.2 million, or 11.2% of revenues, up from $18.6 million or 8.4% in the prior year[98]. Cash and Liquidity - As of September 30, 2024, the company had $82.7 million in cash and cash equivalents, with a total liquidity position of $126.3 million[114]. - Cash on hand at September 30, 2024, was $82.7 million, down by $29.8 million from the previous period[137]. - Cash flows provided by operating activities for the nine months ended September 30, 2024, were approximately $28.2 million, a decrease from $77.0 million for the same period in 2023[135]. Debt and Financing - Total outstanding long-term indebtedness was $285.2 million, including $50.0 million classified as current liability[117]. - The company plans to refinance its $237.3 million Senior Secured Notes due November 1, 2025, as it does not have enough cash on hand to redeem them[118]. - The total debt related to the Senior Secured Notes as of September 30, 2024, was $235.2 million, with an annual interest rate of 11.5%[124]. Capital Expenditures - Capital expenditures for the nine months ended September 30, 2024, were $49.8 million, an increase from $44.3 million in the same period of 2023, with expectations to incur between $55.0 million and $60.0 million for the full year[130]. Market Outlook - The company anticipates that oil demand will increase by 1.78 million barrels next year according to OPEC and its allies, indicating potential growth opportunities[87]. - The company expects demand for oil and gas products to hold and expand, driven by increased energy needs across the United States[88]. Strategic Initiatives - The company has developed tools covered by 38 patents and 9 pending patent applications, enhancing its competitive edge in the market[81]. - The company plans to continue pursuing strategic acquisitions to strengthen its competitive positioning and drive efficiencies[76]. - The company is focused on maintaining a solid balance sheet and sufficient operating liquidity while managing capital expenditures prudently[92]. Legal and Compliance - The company incurred legal and administrative fees of $0.2 million for the nine months ended September 30, 2024[133]. - The company has established effective disclosure controls and procedures as of September 30, 2024[148]. Rig Count - As of September 30, 2024, the U.S. land rig count stood at 567, a decrease of 5.8% from 602 at the end of 2023[85]. Price Trends - The average daily price of West Texas Intermediate (WTI) decreased by approximately 2.7% to $76.43 per barrel during the three months ended September 30, 2024, compared to $78.53 per barrel in the previous quarter[85].

Financial Performance - Revenue for Q3 2024 totaled $188.9 million, a 4.8% increase from Q2 2024 revenue of $180.2 million[7] - Net loss for Q3 2024 was $(8.2) million, with an adjusted net loss of $(6.4) million[8] - Adjusted EBITDA for Q3 2024 was $27.8 million, compared to $27.0 million in Q2 2024, resulting in an adjusted EBITDA margin of 14.7%[8] - Revenues for Q3 2024 were $188.9 million, a decrease of 14.4% compared to $220.6 million in Q3 2023[25] - Operating income for Q3 2024 was $1.1 million, down from $16.4 million in Q3 2023, indicating a significant decline in profitability[25] - Net loss for Q3 2024 was $8.2 million, compared to a net income of $7.6 million in Q3 2023, reflecting a substantial shift in financial performance[25] - Adjusted EBITDA for Q3 2024 was $27.8 million, compared to $27.0 million in Q2 2024 and $36.7 million in Q3 2023, reflecting a decline in profitability[39] - Adjusted EBITDA margin for Q3 2024 was 14.7%, down from 15.0% in Q2 2024 and 16.6% in Q3 2023[39] - Consolidated net loss for Q3 2024 was $8.2 million, compared to a loss of $8.0 million in Q2 2024 and a profit of $7.6 million in Q3 2023[38] Segment Performance - The Rocky Mountains segment generated revenue of $67.9 million, a 10.6% sequential increase from Q2 2024[10] - The Southwest segment reported revenue of $68.6 million, reflecting a (2)% sequential decrease from Q2 2024[11] - The Northeast/Mid-Con segment achieved revenue of $52.4 million, a 7.2% sequential increase from Q2 2024[12] - Rocky Mountains operating income for Q3 2024 was $9.7 million, down from $10.5 million in Q2 2024 and $17.7 million in Q3 2023[40] - Southwest operating income for Q3 2024 was $0.7 million, a decrease from $2.6 million in Q2 2024 and $4.8 million in Q3 2023[42] - Northeast/Mid-Con operating income for Q3 2024 was $2.0 million, recovering from a loss of $2.5 million in Q2 2024 but down from $5.2 million in Q3 2023[43] - Corporate and other operating loss for Q3 2024 was $11.3 million, consistent with the loss in Q3 2023 but worse than the loss of $9.2 million in Q2 2024[45] Cash Flow and Liquidity - Total current assets decreased to $254.8 million in Q3 2024 from $290.3 million in Q2 2024, indicating a decline in liquidity[26] - Cash and cash equivalents were $82.7 million as of September 30, 2024, down from $112.5 million at the end of Q2 2024[26] - Net cash flow provided by operating activities decreased to $16.8 million for the three months ended September 30, 2024, down from $22.2 million in the previous quarter and $25.6 million a year ago[50] - Unlevered free cash flow for the three months ended September 30, 2024, was $7.5 million, significantly lower than $19.4 million in the previous quarter and $21.1 million a year ago[50] - Current assets as of September 30, 2024, totaled $254.8 million, a slight increase from $251.3 million as of June 30, 2024, but down from $290.3 million a year ago[51] - Net working capital improved to $51.0 million as of September 30, 2024, compared to $42.2 million as of June 30, 2024, and $47.2 million as of December 31, 2023[51] Debt and Liabilities - Total debt outstanding as of September 30, 2024, was $285.2 million, with a cash balance of $82.7 million[16] - Total liabilities increased to $484.3 million in Q3 2024 from $464.4 million in Q2 2024, suggesting rising financial obligations[26] - Total debt as of September 30, 2024, was $285.2 million, slightly up from $284.9 million as of June 30, 2024, and $284.3 million as of December 31, 2023[52] - Net debt increased to $202.5 million as of September 30, 2024, compared to $198.0 million as of June 30, 2024, and $171.8 million as of December 31, 2023[52] - The net leverage ratio remained stable at 1.8 as of September 30, 2024, consistent with the previous quarter and improved from 1.9 as of December 31, 2023[54] Future Outlook - The company anticipates a sequential revenue decline of 10% to 14% for Q4 2024 due to seasonal factors[5] - Discussions with customers regarding their 2025 drilling and production programs indicate positive momentum for the upcoming year[6] - Future performance is subject to significant risks, including demand fluctuations and commodity price volatility, which could impact revenue and profitability[24] - The company is focused on executing its long-term growth strategy and integrating acquisitions to enhance operational capabilities[24] - The company continues to focus on cost management and operational efficiency to improve future performance[48]

Core Viewpoint - KLX Energy Services Holdings, Inc. is set to report its third quarter financial results for 2024 on November 1, 2024, prior to a live conference call [1]. Group 1: Earnings Conference Call Details - The earnings conference call will take place on November 1, 2024, at 11:00 a.m. Eastern Time [2]. - Participants can join the call via phone by dialing 1-201-389-0867 or through a live webcast [2]. - A replay of the call will be available until November 15, 2024, and can be accessed by dialing 1-201-612-7415 with the passcode 13749567 [2]. Group 2: Company Overview - KLX is a growth-oriented provider of diversified oilfield services to major onshore oil and natural gas exploration and production companies across the United States [4]. - The company operates over 50 service and support facilities, focusing on drilling, completion, production, and intervention activities for technically demanding wells [4]. - KLX's services are supported by skilled personnel and a broad portfolio of innovative in-house manufacturing, repair, and maintenance capabilities [4].

Financial Performance - KLX Energy Services reported LTM revenue of $770 million as of June 30, 2024[6]. - Q2 2024 revenue reached $180 million, a 3% sequential increase despite a 3% decline in average rig count[28]. - Adjusted EBITDA increased 125% sequentially to $27 million, with an adjusted EBITDA margin of 15%, more than doubling from 7% in Q1 2024[28]. - Revenue for Q1 2023 reached $239.6 million, compared to $152.3 million in Q1 2022, reflecting a year-over-year growth of 57.4%[35]. - The consolidated net loss for Q1 2023 was $(9.2) million, with a net loss margin of (3.8)%[40]. - Revenue for Q2 2023 was $234.0 million, slightly down from $239.6 million in Q1 2023[39]. - Adjusted EBITDA for KLX Energy Services was $152.3 million in Q1 2023, compared to $149.2 million in Q4 2022[57]. - KLX Energy Services generated free cash flow of $60.0 million in Q2 2023, a significant increase from $11.8 million in Q1 2023[54]. Profitability and Margins - The company achieved an Adjusted EBITDA margin of 21% for the period ending June 30, 2024[9]. - Adjusted EBITDA margin for Q1 2023 was 16.6%, up from 3.2% in Q1 2022[36]. - Adjusted SG&A Margin for KLX Energy Services was 8.4% in Q1 2023, compared to 8.7% in Q4 2022[52]. - The Southwest segment reported an adjusted EBITDA of $10.2 million in Q1 2023, indicating strong operational performance[47]. - Adjusted EBITDA Margin for Rocky Mountains segment reached 17.1% in Q1 2023, up from 13.9% in Q4 2022[50]. Debt and Financial Flexibility - KLX Energy Services has a net debt to LTM Adjusted EBITDA ratio of 2.0x, indicating a conservative leverage position[9]. - The company is actively pursuing refinancing of its 2025 debt maturities in 2024 to improve its financial flexibility[10]. - The net debt as of Q2 2024 was $198 million, reduced by 1% sequentially, with a net leverage ratio of 1.8x[28]. - Net Debt decreased to $171.8 million in Q3 2023, down from $198.0 million in Q2 2023[57]. - Net Leverage Ratio improved to 1.3 in Q2 2023, down from 1.9 in Q1 2023[57]. Cost Management and Synergies - The merger with QES is expected to generate over $50 million in annual recurring cost synergies, reducing SG&A as a percentage of revenue from 21% to 11%[11]. - The company enacted approximately $16 million in annualized cost reductions in Q2 2024, primarily from operational streamlining initiatives[28]. - One-time costs in Q2 2024 related to professional services and impairment were noted, impacting overall financial performance[41]. Market Presence and Customer Base - The company has a strong presence in key U.S. oil and gas basins, with 39% of revenue from the Southwest, 34% from the Rockies, and 27% from Northeast/Mid-Con[9]. - Unique customers serviced in 2023 totaled approximately 680, with no single customer accounting for more than 10% of 2023 revenue[18]. - 90% of 2023's top 10 customers were among the top 20 operators by rig count as of December 2023[19]. Product and Technology Development - KLX Energy Services has 38 patents supporting its proprietary products and services, enhancing its competitive edge[9]. - The company aims to expand its integrated suite of proprietary technology and products, focusing on margin-enhancing utilization and pricing strategies[10]. - KLX's proprietary technologies, such as the SHRIMPTM and Oracle SRT Extended Reach Tool, support operational efficiency and innovation[16]. - The company is focusing on market expansion and new product development to drive future growth[41]. Mergers and Acquisitions - The company has pursued two major M&A transactions in the last four years, focusing on strategic fit and financial returns[26]. - The recent acquisition of Greene's is expected to enhance KLX's frac rental and flowback offerings, broadening its market presence[12].

Financial Data and Key Metrics Changes - The company reported Q2 2024 revenue of $180 million, a 3% sequential increase, with adjusted EBITDA of $27 million and an adjusted EBITDA margin of 15% [4][11] - The company returned to positive levered free cash flow of $10 million for the quarter, marking a recovery from previous challenges [4][11] - Over the last eight quarters, the company generated aggregate revenue of $1.7 billion, adjusted EBITDA of $251 million, and levered free cash flow of $83 million [5] Business Line Data and Key Metrics Changes - The Rockies segment revenue increased by 35% sequentially to $61.4 million, driven by a rebound in rentals and tech services [13] - The Southwest segment revenue was $69.9 million, a 1% sequential increase, with adjusted EBITDA increasing by 55% due to cost structure optimization [14] - The Northeast Mid-Con segment experienced an 18% sequential decrease in revenue to $48.9 million, with an adjusted EBITDA of $6.4 million [15] Market Data and Key Metrics Changes - The Southwest represented 39% of Q2 revenue, the Northeast/Mid-Con 27%, and the Rockies 34%, indicating a normalization in the contribution from the Rockies [9] - Revenue per rig increased approximately 10% sequentially and 27% compared to Q2 2022, reflecting market share gains [7] Company Strategy and Development Direction - The company aims to maximize margin and free cash flow generation while ensuring robust financial strength and flexibility [17] - The focus remains on maintaining and improving the asset base to deliver high performance on demanding wells, positioning the company well for the next market upcycle [18] - The company is strategically evaluating M&A opportunities while focusing on refinancing existing notes and ABL [32][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued strength in the Rockies and Southwest for Q3, with expectations for flat to slightly increased revenue compared to Q2 [18] - The company anticipates an increase in activity in 2025 driven by customer integration initiatives and rising gas-directed activity due to LNG export demand [19] - Management highlighted the importance of customer alignment and the ability to adapt to market conditions as key factors for future success [26] Other Important Information - The company implemented approximately $16 million in annualized cost savings, benefiting both cost of sales and G&A [8] - The company ended Q2 with a net debt balance of $198 million and a cash balance of $87 million, indicating a strong liquidity position [16] Q&A Session Summary Question: Visibility on Q4 activity and potential seasonal slowdown - Management noted that while Q3 shows fewer breaks in customer activity, it is premature to provide guidance for Q4 due to fluctuating natural gas prices [21][22] Question: Improvement in margins despite pricing pressure - Management attributed margin improvements to a mix shift towards higher-margin product service lines and effective cost management [25][27] Question: Balance sheet management in a challenging environment - The company has focused on maximizing margins and generating free cash flow, resulting in a stable net debt position [30][31] Question: M&A opportunities and leverage position - Management is currently focused on refinancing existing debt but remains open to evaluating strategic M&A opportunities [32][33] Question: Facility rationalization and industry response - The company has already undergone significant facility rationalization and is well-positioned for future market recovery [36][38] Question: Spot activity in the frac and coil market - Management indicated that while the spot market remains challenging, they have strategies in place to redeploy stacked assets effectively [40][41] Question: Total nonrecurring costs for the quarter - Total nonrecurring costs were confirmed to be $1.4 million for the quarter [43] Question: Sustainability of gross margin levels - Management expressed confidence in maintaining and potentially expanding gross margins due to reduced white space and ongoing cost management efforts [44][46] Question: Refinancing opportunities in the current market - The company is monitoring market conditions and evaluating opportunities for refinancing during 2024 [48]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Quarterly Period Ended June 30, 2024 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-38609 KLX Energy Services Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware 36-4904146 (State of Incorpora ...