KLXE - Earnings call transcript Q1 2020 | KLX Energy Services Holdings, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the KLX Energy Services First Quarter 2020 Earnings Conference Call. At this time, all participant are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. Instructions]. [Operator my VP now Ryan Corporate to Tyler. pleasure is of introduce Development, It

Ryan Tyler

Good you Services and Today you, April morning Thank Andrew. thank the quarter here discuss XX, XXXX. for we to for KLX results Energy financial first ended are us. joining

with we program, associated as and These with pending impairment comparative costs exclude our purposes, results costs to company's earnings news issued company's results. was morning, merger. referred The costs presented associated defined. have For charges, to are financial the our adjusted which costs asset downsizing as this collectively major the release, earlier presents

If it, you'll received you a haven't copy website. on our find

with Chief Executive remarks begin McCaffrey, Tom Officer, will Financial President, KLX and of Chief We Officer from Services. Energy

prepared follow help have slides For today's our a you we to few discussion. call,

find our klxenergy.com. at of the Services Investor on Energy KLX presentation Relations the You page website can

to. to addition, the for In of copies you are posted website our on refer slides

forward-looking Before to Safe we acts Safe we the prepared under we have information exemptions subject some and make in Exchange additional begin, rely on our cover. will securities we questions Harbor the risks Harbor responses uncertainties filings our and always statements and statements and the and Commission. company's remarks various are our as Securities that your to and the Any to with

Q&A will We will address questions following at that instructions. provide our the operator prepared time remarks,

will call McCaffrey. Now, over the turn Tom I to

Thomas P. McCaffrey

us resulting by which the was is the you The destruction during results joining demand QES. and half Quintana The Thank the Thank and steep demand industry continuing responded exacerbated Services and with resulting of everyone. Arabia/Russia of merger decrease COVID-XX million. price rationalization combination COVID-XX today abrupt pending contemporaneous by discuss and services oilfield for unprecedented in you pending Energy all oil costs our Saudi has levels in to business, oil oilfield initial Ryan in demand business pandemic. good cost unprecedented and share and XXXX $XX the the caused company’s quarter into QES, by the company experienced the services. the The costs, dispute demand for in driven totaling an market to to destruction XXXX the first of with financial caused reductions merger pandemic morning the further deterioration or with abrupt an aspects of second in related

In oilfield demand to approximately the due in $XXX impairment non-cash as decline the an company recorded million services. asset for charge, by required sudden addition, GAAP,

All aggregated of these costs million. approximately $XXX

ongoing structure rationalization an business aligning program demand. As our cost at we initiated discussed review and previously targeted comprehensive cost we with customer

field XX% expectations we general, the current pay, demand. referral in and to to costs structure, Specifically for company we environment, base align trimmed set approximately realigned our structure implemented with program no-cash expected bonuses our compensation areas administrative our allow in we various and the selling, in reduction and we organizational

of second these to reduce at XXXX. cost of quarter structure All compared million our of $XXX end the cost approximately year our per structure by actions the to expected are

the of second reported aggressively our forward. revenues our of today, XXXX, will approximately monitor XX, to we for which May every were employees We XXXX. $XX approximately stacked area way quarter million, the XXXX warm in quarter a and XXX the cost XX%. of quarter cut compared end reduction about second and costs a decline at employees as business XX.X% we of structure as the stood that's at reduced approximately of with Our staffing was first workforce, comparison, of the we By at to assets, going XXXX, continue

during as the XXX our while sequential in our ended, cost a service gross protect quarter continuing realized from quarterly customers. substantial basis benefit necessary of just revenues. best The period million. to rationalization margin were decline provide realized to a While approximately actions We in benefit painful, a XX% these to liquidity in incremental first evidenced uncertainty quarter reduction in actions our class cost in point on first the increase the adjusted was by $X

customers from should credit generated During on tight free continued the company borrowings -- focus invested under the had employee customer test COVID-XX or has to tools million $X discontinued KLXE ended COVID-XX cash employee value first return liquidity million our and the quarter, as cash you of the profile and of capital positive approximately flow cash in facility. to with and pleased and company’s operations $XXX using or result position our environmental approximately $XXX share that a one and to KLX as to history proven no a while a and with on controls and ended proper value not maintaining we've no controls quarter and strong We're superior generation health, safety, flows with flow partner date, on cash providing million believe enhance the cost lack a for our $X.X job. free illness services added of added We standards. of of prevent million

of proud instilled talented that HSC our the team, in discipline our employees. they've very are We

the as supply culture We demand the and the the pressure equally the led pandemic. imbalance the Arabia/Russian pandemic and processes complying at and our safety following customers this share training environment market unprecedented of first not know importance We be and should appreciate unprecedented extensive conditions. and in like we of deterioration work all are a resulting safe efforts an the to land of procedures. impact day happen to the of equally The reinforcement established and various with for of the Saudi live new every to KLXE. dispute stakeholders U.S. grateful the price all maintain industry Results employees our processes without your in field proud continued market quarter under proud during be do during

wells were canceled or that completion were has underway all delayed As activity that activities new we know, while been were all new started. no but essentially planned was completed

months severe price the than was globally more standstill. of For evaporated, storage oil. near at or consumption in two Energy and activity dropped declines economic resulting more for production a in

has to increase. production and for consumption and demand us Our for outlook The decreased oil our for at for the remains services gas best. and has production oil energy murky begun

review quarter Let's X and results. XXXX turn our consolidated Slide first to

costs For operating points million reflects benefit and XX% as margin to quarter, gross $XX.XX a expanded the quarter market impact $XX.X revenues despite expense, and the the XXX The the adjusted share compared the and impact improvement depreciation negative initiatives. by first quarter. Adjusted gross loss in Adjusted in the were defined margin, supply pandemic, the Gross profit the basis $XX.X revenues reduction of ended the decrease the led for loss EBITDA substantial or in million. conditions. cost as $XX.X XXXX. compared decline exclude imbalance as of industry adjusted gross was sequential which margin revenues. dispute, $X.X XXXX million adjusted $X.XX million from with resulting of April million, was or share approximately prior $XX XX.X% company's deterioration the demand to decrease net first a and per respectively. in reflects of unprecedented COVID XX, million XX% This and fourth quarter was were Adjusted Saudi/Russia to

$XX for costs million, allocated month were segment million, approximately our to million. XXXX three segment three the the follows; first corporate segments. April Before were to The to Southwest that we segments $X.X everyone allocated three quarter our segment like results all our costs company Northeast/Mid-Con during we review $X.X Rocky $X.X our quarter the of period to first Cost XXth and million. each remind allocates as ended Mountain segment segment

to turn Slide of our first that results Rocky the which Mountains costs allocated to were quarter million include allocation now and Let's financial review X them. $X.X corporate

segment quarter loss was or compared $X.X adjusted XX.X%, Adjusted for operating million EBITDA in the quarter of fourth million as fourth the compared of by million fourth XXXX. was adjusted of $XX.X revenues negative to or of $X.X fourth loss Adjusted as quarter XX.X% revenues. as EBITDA of of first the decreased quarter million million or $XX.X the of Rocky revenues, X% quarter operating Mountain $X.X with $X.X XXXX. with the compared During million

turn Let's Northeast/Mid-Con our Slide segment to performance. quarter and review first X

X.X%. $XX.X adjusted or margin was First X.X% adjusted and EBITDA respectively. revenues by and increased quarter loss EBITDA ended $X were and million April $XXX,XXX XX, XXX,XXX XXXX were million, operating Adjusted Mid-Con

Let's Slide to turn quarter Southwest to X performance. segment review our first

fourth XXXX segment were negative the quarter $XXX,XXX first million, to April loss Southwest $X.X and of adjusted million $XX.X or Adjusted revenues quarter compared EBITDA adjusted was XX, was quarter $X.X compared compared a ended EBITDA as operating of $X million. And adjusted million. million operating XXXX. loss a decreased quarter fourth to First with XX.X% $X.X of

gas an an into merger pending May The product position, with will company excluding cost combined major EBITDA, in profile briefly On leading we million present $XX Before and million all credit. revenues oil light every billion liquidity agreement more entered the an of $XXX of the our financial X, estimated and asset Pro industry cash million XXXX of adjusted let's stock Forma company $XXX review approximately offering have onshore fiscal and with QES. U.S. revolving XXXX line synergies QES. strong and merger and than XXXX basin and year service discuss dollars of fiscal with in a with year million annualized XXX a approximately

services broad of spending tubing June engaged merger to the provides add and in control proxy snubbing, activities. of wire with was have during not lines. future completed we planning of five for significant year. revenues Together past of SEC second the this been been otherwise on will directional be of the the be breadth opportunities two managements well and already filed dramatically range line merger services the rationalizing of the believes legacy the X, assets product available. half to that requirements. reducing lifecycle will well clearly have KLXE’s and XXXX expands generate the company and merger the Over the fleets weeks drilling, both coiled of throughout service capital businesses companies preliminary incremental The largest integration will may offered This and the QES

pull U.S. and this return Both repurposing to developed integration has the completing provision integration the North $XX clearly to expected the addition on positioning in recently benefits plan and line this focused Baker, the support the wire as customers know forward to combined pursue the we up we reduced grow CEO services beginning combined facilitates successful largest to majority address pressure coiled the weather our our merger which in storm to with greater KLXE ultimately America current Fundamentally, capital transaction the merger We new returns and share light arising pumping to QES’s expenditure company more idled in foremost focused asset in so to through invested leading expect of the of light and his successfully what of preliminary results merger companies savings opportunities embraced one market budget. tubing capital to customer and capture along its team our significantly range a million of of have that asset facilitate demonstrated on tubing of combination. planning spend. negotiations throughout products while implement broad than the of reap the a looking fleet new are support and company and and facilitate and from allows philosophy annual services, in Chris expected merger a coiled large jointly addition throughout a cost vast from this be the discussions. strategy, to QES’s services on facilitates decision is the equipment and to diameter of the of assets to companies the products our

let's on a Slide Now our X. moment position financial take and review

The company's cash company's net November facility times. were hand was million net quarterly borrowings and approximately on $X.X debt resulted X.X XX, until As in outstanding approximately million. ratio increase sequential cash XXXX. basis. million no on $XXX XXXX $XXX Total debt the April an there under leverage less of approximately million, of a long-term of $XXX no was million credit $XXX maturities of debt There are

prior flow cash cash flow free $X XXXX most $X cash XX, X.X oil by -- collapse. million April expenditures Capital to operations was ended, approximately $X.X spent was flow million. price million, the months were provided three was the was For of and which

$X expect for of We about continue year this to total CAPEX fiscal million.

differentiator, In lines needs share the of spend customers and gaining and focused merger key broad allow KLXE believe our driving in service winning oilfield remain of maintaining service major QES as combinations operating high cost to will is strength healthy industry other will pending on our while apart new by both across the We from expenditures. reduction a a providers all efforts the customers that in we we where with of our our strategic basins, financial providing portfolio a company liquidity environment capital the customer serving an set from cost further and level synergies ongoing -- and combined of managing equipment pursue consolidation. the prudently product and level of participate

So as committed change. to and maintaining we healthy liquid sheet remain a conditions the industry balance

begin deploy to it will product the With that, and Ryan. the to generate in to turn we the or lines. over potential repurchases debt I'll highest shareholders We back will investments believe same share capital our evaluate where through our our or capital service lines return call

Ryan Tyler

how on the ask now portion will call of I Q&A The today's question. Tom. you, Thank a the will operator the Andrew. to instructions for call. operator turn to provide over

Operator

Instructions]. [Operator you. Thank

question [ph]. comes from first of line with the Jamie Perez Lassidy So our

Unidentified Analyst

I completion going trimmed next think activity some the of Thanks heading in call. towards quarter, Good and but some morning wells, -- where was color, going us was hearing trough give a us quarter. it market, taking This given But of it although -- you amount down Permian double their tell and months, we've the solid the for limited the been in haven't could some solid a and limited Yeah, the you that is restarting wells? actually tough everybody. mean, some producers do since market a my a fact back are restarting of producers are couple EBITDA. the was almost May.

Thomas P. McCaffrey

activity initiating that awfully think it's are -- is thing re-stimulated them additional actually is back us wells in will have logical occur to early a the the for are going shut and the production. folks about and which beginning to occur those now first the believe number and beginning do What been initial E&Ps providing to a color that talk on are most activity. of back to I in having few Jamie, completion we of put is wells

is have If with to well fishing is profits you known. the I one intervention in a area it, business. each fastest to way where think that's well of the very think go and we're And industry largest inventories of suited tool well. to expertise pretty our we But about revenues strong an and our generate producing regions the

about which best second the then be into to to if an capital wells at, the are the drilled And new they their So and activities. complete look and be flow going scattered what an U.S. E&P. drilling of look where progression had an we perspective think that for throughout cash it, and the before from area get ducts and the wells, had uncompleted it's XXXX first to first. revenues would the natural inventories E&Ps to capped to the initiating we'll would And of there way going E&P which production from deployment see that's an off. not, uptick be you And you think cheapest seem back put previously over

completions of the to right the well Permian. enough we very provide some hope helpful. of topic. on some that anything information But ducts may be referring anecdotal the in so more could really to I there's now, And that's be not

Unidentified Analyst

you Yeah, that some the consider going was the have PRB something is that the that that could future, attractive, you do in helpful. assets open mentioned up into Also, the redeployed basins another is be will PRB producers area? of any

Thomas P. McCaffrey

-- in We wide and of presence major Rocky’s have proportion we so of business. our are each basins the a

will to is opportunities we what So and or which reactivate we going people that look have hearing August, that what some are us, be. we to soon to -- at to presented are is as see as the it going really July as pricing is, being the are its

down. in been have we we're and just assets As run work the to free for past, not going our

I generating So flow into a done smart about view it bring assets how we people on, our towards not with will running assets we back the for think be that just purposes. because and ground deploy our and to has cash profits be

balance We to want way. sheet and keep a it that have healthy we

Unidentified Analyst

keeping it this job be for now. environment. have solid pass That's for, balance you and more have I tough an all the questions along. it that's which sheet, you commended a should primary guys in it excellent Thank Yes, I'll thing for done is the especially you.

Operator

Instructions]. [Operator you. Thank

line Simon next comes of the Wong from Our question G with Research.

Simon Wong

morning, Good How and Ryan. Tom are you?

Thomas P. McCaffrey

Good, how are Simon? you

Simon Wong

quick million year? you've for a quarter Good, in how the just got cost cost the question job you like cost wrapping a do the of on [ph] looks saving saving, the remaining at savings, $X did up of the rest detrimental first you see good

Thomas P. McCaffrey

the our in a way but thought the excluding with from break and cost it gets normally non-cash it lost gross show out little business the we the to we this profit charge. helpful by in just depreciation, it's bit was cash otherwise Well, don't benefit situation

you'll order. benefit through that of quarter, of the each further we that the quarters it, the for costs And the whatever the to as reason exact as the first think begin I we'll realize out seems of taken that begin through in talk we've reductions a end to most always that are see period. we at always it go

the bit with But of loaded to the back also tend jobs just human improve. a and and to do has timing they So maybe benefits little of end has begin you that should be to see nature.

to that to we think should when is we I being it an with where point we bringing benefit really bring the improve see demand as additive activity increases people back. does that to look begin associated at need

unless we're will will add Our people be generating and we thing positive that'll profits. But actually in again a add structure some in. change them cost won't because

Simon Wong

quantify versus is the cost variable? savings, the this -- help. how does Can in $XXX cost Can you how much structural of million saving you that much quantify of

Thomas P. McCaffrey

It's extent and it's health mean, the all variable. It's costs, It's with all basis. that on trucks is to think about benefit I you labor, almost drive. the fully it a it people loaded bring the lot people people in and into to are of the man maintain to each onboard subsistence it's required training individual. It's there's each It's a camps costs them. that -- offsite. go that's

costs you I just aren't regular costs an Gas, stair through sort of the with it going -- those it off drop employees in off drop of a activity. and incurring basis. literally fuel, when mean, All the there when don't down steps on

Simon Wong

question. final a just Okay,

credit available. because the talked You revolving that lower an XX what is facility million XXX million? have the Is backed XX than you it's asset that's million is in about about $XXX million only But is than facility lower availability undrawn. where --

Thomas P. McCaffrey

Yes, it is. Yes, it is.

So it's -- I receivables our managing exposure. in very shows job a and receivable we've well, done our think it good

If can't you receivables, are going they're you there. if through them not pledge

in think think simple the at to it's So have before case with the begins off revolver money, drawn sort look business loan the as we've our we there's I that. of grow the did I Candidly, just that we our capital, availability. drew sort working ever at spin as we we KLX. And never on that way that of don’t

I overly in -- Chris but Lehner shareholders, share that equity bondholders that the Baker take know that risk think we at And put same to the don't the way. intend we an over are and both going holders, harm's is in Keefer stripes. the to balance view. are don’t we a I industry, just to to important So tend QES our conservative change and think I that's run know our we sheet really to cyclical highly and company

And expect post-merger. any so change you should not

Simon Wong

Alright.

Okay, I great. That's have. all

Ryan Tyler

safe. thanks Be Simon. Okay,

Simon Wong

You too.

Operator

for remarks. to turn back I'll the closing you. now over Thank Tyler Ryan call

Ryan Tyler

a We morning's again Yes. everyone forward you and great to on Thanks for to Thank next participating quarter. day. this speaking you to call. have look

Operator

This may conclude for Ladies and conference. today's in you and thank does you all the disconnect. gentlemen, program participating

Ryan Tyler	VP, Corporate Development, Financial Planning and Analysis
Thomas P. McCaffrey	President, CEO, and CFO
Unidentified Analyst -
Simon Wong	Gabelli & Company

KLX Energy Services (KLXE) 4 Jun 202020 Q1 Earnings call transcript