KLXE - Earnings call transcript Q2 2022 | KLX Energy Services Holdings, Inc.

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Operator

Greetings and welcome to the KLX Energy Services Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It’s now my pleasure to introduce your host, Ken Dennard, Investor Relations. Thank you, Ken.

You may now begin.

Ken Dennard

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

Also, details on webcast opening be remarks, a financial in by the call your these call available replay federal transcript on on meaning There forward-looking will company’s be will call speaks replay on management that quarter of available information website that August second be be will the were More yesterday’s access as also laws. the my United a as views therefore, klxenergy.com, the KLX how high telephonic release. may within only statements today, XXXX. longer management. statements listening the for that until included advised at time replay the Following you any features These to of August commentary are reading. and a replay Please today’s recorded no contain securities accurate note the this level provide may States the earnings information forward-looking current call XX, of of And outlook before questions. XX, of of or XXXX. on comments information reflect reported time-sensitive of this

results, those current today understand reports reports cause is contingencies. quarterly expressed risks XX-K, reader to Form management. include or risks, various read on of listener in by non-GAAP However, made may certain actual to to performance statements The differ measures. encouraged uncertainties also could uncertainties contingencies X-K from Form comments the the financial and and Form achievements and materially XX-Q those The and certain on or report annual on

website. And directly on Chris Additional Services KLX release, now to Energy press the CEO, like to are Energy’s financial me, President behind be the which in found can Baker. details that the reconciliations measures and GAAP I’d to the KLX and turn comparable over Chris? most included quarterly call with Mr.

Chris Baker

good for joining Thank Thank us you, everyone. today. Ken and you morning

We strong guidance of revenue macro commodity prices. averaged somewhat Average importantly, continued discuss our as broader both to well results, rig experience to count services and top Frac prior adjusted our excited are during go-forward which XX% quarter. natural our outlook. end for and EBITDA $XXX the up KLX’s prices averaged more barrel exceeded sequentially. backdrop very was MMBtu. margin QX demand as for volatile up $X.XX per was per count the U.S. Crude gas X% despite approximately spread The over

of qualified improved strong and remains constraints, multiyear beginning pricing. are and continues fundamental at industry a we the chain personnel supply very certainly up-cycle. The OFS backdrop to like feels Additionally, support

generated quarter, QX in which second in of million above the generated up EBITDA was from we $XXX.X our the QX, which XX% QX, end or guidance. $XX.X sequentially During Likewise, revenue, than guidance. sequentially prior the our KLX $XXX.X of also prior approximately adjusted increased X.X% was million Adjusted to margin $XX.X million from Xx X.X% of sequentially million, increasing top above or end XXX%. top higher EBITDA

the synergies, product operating with driven significantly XXXX in and the higher by benefit and improved and QES also leverage, importantly, significant to second continue pricing the service more associated experienced all quarter. lines We from merger we utilization but across

to am except revenue for increased say proud line one. fact, and every In I margin product single both in quarter-over-quarter, that

depth increase days were along in up was have XX%. out XX%. that up we lines, supports were materially opportunities. capacity ability leverage X%. were our stages Plugs product to Wireline remain BOP a The pricing, were Reduced including XX%. production services. across across drilling, additional utilization days And up new expanded were were we of service our businesses rig versus I up drilling and high activity to would approximately Meanwhile, days XX%. demand up and support extremely coiled completion, largely rentals experience and to add, revenue white strong sold and drove count of several sold our customer due to Accommodations tubing, asset results. rental tubing XQ to Directional improved Fishing service frac wireline were XX%. intervention and customers. Pressure cross-sell days for up our days and offering continue We equipment activity business revenue XX%. up XX% up improved synergy charge space, rental XX% continue pumping with line. rental

Given and The deliver execution and KLX KLX’s to be personnel fortunate are in we fundamentals sufficient qualified to the the position demand lines the industry required efficiencies to U.S. margins in for percentages double-digit board. labor value sequentially. OFS pricing the to highly able the of a demand operators single support QX generate the reality across service meaningfully the supply come to expect. brand required product field, and equipment is leverage remains all compared low in the of increasing to across pricing QX, shale tight the high and market increased to the is the to have improved when that market demands from

in levels not XXXX levels in above yet aggregate. While lines, some have XXXX product returned to we historical margins are

We pricing service prepared additional provide my QX of our later outlook accelerate the during I leg portfolio expect during and will remarks. improvements another in continue across pace QX. to up

quarter exiting our million $XXX call I in EBITDA trending Keefer, monthly turn low prior record last who the and However, see rate as did will over now revenue review second the financial discuss on telegraphed not monthly run call with we towards upper in adjusted later will and Keefer? revenue call, last an long, to to our double results meaningful detail. the With the margins we outlook digits. greater that, will return our I to on the improvements continue

Keefer Lehner

by broad-based improvement and will experienced we revenue results, Chris. our segments and across morning, XXXX geo lines. all everyone. in you, service discussing morning consolidated Good second margins Thank where begin product quarter this I our

$XX.X income increase largely tubing, drilling, or XX%, of wireline, by core the to is impact approximately compared we million. Revenue intervention QX This and lease increases production operating were margin contributed of XX%, X.X% this quarter SG&A intervention related revenue of majority completion, the and across the Total QX We markets. and results. be and coiled $X.X respectively were Note, adjusted operating saw expense million, strong respectively. $XX.X drilling, million, from Adjusted rentals first our basis, cost On of QX XXX% income respectively. burdened tubing contributions was not comparability We and quarterly $X.X revenue product million for activity was For and coiled pressure expense broad driven as million production generated second operating drilling, very quarter. for million of revenues the it to our back, was second pricing and quarter in EBITDA first accommodations. completion, by a quarterly growth geographic by our million from roughly since on add to positive and unchanged income line of second QX increases largest approximately products adjusted leased directional line does packages. quarter, result to an XX% adjusted These services $XX.X $XXX.X XX% QX to a to XX% sequentially revenue. and XXXX. but are our pumping, relative sequential the XXX%, or for EBITDA in and do $XX and the margin X.X%, QX. to XXXX. which continue million peer improved and we equates XX% EBITDA the Adjusted $XX.X incremental Adjusted

revenue. you G&A If back we were expense, nonrecurring at X.X% out really of

from KLX has fixed the one cost OFS of fixed prior we’ve cost G&A merger believe current levels minimal additions. in with we industry QES can calls, and As structures the efficient now discussed to integration, continue we the on post most scale

Turning a results. review segment our now to of

loss compared to downhole increase as bulk and throughout lines in was as Let and mentioned across $X.X with increase in for quarter million previously increased XX% increase primarily the me for driven the $X.X the tubing, quarter second across The increase directional compared way. $X.X Wyoming million DJ product with sequential profitability the million and margin driven by drilling quarter. EBITDA segment as fishing with of pricing million. The quarter service products of the EBITDA or primarily offerings. in operating begin our and compared in revenue operating $XXX,XXX was the Basin, rentals, of activity leading million first Rockies. with pricing wireline adjusted by first was adjusted rentals, second $XX.X of first $X.X revenue and Rockies quarter. by coiled activity directional drilling, an Bakken, Adjusted was our the The Adjusted the

million $X.X tubing, of revenue million but as Moving driven operating first generating strong adjusted various of adjusted and product drilling, by was product margin income now $X.X EBITDA the across $X.X adjusted across in across QX. increased compared to first The to in adjusted by with the previously wireline primarily $XXX,XXX second by operating driven the our QX to of first tubing of increased million. directional revenue and segment. drilling, sequentially segment for our our million loss its quarter coiled rentals. increases expansion $XX quarter The XX% in activity compared the The wireline and frac the was mentioned quarter increase was was service Southwest increases. coiled activity in directional quarter, profitability increase to by lines the segment majority and compared lines experiencing EBITDA largest pricing pricing service and for led revenue

revenue operating first in in revenue margin the flow. The Now loss accommodations quarter by second balance adjusted and improvement, activity the $XX.X pricing the EBITDA service pressure pumping, million profitability with now quarter quarter of expansion driven again, turn across income $XXX,XXX I’ll primarily quarter. meaningful up increase by both for activity Northeast and with as pricing cash was first and Adjusted led $X.X sheet increase lines. same QX compared in to to to sequentially rentals, the driven $X.X and $XX.X coiled segment second across tubing in EBITDA the and compared discussion to was up Adjusted million operating mentioned $XX.X wrap million adjusted product our The sequential across in million. Mid-Con. was in region. was by as was million. increase previously of the those the

was in $X.X interest semiannual of assets paid program and of real by to The when million ABL Our cash facility $XX.X well borrowings $XX increase in QX. our as as compared million share sales million non-core million QX early $XX.X our cash in continued to monetization increased and in million by balance on obsolete million largely additional property, driven by $X.X under $XX.X ATM of offset May.

We approximately manage was $XX.X were proactively million, increase to some and of continue by spending cash QX, increasing in as capital was reducing compared able maintenance Net negate time, working net The QX XX investment segments. capital to the in days possible. of the quarter across focused as X% Capital we days but million. and largely $X.X primarily revenue, DSO convert same million for modestly working as to expenditures quickly our capital approximately payable and by we’re working XX% to $XX.X the by net on capital at second our XX% driven outstanding. the were increase in flow of up working QX

CapEx supply we slowed navigate through but million XX% the continue trend so the to far said, items approximately and deliveries this $XX XXXX. be of chain the forward, on improve XXXX, will half XXXX for remainder in in million expect we hope With to total of to be issues as first to range maintenance have CapEx we spending. that focused of $XX Going of

As related of Southwest real million June for and XX, the we held of sale property the assets in had to primarily Rockies $X.X of sale segments.

outstanding and was work through expect was $XX.X in XX million $XX.X facility $XX that and of on as availability and the million of XX $XX.X and a those options $XXX on in $XX.X as ABL and in the secured million available in sales Total which million borrowing million our was of was June ‘XX. current cash facilities to drawn monetize QX. our close based fixed million $XX.X continuing to base million, we QX on notes status, to are $X.X QX Debt million, of liquidity June maturity million charge of comprised liquidity senior $X.X of We near-term matures $XXX million certificate in XXXX and fall borrowing holdback. coverage net the ratio and

we our advanced Given cash half, that around fall facility facility refinance to around in extend. discussions with of expectations navigate And lenders may the given we our we XXXX, as in an reduce the ABL able generation are amend matures including second in remainder various ABL the be borrowings and XXXX. we the options, under believe of

and focused close on out and XXXX. the to XXXX. we will provide I’ll on the generate pricing on color as rebound as the emphasized half to half the some liquidity prior in to calls, free the about top remains As continued call business support calendars We believe of for year to second we are back our additional we remain outlook into look and outlook. achieving underlying preservation Chris, trends, on flow Based our have turn positioning are now continued levered back the we who cash current of our excited management goal positive we the company this priority. and of

Chris Baker

Keefer. Thanks,

market to detail With of in wrap crews KLX given is long-standing operating our equipment most reliable and latest a to choosing continues it outlook up, tight the expectations for equipment improved for and like to production are attract in reputation, crews, labor and for the more Plus on relationships some KLX be experienced continues XXXX. mind, their as the with catalyst programs. and efficiencies and able to net further to drilling employees we completion work the operators. pricing. generation and top and with QX The technology benefit primary I’d remainder and our strong Before customers share be for

XXXX. through and higher strategy the of pricing should reduce remainder further whitespace Our utilization

opportunities evaluate in product multiple number success vast touch. of KLX across wells and seen and that to cross-selling the have through continue pulling we We lines

we to basins that customers deploying by in dynamics free market assets continue will improving amid to basis, pricing commodity most expertise of backdrop. the We both volatile perspective review assets operational our opportunities flow a returns from leverage generation. the maximize profitable and and prioritizing our a cash deployment can with By

and net exited pricing Looking grow to of and strong and half to second QX ahead, with and continue we run our the a we very in We will macro are extremely expect margin and bullish confident favorable drive top rate a about on XXXX. from expansion into QX benefit backdrop improvements that line June are XXXX.

quarter third EBITDA and the revenue to X% between adjusted We and expect sequential growth range in to margins XX%, be QX of XX% XX%.

to from KLX. $XXX very And revenue operational expected team importantly, are to our year full we to most on closing, And the guidance are and way executed our single believe planning without quarter. and tremendous team coordination personal by results Operator? sacrifice to take of and range we million white million. return current excited by to about results to the that, second future every current delivering year superior doesn’t KLX In and and on utilization and opportunities believe uniquely positive our and increasing deliver maximizing flow beyond. $XXX well second We also half in a The and financial and performance the of we results, KLX free drive in cycle questions. are revenue We based for the end. second I levels, to benefit up Eliminating the team come space exceptionally for thank cash pre-pandemic your trajectory maximize in want positioned With margin member. quarter. is may to improved the well will KLX we activity back now margin XXXX

Operator

the Instructions] Daniel line Please Energy Thank of question with John your question. our you. [Operator proceed is Partners. with And first from Daniel

John Daniel

Hi, good morning, guys.

Chris Baker

morning. Good

Keefer Lehner

good Hi, Yes. morning.

John Daniel

then elaborate remarks, some out go what’s Could your just you for that. capacity segments Chris, be me again? bit through little I idle with still prepared – missed could about In put on of a your there? And thanks that you in deployed. in. that the talked

Chris Baker

the did at think excuse where Yes, a we not sure. me, the give But assets day was really about transparency think provide we’re not market trying Look, counts talking we did we that with product and our job I And I – on right. that capacity. lines driving count more good did unit are results, that up. in to

wireline tubing deployed if incremental incremental we results and space, undergoing basins the our in have in if market QX are for demand. we’re either And you As refurbishment saw rental we the warrants that certain materially businesses, the we And really, customers seeing additional frac valve and we definitely of those evaluating improved know, then have to well the utilization, we’re as all market think unit before coiled prepared assets but assets. be space. about business, it’s capacity, or on deploy

John Daniel

this the did Okay, fain monkey you’ve and math my what enough. got guidance head. at the and doing Because I in I was monthly looking year-to-date revenue

driving, could to math. implied millionish I QX, was range be wrong $XXX in the similar So the doing that I had revenue by I here because but just

not I’m mistaken. think I

And exposure areas. that have so feels would therefore, It that there quarter-over-quarter. Normally, some seasonality to is weather up just prone be good. really

there color and my right the then is QX from way there and versus any so of And QX, how driving? math get if you

Chris Baker

Yes.

did look, on So guide not QX yet. we

We evaluating brought exhaustion. always for There up We’re point the still your potential seasonality. last quarter. to quarter budget fourth is

We in actually from opposite. our that fact, we’re clients. are not or And hearing seeing seeing the

We’re activity. incremental smaller seeing for of the especially operator a for on lot fourth – quarter RFQs side

XX% So get quarter-over-quarter QX, you’re the there. extrapolating potentially guide QX, up you further effectively to if into for revenue X%

it, at still think seasonality point time. this that’s hits I if TBD in

John Daniel

customers. Any the as picture about guess the on are be Okay. one the Can to incremental drilling appreciated. just customers you what big Alright. is, XXXX, And last for inquiries ‘XX? for companies from you would of talked you prep side, color have I speak the most particularly reported, equipment asking

Chris Baker

Yes.

typically services, side, in specifically the the completion of we right? completion this they and on etcetera. heard definitely rental programs frac year conversations drilling are other kick look, contracted for within about in wireline at and throes more frac with end I off that, the having customers customers to flat run out we’ve to initial think, starting where RFQs about type the next are lines, talking talk of you where service But year. the see are and through to So are business, We on that going

budget As you clients. well know, it’s our for season well before E&P

conversations, are they so all And initial right.

John Daniel

my you I Thank that’s questions. taking all Well, for Okay. had.

Chris Baker

Appreciate it, John.

Ken Dennard

the first says, transactions Keefer, in that back questions a has for you e-mail call. Thanks the And on to and have tubing are like questions recent how coiled picked call But drilling. the received don’t Chris, fit up loud the people M&A. about we be looks services? typically OFS ask landscape KLX number or related weren’t to with thinking on going And of equation? consolidation John. one was does it into the directional How for out M&A

Chris Baker

Yes. Appreciate will in here. it, jump I Ken.

talked few saw we both Candidly, QX deals as as early done in OFS we needed a previously and to coiled getting drilling. space. it’s is consolidation and in nice non-distressed So, about QX get deals the in desperately see directional done

especially a have consolidating Our of candidly, the Marcellus. sector customers done But has Rockies pace. job service not the and fantastic the the kept in industry,

think acquirer. it improve think deals not. And we marketplace improves are It’s we going or target our for just a the that Candidly, whether marketplace, to so the similar consolidation we the to recent needed. is the consolidation or in the not participant

through integrating strategy. proves to participate of in we So, acquisitions we continue well think think out our is that improved consolidation, successfully long consolidation financial growing and history and results KLX and to positioned

Ken Dennard

what are Thanks. ESG to the taking steps The and regarding I to KLX strategically? came question and next address change wanted in know climate field And ESG.

Chris Baker

focus where What the looking wells. makes is otherwise. our be front of and electrifying I Yes. the our at the primary evaluated throughout in as our sense a methane of sequestration, mean carbon would markets really or that those containment we well drilling fleet Appreciate might number opportunities ESG geothermal via including to some today front of it, assets on continuation history, of able participate components ESG how various as on say our conversions Ken. have look, I

we in in have about time, so two past got we have talked wireline units. And hybrid this that at the electric point

currently are We two additional units. for undergoing conversions

hybrid CT electric to as our snubbing and trucks have of converted one of available actually our and units, adding and to one are electric units we appropriate. fleet our where We units

the had we a have we customers So, specific basin conversations footprint very fully on like that in have would a one with in the spread electric KLX near to of future. couple

our ESG R&D along initiatives Additionally, in we X with that dissolvable have Gen our will other just commercialized the and assist way. plug goals numerous

to all more compliance so later analyze know standpoint, on we regulatory next And are ahead required expect make formal that all this But and order regulatory data from requirements working stay of we a for we the reporting our to bodies customers. to and KLX year. the early sure in year, collect,

Ken Dennard

thinking you. the was, options sheet one this is The EBITDA, about through for credit significant here notes? coming probably Keefer, with next are to improvement both you. the and the question Thank in ABL given how the balance you

Keefer Lehner

Ken. Thanks Yes.

we with If you availability gross QX million. look sheet borrowing exited and balance XXth certificate, at June base about $XX of

$XX If our holdback that’s That million. was fixed coverage back related ABL covenant the you charge holdback the in a to ratio, out springing dock. structural

You available second get the about the million liquidity end to $XX of as quarter. of of

facility, in fall ABL of year. that the mature Regarding next does it

So, to amend to prior to lenders options the address we continue current, extend that in including an maturity going with option. facility and order advance

until be XX% we XX% ratio. And in adjusted to are on side did Xx EBITDA We an based forecast QX of results, in sequential question, but don’t guide revenue to forward. as XXXX. didn’t on to notes the run uptick ratio QX leverage net basis, the which improve mature we the our net would guidance, On your explicitly should leverage a going our that margins as on continue well quarter, imply of rate third growth the now fall note below rate run

that as credit just lastly, improvement I certainly our more run perspective normalized as profile, much to a rapidly strategic our are ATM addition then planned our and as both today. during business And continued just mentioned our asset opportunities our and profile, underlying in liquidity on a optionality we a the think augment approaching in we continue the then positioning that well, results, basis So, said, well prepared with Chris rate position program financial to from and remarks. to sales have utilizing credit

Ken Dennard

Thanks. of speaking QX, think margin the margins how And strong going very QX experienced appears and operating next from leverage says you question do it you margins, sequential to forward? about

Chris Baker

Yes.

jump Keefer is This as necessary. Chris. So, can in. add will Ken, I

things think rig X%-plus for annualized put perspective rig I generated to million a an QX. time $XX in EBITDA rigs XX averaged count period. QX were was count during at level XXXX. at The quarter [ph] of of was a EBITDA actually we a margin. last about this X% adjusted We that at annualized And margin at $XX that approximately million generating point, of for

assets a the and are math and the think would cost our of reductions They comparing in of some as when current increased, similar merger with of performance you or etcetera. to candidly is a that And delay real. be the until it say historical. I apparent while been un-stack expenses seen to reader we fence have So, the to I revenue benefit should our little reach the many has are you the in scale associated somebody that think peers certain readily of some permanent. drag off takes doing fixed R&M I utilization. realizing consistent normalize line, that

say, And that so normalize, we saw QX. some in would I of

of amount have a leverage we so business. tremendous in the got And operating

Revenue up XX%. was We push assets ROIC as about redeploy continue an price existing market as well to warrants perspective. as the from

up the However, low-single was digits. in headcount

labor-intensive business. are a we So, very

price think the over about of that’s the how push utilization crew driver So, we significantly the and same really margin. effective you as time,

XX always to kind month. on laser-focused to So, customers crew we focusing on of we for been utilization are allocating maintain assets asset where as focus they opposed to utilization, a have going on utilization days and

seeing up of end in I been impact have remind QES thing will you on just the material in deal forma we a from small change synergies utilization think $XXX the including I XXXX would I would about very is, guess excess pro to a you, EBITDA, that million. add that the has so if And crew last margin.

room SG&A. So, much efficient back there Keefer to in and remarks are as still pointed and is get levels significant around to to run a out prepared XXXX clearly we leaner his organization,

would So, if the business. market we we were today, operating outperform likely XXXX that legacy in KLX

Ken Dennard

Chris. Thanks

Operator

you. Thank

Energy We John from follow-up coming of proceed with have with Daniel a Partners. question. your Daniel Please the line question

John Daniel

for prices Hey are. lead I there guys. my am smaller – question Chris, Juan you on step that a And hear the never anymore, about Barnett, Utah, question, basins that caught there. my seeing you sorry Thanks for Places really putting believe the me next some activity just into anything in assets there math, back if not in. that of Basin, math San I but commodity where the might change year? earlier. a about we but to like you be you are would are one reposition there, given

Chris Baker

the are rentals Henry guidance, our wireline, really one were activity. And every fishing, I and exponential mentioned, Yes. – of not we production extrapolation before, we try But know, said things. it’s you well we Look, Look, you drilling, in. little we assumed as lines on so so we business has doing process. assets redeploying completion, supported incremental the integration within flowback like through and taken active are In to rentals, intervention basins frac that and very and are P&A, problem. And while like haven’t company, lines certain call last math, what’s and other certain the think basins. look, business like bust. I completion a get QX we a I you in a math diversified really given talked guess where Hub etcetera, scale two One, the no on I and problem beyond some

definitely range. operators the deploying weeks year. next have to basins Those the it’s to And sitting in gas so trying in become been happens I advantage we of seen last as in project where take NATI say, and active, $X in couple hold what are natural don’t spaces. alone let want we of to $X $X to the I But smaller would those north of into assets have

John Daniel

much. Thank Great. you Okay. very

Chris Baker

I it Yes. appreciate John.

Ken Dennard

are management be we at coming to Thank Barclays you, that call. and wanted Wainwright reader of just to looks it I the or the listener know at the like in September. will John. Well, let end H.C.

and up for conferences. at comments it then them those away. up call, Chris, sign So, And and take in see final of person the closing

Chris Baker

once in for Ken. forward your Yes. next KLX our you, today on Thank and us again look again interest Thank to speaking Energy to quarter. Services. joining We you you call

Operator

you. you and participation. Thank for This does teleconference. gentlemen, Ladies conclude thank your today’s

a this You your disconnect day. have wonderful lines may at and time

KLX Energy Services (KLXE) 12 Aug 222022 Q2 Earnings call transcript