KLXE - Earnings call transcript Q3 2021 | KLX Energy Services Holdings, Inc.

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Operator

Greetings and welcome to the KLX Energy Services Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard. Mr. you, Thank Dennard.

begin. You may

Ken Dennard

With operator, Keefer joining and call We you, Chief Chief XXXX morning, webcast KLX Officer. Chris Energy's Financial President Executive good for the Vice you and results. quarter us third conference Officer; review appreciate today KLX is to Baker, and Thank Executive fiscal everyone. me Lehner, Energy and and Services President

the available outlook the today's before a DecemberXX, level remarks, DecemberXX, reported call on you the and commentary a on website or release. the third listening was There to information in will management included how as quarter until by details financial replay replay accurate today, will earnings at this my are time questions information and Following for the no that XXXX. also Company's available high be sensitive More of opening of be call of reading. on replay of and call Please XXXX on will the that There’ll telephonic the any as a transcript webcast klxenergy.com. be information provide replay features may note answers. time longer and therefore of be recorded advised only access speaks yesterday’s

comments the the management's current of contain United addition, views These may within looking of statements reflect statements In management. States forward Laws. the meaning looking forward Federal Securities KLX’s

annual those results reports the website. XX-K, now, and details, X-K cause is Form of expressed However, and and reader management. current Chris? KLX The understand or to on various contingencies. CEO, read listener in Mr. are I'd KLX by in Energy uncertainties turn risks Form made can Baker. quarterly XX-Q, actual the on certain additional included to most Services' to to include performance statements The differ comparable encouraged to on GAAP financial on and And could contingencies call of today Form non-GAAP Chris from the and financial President press be the reconciliations the risks, found quarterly and release, achievements the over directly may reports materially also those uncertainties measures, certain report which measures comments like or Energy

Chris Baker

and Thank you for fiscal Thank third morning KLX today XXXX call. good Energy Ken, for you, us everyone. quarter joining conference Services

at gas fiscal per per natural the I'm of expand with increase financial results the by begin what's QX we detail million, as service Keefer QX natural product barrel gas $XXX quarter. me some in commodity WTI on snapshot quarter averaged before results, the relative where XX% final the Hub improving oil to Let impacting a and XX%. exited greater began XX% associated second production, the our our was returning the our was quarter higher this, of Beginning for positive turn environment to will market macro price XX% materially consecutive third adjusted an fiscal QX years, our EBITDA period the lines. the majority very over business our $X as exited increases across intervention After utilization, pricing QX higher fiscal we significant and and drilling, for MMcf, quarter. $XX which of quarter in XX of same The XX% the began during rigs constructive the third and sequential averaged double Henry increased call to strong results, improved most and provided we performance highlighting was price fiscal for third X% with the our we Fiscal call. where by in revenue million, driven largely quarter. completion, than share, to some and the things I over review that Recount quarter. and to high revenue than quarter report end well guidance $X.XX in backdrop to our comments. was or third prices pleased with QX our The

million quarter the ended with forces we of and always total the this million, liquidity no or XX.X holdback the Additionally, of FCCR improvement, is of liquidity countervailing to an QX. available and time monitoring, Despite they're that $XX.X market increase XX.X exception. million approximately of there're compared net XX%

an acutely of are in We inflationary the midst environment.

our has will in these inventories clients moving prices inflationary service approach Ultimately, us as The key available. not were on inflationary material became issues persisted afterwards. providing of to both partnership whether current our early to well our to there into going and costs pressures warning and at of to cannot margin such of This our our always and in pressures by while as transparency fourth sustain customers The a variables vendor to structure through and the manage the to provided consumables supply will the the in labor chain wage directly OFS that with team lead to will margins. it challenges some ahead pressured erosion times into pre-purchase have realizing well prevalent critical our cost as have and another lower vendors these pressure higher pressures, decisions ahead unfortunate and take force supply in advanced and make lead our market suppliers We seen pricing primary QX and late expand calls challenge will just stay and as pressures. XXXX These have to have pass chain. manage one has for surprises. selection items inflationary in our The longer and times be inflation on price industry customers. is quarter consumables are and

front, On discussed labor it the we before.

on are flow. keys rather profitability price that just begins competitors true incremental the focusing maximizing and poaching However, utilization, have deploying, to pricing cash than momentum which employee resort disappointing industry attempted to positive it's when to and and assets, the

the worst again, its become own industry once can enemy. So

ability oilfield Additionally, our COVID-XX an the market driving in space impact is complicating tight third and a creating had organization. incremental the well the rate in the material business industry's white to throughout the already overtime low and staff labor as quarter crews within on as vaccination

look crews of excel on forward $X due as to put incurred strides QX Xx largely suite across overtime few over have of for over we an lines. numbers to and we quarter. expense the all COVID costs augmenting increased rising will that in quarantine And said, to maintain remain last going pleased To and continue higher With million have today. our incurred of quarters. related over of we have days in issue cost very approximately This QX a to XXX have margin have cost days treatment. contract made been we crews. but third the gains XXX and testing third quarantine be year-to-date labor we QX will great industry, on continue We from these successful that ahead some to the and staying report the to products we critical in service pass to at days this, to material from COVID quarter, to priority Operationally, in I'm quarantine and currently achieved prices able pressures have to-date services. been to the in proprietary our

in latest take composites increased XX% with share to We Plug sales dissolvable and generation sequentially the frac plugs. approximately the plug quarter. our market in volume continue

will customers We benefit generation that commercializing towards are technology also to leader. and completions latest R&D beginning now organization our as fully market position integrated submit our from a are working our

optimism review volatile With and million concerns rate XXXX. volatility now our fabrication over a to run team considerable operations, our us Despite call continue new job Additionally, for the portions fantastic pursue despite third has I'll our results. Keefer? at highlighting to will in our quarter we will Keefer wire over QX the have towards R&D last COVID clearly where coal which this weeks. minimal XXX third on in and exited done opportunities over snug our strong line, who and to variant, effectively to of tubing with and gives market macro electrify we financial few that, cost-effective. results, revenue, working are over annualized possible The capital cost the and spending, equipment in we our quarter turn a a electrify been

Keefer Lehner

Thank you, Chris.

consolidated me our XXXX third Let results. quarter by begin discussing

was million our $X XXXX was $X.X For basis, X.X% quarter annualized for QX ago was improved second EBITDA compared And operating as for roughly by basis, the Adjusted well XX% October product would million, revenues would ended and imply and activity. significant our combination million, a $X.X margin and to $XXX run quarter year imply to EBITDA compared rate compared broad this Adjusted an completion, $XX the contributed and and the On completion, results XXXX.Adjusted EBITDA fiscal XXXX. line quarter. X% million million a services growth when drilling, production respectively. intervention by XX%, third XX% to in On for or of synergies fiscal the XXXX, was SG&A approximately and loss adjusted roughly rebound as increases a for third XX% underlying and quarter $XX.X for by in revenue. which products driven $XX intervention million an XX, of to activity expense of equates a were Revenue $XX of million XXXX. Total annualized realized QX production to pricing. respectively cost revenue XX%, improvement revenue increase as QX second driven quarter drilling, fiscal adjusted million. the of a

only believe has with revenue. in the We merger the third current industry, the the corporate for one SG&A adjusted loss quarter and structures associated cost the QES additions. we Our other and minimal represents synergies. from metrics of OFS cost million, most can now levels the fiscal scale believe X.X% and was of efficient merit we KLX further $X.X of these which EBITDA highlight

to results. Turning review segment our

in compared million the with $X.X of $X.X customer operating of mix as was of to scheduling adjusted million compared revenue the adjusted in to fiscal million was rentals, tubing, loss wire by The of completion revenue completion third our sales line, revenue Let Rocky included increased quarter the by the Mountain smaller $X.X fiscal sequential plugs offset QX or in rentals operating fiscal Adjusted tech as service $X.X quarter. $X million margin service primarily second pumping, improvement lines EBITDA quarter X% uptick including of driven increase for the Rockies, due fiscal me was $XX.X was and driven begin margin concentration as million. EBITDA by services few second material in million shifting by segment higher declines issues. second with XXXX. fiscal third and of our fishing, loss quarter compared in with lines modest drilling coil higher and to a Sequential oriented oriented quarter services. our Adjusted

was to region fiscal of directional second quarter Southwest loss as of to second due adjusted Moving an operating adjusted by generated $XX.X labor improvement increase revenues our by and QX in in million quarter decline labor in second primarily was million $X.X quarter $XXX,XXX The margins million, and XXXX. by of sequential The was and modestly sales constraints South slight fiscal adjusted compared overtime segment lower It accommodation. $X.X contract segment Texas fishing EBITDA drilling, our decline driven for million. of increases fiscal this or to in costs. EBITDA loss segment. million QX $X.X revenue The and was tubing, in $X.X was of to coil plug margin driven offset operating to COVID-related adjusted line, compared wire activity. X.X% compared

increases up increase segment segment The fishing rentals. million. third the drilling, the drilling quarter Mid-Con. operating as material QX. revenue Adjusted million corresponding adjusted and in million from XX% led to of of revenue fiscal were loss increase all coil incremental EBITDA Northeast and $X.X pumping, completion discussion for compared $X.X margin to tubing, was a $XXX,XXX. by activity quarter by second to the and and the the to Adjusted in quarter QX second income across fiscal third for sequentially Fiscal in was with wrap The production million up lines service to compared operating XX% driven $XX.X the quarter. Now revenues as was directional $X.X led EBITDA with adjusted

and sheet almost cash by Now, million $X.X million. sequentially $XX.X to or to balance I'll increased our Cash flow. X% turn

and $XXX.X by our million by increased the sequentially long-term debt a balance. aforementioned million net Our debt slight offset increase driven in $X.X to increase capital leases in cash by

the XXXX, quarter $XX.X working in capital focused be from XX, October of to net cash free fourth was XXXX for was ended expenditures months to three million the total operations million the part and in to offset For $X.X flow for which asset in flow to We CapEx expect $XX down now is the were maintenance million, negative Capital to million. and capital $XX $XX.X sales. the used previous cash due million, operations working We we're million $X guidance in million. $XX proceeds cash spending. from of ATM approximately was compared $X.X million million on QX Net of flow with range and in program used abbreviated able quarter. CapEx to $X.X

During we plan quarter, of costs. the proceeds shares, $X.X million net third aftermarket fiscal which X.XX had sales yielded of million of

XXXX. close assets $X.X assets We tied location, aircraft the also sale to an obsolete of for of sold we remains and by $X.X primarily within of the a operational held the obsolete company which end quarter, $X.X million million of million to and in sale expect owned

increased sequentially balance million. net and $XXX.X borrowing base XX% increased based $XX driving revenue million to our Our on activity to AR

reduced also or by as a for which part renewal has during impact availability. credit of million of one borrowing one our $X.X base annual insurance We our letters XX%, QX on

Subsequent semi-annual ratio As cash was $XX equivalent and almost or early XXXX on increased $XX.X of which base. interest our charge utilizing million our QX, $XX.X million, to borrowing is end sequentially, second payment in interest was was XX% to million, a And holdback. $XX.X in payment. semi-annual Liquidity which the November, we XXXX, cash available liquidity of million of $XX hand. made October million less our comprised $XX.X fixed a total liquidity coverage of million in available XX,

have in to in the top preservation business past, liquidity cash we the management continued and support our a the of and continued As emphasized rebound our remains priority.

change XX-month two begin December. period to we of and XXXX our quarter on effect, QX, the to will complete taking January transition fiscal Once January XX-K due November will a XXXX end short comprised XX and period only December a fourth we'll XX stub an in and X. Lastly, fiscal year be file months, from we of with fiscal

end this of I part pro the periods. back With As forma transition, to also share calendar for Chris. to plan we that, now turn results call will

Chris Baker

as and market by close returns I place pricing to Thanks call gains. Keefer. the discussing changes therein well and taking achieve outlook will efforts our via environment notable the our higher as current forward

stay is bodes Friday we've And path. constructive demand price pricing limits, SKUs, macro business the towards due forward. continuing is industry for Omicron out in beyond, favorably and here ramping is Looking XXXX. outlook as upper improving a incur a of to opposed commodity on QX environment we backdrop the favor the is through accelerate, Black demand, that believe in production trend, Only tenuous a to going supply experienced pricing positive equation whole constructive which This very plot rate the clearly as as at variance. our which this continues to and to recently

like as WTI more as However, it seems about their seen alter and far, regained our thus is Omicron. materially have learned we customers any not plans of steam

disproportionately has at the of spoken up how the E&P prices rising depressed. past companies you equipment as fragmented the know, all market come of kept services early have sorts the surplus commodity companies and largely prices in the of stages benefited industry about nature I've expense the Conversely, of cycle. As available this of in

of proportion of the point and However, a importantly, where equipment, available more crews. absorbing available a is we greater at are demand now supply

not do price due a approved XXXX to We more challenges. to are to some simple the side power but accelerate result, past XXXX. in activity provide continues flow free continue of the possible slight I same color holidays, in services is happen as the on pricing QX slowdown few the in expect a we've of increase to due will decline nearly will to cash will we commodity of levels and and increase. we budget a this now exhaustion business, As The trend able quarters, supply reality level to has for especially chain attain believe as operator years past generation the greater of guidance was in supportive production than on customers. pricing to seen tied environment our the into it

in to two million For expect the quarter, $XX be $XX we the abbreviated million month revenue range. to

the million. expect XX, For between December months three $XXX ended generate quarter million period a we four revenue pro forma and to $XXX

to we for Looking ahead the XXXX, optimistic are prospects businesses. very our about all of

We on are pricing been service already our lines, plans. still many activity their have a to XXXX sizable customers of awarded and we improved capital packages range of of waiting and a product materially but finalize across

were and along to employees, improvement through let substantial is our the pricing KLX we the once for extensive we operating platform making In rationalization the activity realization market customers shareholders. cost move with favor. via side, significant R&D built on momentum, closing, and continues With again our to-date strides in in there positive leverage the technology positioning and as synergy me thank

a and conditions focus specialized KLX our The KLX we confident Operator? With results of services. market returns comprehensive are comprehensive now experienced for Energy generate deliver and and ahead operational take times performance equipment KLX’s to positions from improve, superior will your are portfolio of on strong and questions. even personnel, innovation better of that that, products technological higher combination Services. our tools, we As and portfolio

Operator

Daniel We you. Thank [Operator do sir. Daniel have John Energy question Please of Instructions] a Please ahead, proceed. Partners. from go

John Daniel

Can hear you me guys now?

Chris Baker

you got Good morning. We’ve John.

John Daniel

should terms but assets Sorry. is be guys. middle hard thinking reactivation costs activity you against comment of costs? I've continue those in sort nowhere, listen question in what to The on that trying are of ramp? to of should to the and I'm we Texas, reactivate terrible service, I'm Just got to about a just

Chris Baker

the of I the good would are finalizing still for because very we're there know, question our much industry. throughout say still process of plenty [indiscernible] year. you What as is, So assets next budget a very it's in

line probably close have phenomenal even this So some still at I $X.X said, have reactivation We year, point held of that costs think number job the will sale a million the I for year. specific quarter this That time about don't it's via assets very product not we expect cetera. fourth sales, being in some of in et next offsetting if asset because specific. year

economic That can is this in there you that we very expect, so, no assets which said, we've what make of sense. way which being we the face to finally recently, digit And seen the to year. we're the start preserved of CapEx as incremental levels double the optimistic would at curtail is sustaining price increases, about,

And so, we're actually we're year incremental to going for We've the but frac the comes of lot it that pretty finalizing well spent activity that I activity, on this money pretty QX. are and well side, say when process et especially a today, would cetera. situated into incremental rental, valve situated

John Daniel

the line Thanks on Okay, quarter. this taking top great, my job good call. for

Chris Baker

Yes, anytime. Absolutely, appreciate it.

Operator

to would session. to closing our concludes That question-and-answer remarks. for conference like the turn I management back over

Chris Baker

Thank you, operator.

about are today call us to macro for you Services. the the on outlook and of for the XXXX. remainder joining optimistic and for next We KLX forward We Energy into XXXX look Thank again once interest quarter very in your

Operator

This Thank does conclude today’s you. conference.

And participations. lines for your at you disconnect may You your thank time.

KLX Energy Services (KLXE) 10 Dec 212021 Q3 Earnings call transcript