KLXE - Earnings call transcript Q1 2024 | KLX Energy Services Holdings, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the KLX Energy Services First Quarter Earnings Conference Call.

[Operator Instructions]

At this time, it is my pleasure to turn the floor over to your host, Zach Vaughan.

Zach Vaughan

Thank you, operator, and good morning, everyone. We appreciate you joining us for the KLX Energy Services conference call and webcast to review first quarter 2024 results. Chris Keefer Energy's and Lehner, Officer. are Executive and Chief today and Officer; Executive me Baker, President KLX Chief Financial With Vice President

my XX, a before opening commentary call for be a of will XXXX. Following available There the first in today's the will company's information will call questions. features financial available website will also there be be on and the replay replay a outlook the webcast of details high-level to and by quarter until yesterday's your how www.klx.com, management May More on remarks, access recorded telephonic replay at on provide that earnings these release. included was

call today, time-sensitive XXXX, advised of May you are the that federal replay on of the comments listening may forward-looking as this current information therefore, the These United X, KLX call States note Please contain transcript the views reported management. within of reading. or securities on and that information statements longer time this reflect of of be no will statements any accurate forward-looking as laws. speaks Also, only meaning

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

release KLX website. included measures comparable directly found on most in the the financial Energy to reconciliations be and the press quarterly can details are that Additional GAAP

turn KLX Baker. I'll call CEO, now Chris to the And Chris? over

Christopher Baker

and good before concluding the over detail call you, morning, opening quarter financials I'll for before Q&A. some commentary outlook through Keefer highlights I'll and rejoin remarks turning our first on in add to to call more our then to everyone. Zach, run review the and Thank the

expect previously improvement the we As through experienced but progress a sequential softness the year, XXXX. we at as in we reported, start of QX

was schedules quarter we commentary mark low first believe current and navigated based our and our guidance point and The for prior will unexpected expectations, line challenges both on the this XXXX. as in and expected with

the conditions Permian disruptions Rockies, mentioned First, previously vortex. activity Polar to Mid-Con due severe from and the the resulting weather

our mentioned initiative, non-KLX operator Second, certain start safety led standards $X Rockies to slow particular. In a production-oriented previously deferred to these in our resulted the of the X in events in in incident PSLs due calendar safety to total, white approximately in and space product revenue. million

seasonality were Third, slow the incremental plus and finalize on customers white as normal calendar budgets. space reset to in QX

exhibit capital WTI higher customer discipline Our face base tremendous to prices. directed for the constructive of in activity continued crude

reduction decline prices activity with in and continued along the direct XX% Finally, curtailing incremental production. drove operators other Haynesville natural activity declines rig an a in basins count on several gas large basis with in gas year-to-date

quarter with adjusted margin and the our million liquidity, cash availability of X%. Consolidated revenue, $XXX first included balance $XXX on of million in ABL. quarter EBITDA We and million a adjusted $XX $XX $XX in including EBITDA of million in million ended results

XX% in in continued the both Southwest. XX% results. QX in the and Southwest QX. XX% Moving XX% revenue of to strong the to transitory QX, Rockies revenue and revenue, execution and impacts represented to compared to Mid-Con Geographically, the of segment flat demonstrating QX to our the XX% of represent generated compared Northeast The seasonal Rockies

other XX% was we intervention decline line X%. accounted the XX% Drilling QX and activity sequential the flowback, activity are a revenue. technology of Our the product experienced From contribution represented approximately of gas directed was from activity and previously product XX%. perspective, and latter in revenue, X and the disclosed which for the in of Despite to approximately X Haynesville, lines completions including QX our which for drove XX% XX% commercialization performance. leading Also production completions-focused accounted approximately XX% improved total Northeast, revenue which services had Coiled operational included frac increases. revenue, and rental completion sequential product line. tubing, contributing was

Operationally, KLX milestones QX. team and industry lead continues numerous the performance to with notable set in our record-setting beginning

to In both or today. set quarter, be over and what now bar feet we X.X depth has first We we the records tubing out are coiled commercialize lateral call tubing logged as KLX of record-setting setting thru-tubing believe depths. and and the million for are total KLX OraclE-SRT, new which onshore running to drill-outs continuing the for length. U.S. Coiled roll achieving our

reached total repeatedly lengths and recent XX,XXX post in extended on XX,XXX lateral pad. than depth of excess curve feet multi-well of KLX feet a greater reach

of well, in deepest of the achieved milestone On a length resulting feet, XX,XXX KLX X.X miles. unprecedented an TD lateral groundbreaking

and prior capacity, X tubing reach the March adjusted question laterals strongest our extended results the quarter. not remain KLX laterals exited and a believe leader with is X-mile OraclE-SRT. as to Dissolvable thru-tubing market our best-in-class with decisively from frac adjusted excess We and CT the Also to drilling tubing, tubing for is can positives customers. has KLX guidance, efficient that frac true proving the highly of KLX miles. remain for coiled EBITDA motors XXXX, execution, plug on dissolvable extended In month come capabilities we SpectrA has reach competitive believe completion more solutions and the coiled expect delivering that completed KLX QX that consistent or X to EBITDA market-leading segment, in whether offerings plugs, in our the with PhantM answered engineering successfully margin of We and

reduction in space Our our lines. white of QX utilization increased product a material for some shows calendar across and service higher-margin

beyond. early and which both Additionally, and measures our fixed sides quarter in during and the quarter margins the second QX, we should of several cost through initiated the on first variable cost-cutting structure, improve

in structure continue align our will the margins to market We to environment. maximize cost prevailing

members spending. U.S. strategic to major critical our all of greater Most importantly, and positions our onshore across network by us competitors most position services makes onshore our KLX largest, a and been and the the of team out proprietary market. has from capture market-leading well-capitalized success stand basins U.S. summary, its efficiently active customer operators to our date and products delivering for to dedicated portion In diversification in

outlook. I'll the call will over to in return With turn to results that, Keefer? I'll financial now discuss our the Keefer, in detail later review and more call our who

Keefer Lehner

morning, Thanks, everyone. Chris. Good

shift we led drilling in directional with reduced product reported million. respectively, consolidated and and by service and and this offerings. tech Northeast by Chris Southwest Rockies trend second the the of service mix reverse On tubing revenue, of to coiled Southwest from $XXX revenue basis, XX% and and segments sequential product lines, XX% pumping, lines the product representing space decrease services, frac As some line QX which Mid-Con decrease and revenue white increased in higher-margin in see consolidated was which including our Chris mentioned, by drilling, business, in accommodations we in a directional rentals quarter. EBITDA contributed includes mentioned, expect $XX the QX a as and million, QX of our adjusted a and of Mid-Con, geographic our rentals service pressure contribution our driven fishing The and XX% from sequential the

million. Total SG&A quarterly expense SG&A by have you contributed XX% nonrecurring for tubing, led just revenue. or $XX.X back services. and costs, $XX.X for XX.X% QX been rentals tech Rockies When of was would coiled only expense QX The out adjusted million our

begin to to structure changes actioned we and for benefit our several QX, overhead of related streamlined remainder most be to our our reduce will to cost continues This in the to the one late will QX third-party business. margins forward. overhead fixed KLX have a structures for reflected XXXX. diversified and insurance During costs of results going

Turning of segment Southwest. results. now to review a Starting the with our

QX for revenue, respectively. $X.X and operating $XXX,XXX million, negative and loss million, Southwest were $XX.X adjusted EBITDA

coiled despite First positively represents average offerings revenue affected XXXX a X% of in and services extreme sequential tubing the aided negatively quarter vortex. by the of increase wireline, quarter which largely a operational management count, increase polar over rig tech the being to flowback, fourth weather our improvements, affected and due by X%

sequentially elevated activity. maintenance an XX% the QX decreased as function a and slightly slightly in pricing EBITDA levels increase expected support reduced adjusted to of staffing Segment of

EBITDA respectively. the revenue, loss was to Rockies Rockies. million, million operating adjusted QX $XX.X for million, and Moving $X.X negative and $X.X

majority XX% a our were represents activity. in coiled average production related standdowns revenue fourth vast non-KLX an quarter and rentals, drilling, largely tech of due seasonality, decrease safety quarter over and XXXX, regional offset of which wireline affected and X% a rentals sequential frac annual increment weather, First tubing the completion in increase rig and by the reduction services, offerings, partially to negatively count, including

through as of the function to EBITDA sequentially of revenue, second the decreased is XXXX. quarter correct decrease XX% a progress expected materially which as Adjusted seasonal in we

income results, EBITDA adjusted segment and respectively, segment of the for segment for the Lastly, million million, Northeast the revenue, were $XX.X quarter and first $X.X $XX.X XXXX. million, operating Mid-Con for

quarter improved and X%, adjusted in and increased and cost offerings of services. At respectively. reduced to fourth our drilling pricing. adjusted respectively, a operating and income slightly to were improve accommodations to initiatives. loss for previously regional operating largely vast gas-focused $XX.X discussed adjusted basis, the fixed QX decrease QX on reduction of the but and due lower represents decreased to expected First and on million, our activity revenue directional production XXXX X% of XX% based sequential tubing, when EBITDA over XXXX and QX drilling, compared and $XX.X tech loss XX% sequential Segment quarter corporate, EBITDA loss adjusted the corporate million majority The EBITDA is actioned across due including completion coiled

of working a capital I'll quarter $XX was capital, debt million. working now turn balance QX, net to of the approximately Net and and net with $XXX flow we million cash capitalization. as our ended

payroll typically elevated working extra to up Our bonus the first million, fourth XXXX. elevated with million QX the quarter is typically most cash relative $XX March of XXXX prior run by the the driven burden first the XXX% that commentary, an of payroll $XX by of first was and Consistent sequentially from and capital-intensive XX seasonally quarter quarter quarter in driven our down in payout, XXXX. quarter payroll payment taxes balance

also of We had sequential negative which reduction both in DSO in slight a on impacts a change cash. in DPO, increase experienced and the sequential

CapEx. to Now turning

maintenance on CapEx which net First focused sales spending million. million, CapEx primarily across quarter were capital were or QX segments, $XX was our approximately less expenditures asset $XX.X

million, XXXX be $XX in forward, million CapEx $XX to now million. range from million to of $XX $XX the our we total range Going to of expect down forecasted approximately XX% for original

under million budget XX% million ABL $XXX roughly of our in March for maintenance around We Most the million certificates. for the our dedicated operations. consisting quarter is liquidity, cash expenses of with ongoing to $XX with first supporting ended and availability of base year $XX XXXX borrowing earmarked the of

notes, XXXX. and fall mature ABL the senior Our both secured in of

Given and to our and conservative evaluate outstanding generation capitalization confident results cash well monitor business the refinance the and year-end, Throughout conditions to ABL. opportunities notes market positive outlook free XXXX, improved will is remainder we of positioned. we meaningfully continue the our for are and through flow

margins opportunities. ensuring Going focus remains flow well forward, KLX financial that and pursue our is maximizing and robust generation, free growth positioned to strength cash on value-creating

turn back now the I'll that, With Chris. to call

Christopher Baker

Keefer. Thanks,

wrap up, for operator additional continues in E&P and QX in we market $XXX and The color over current I'd and XXXX. XXXX. XXXX share Before and remainder billion in acquisition activity the consolidation to industry outlook on experienced like merger some of our the

enhanced the exceptionally well safety certified to growing customer platform features equipment geographic greater need outsized are for positioned most our to across of a We driving our industry at PSLs. active our on customers consolidation redundancy largest, have higher capitalize exposure consolidation as This regions. is is the confident and including we many across specifications, that

record vendor already performance-driven KLX as of operators These search in as has to exemplary requirements by Customers most and differentiated enhanced premier been our of stands instances, are future. and safest providers for expenditure apart due into driving capital choice with our the to its position job XXXX offerings, certain KLX technologically KLX capabilities. and top-tier selected and a safety execution the we lean efficient for service portion the demand program available. continue

combined position. footprint, geographic with capabilities, strong These our contribute to broad our competitive

the ultimately industry continues X which energy players industry years from key expect to benefit rises, drive will and over in constructive directed demand service it LNG U.S. fastest-growing to investment to KLX is all be pricing the intends incremental Our export basins. drive through believe XXXX. gas LNG should source next gas prices incremental natural which to expected commodity utilization across onshore U.S. elevated as activity, support and demand

improvement in our on white we we a expect Based pronounced. space much QX. As less exited current QX, is sequential schedules,

perspective, June of For by and seasonality on has revenue segment the dissipating driven impact was XXXX, for month in the be an October are currently first roughly We April X% since to consolidated levels. increasingly for $XXX based quarter, anticipate was second and $XXX higher to be of quarter since adjusted our million to to revenue the XX% stronger of QX. XXXX, current with our best Rockies April scheduled of with EBITDA above margins revenue April the into than XX% it partly results, or million been strongest performance May November X% to

relatively deliver I the By summary, even market. of for now are we our will safety, profitability initiatives, and execution successful where KLX flat take we customers importantly, service our questions. most for like support Operator? a would to In team to our of we your that, thank in and will propelling today. members customer strategic their continued and With shareholders prioritizing us

Operator

Instructions] [Operator

question take first Sidoti. from And from Steve Ferazani we'll our

Steve Ferazani

the I call. appreciate the all on detail

now of immobilizing what drive on how know In plays to do in in how for something see comments at profitability? you right is for drive the your of year. we terms if Will of assuming full get remainder -- out, the year noted, half the was the what to based the your U.S. that you you're you probably think second land usually XQ of you compared you terms beyond further year? not the this going Or you seasonal point XQ? cost to XQ, activity -- think uptick we cuts expect see, think closing assets? can you how about in second what today, typical for be do based guidance half XQ, us you the tell Anything guiding close to profitability can assuming to flat we're on What in

Christopher Baker

tough a Chris. with number is know the topics, QX with et seasonal Look, different of some issues, a I'll guess of as That's first. take ultimately, this and Steve, was guidance long XQ question I XQ transitory impacts, we cetera.

reduced space, as segment, rebound rentals overall we in which include white in a our higher-margin XQ which specifically, expect as activity, PSLs, margin typically well Rockies fishing. material a For is would rebound highest and our

remarks, As we October. best April month April said and prepared is since the our was in the our best month since in November, Rockies

if the million April, calendars look adjusted of think believe we and to XQ as trending well million our reality our to we of internal to the X% about at just high end And current of initial range is at as we guide so of $XXX $XXX XX% the it. towards when EBITDA our mid- our margin, look for financials we're guidance

And as to as we improvement XQ. further expect stated, progress we we

the of in XQ we exit on April as talked about we the QX. call which revenue in think so saw about And to in relative an increase we exit our rate XQ, March was rate, highest

show forecast revenue current July. further May, our so a June increase in and And

par with is astutely that simply you improvement. to then So just XQ on cycles, in you outside regions the your mere are And month holiday, typically if point, May Northern it's best stated, we'd months expect continued services the to impacts seasonal fewer well. have due in and historically the space, longer X and and X daylight holds of as XQ June,

enacting we're would margin cuts we in the and of growth the in face just today. that the cost So face enhancement expect overall continued

Steve Ferazani

That's really helpful.

is hopefully, Given year the to believe and challenges of better. certainly 'XX this reasons

And years you're last been sounded improve like much ago. the a protect Keefer of on had balance Over CapEx, the lot with X said, did that than sheet. outlook? that level given flow sheet year to you do your lower the of sort cash balance better position Is can expect fair? It you this the you you this years, sitting some you expect a Obviously, X cash year.

Keefer Lehner

Steve. Good Yes. question,

have free was I this generate expect point. QX think point growing from operating back into growing focus balance cash terms we positive and and what terms last over that And operational the the of we I where few said our to in through remarks lot back performance, is of flow forward. sheet. has actually the prepared Spot the low been a as into progress on is platform we our in year-end, in years of

obviously low than is exiting We're the to done more off that. a we've XXXX. think we're what going XXXX, pretty and point coming We be strong for

So strong into expecting Chris improvement improvement sequential pretty mentioned, thereafter. as with QX further

we So sheet. balance a very believe from capitalized from and be and standpoint, liquidity a then we conservatively leverage continue cash have to a standpoint, strong obviously,

Steve Ferazani

much more is did you balance one of terms conversations. can in, those May. If in your the refi conversations, From you stronger. sheet I this, get Have started time last it's

a you're them for about general, but entering how does conversations? And You've those improvement, shown now? thinking the at you in probably that time OFS are influence conversations those tough right how

Keefer Lehner

tough. I QX Yes, was think certainly

the for I you as XXXX think support market, what gas it about then certainly, remainder that U.S. floor of including basins. directed the we services higher a about across think the broader as as does to and and demand activity think improved the relates to liquids onshore

get think you to as the pretty for services XXXX the and we short- outlook I think onward excited about space. medium-term about

So pretty I actually think there are for tailwinds sector. the strong some

said, talked we that it. just With about

we're I capitalized. think conservatively still

liquidity have There today. a premium strong I X% almost notes position. on think the cash a call is we and really

the that the we I then remainder as the progress ABL acknowledge and remarks, notes of actively prepared both to we'll as the to said refinance exists. we market continue XXXX. So the monitoring evaluate And in through and we're opportunities

Operator

question John Energy next take from Daniel Daniel [Operator Instructions] And from we'll our Partners.

John Daniel

over or X%, for Just to count sort ] we're or -- the next years curious the [ minus rig XXX-ish if stay of at that so. over bound range going summer we pretend X.X plus can next

that very do prosecute any small scale Is feel areas? particular need to be just you that -- across get you various there basins tuck-in -- look are you're would any that you evaluating? deals a the to something As do in in,

Christopher Baker

Look, about past seeing say we or every will say which bankers surprising. in the we I I we've won't multiples, today. flow outsized call I from deals view decreased. is seen lead what cash at deals yes, look think as deal that, And increased and on horse for earnings time, has had we've deals necessarily is of quarters, been all couple the where right? all PE the the it's bit of a lately still of we're talked that is a we've essentially kind What candidly couple feedback

before aligning talked deals as believe strong And mechanism. and we're are here at so about we KLX, majority alignment believers equity-linked in a incentives keen

That's executed the we how deal. Greene's

we've very pleased been and So of with far. employees retention customers thus

we're continuing to is opportunities, so focus our driving our primary evaluate and but initiatives adjusted internal EBITDA. today, And

to diversification to strength deals so it tuck-in very And quickly. key because a is your integrate our point, allows us

we'll the is all them. have counter assets have can from our we've so primarily into travel, more some some the activity of basins we evaluate And of has redeployed The active assets basins declined. gas away shied as and wheels and

it So case-by-case I basis. on think going to a take we're

John Daniel

I you, could saying QX, arise in next you months? the it just but of X I'm -- to not X Would be like to see Do weakness opportunities feel more Okay. pockets mean you're you think does there broadly speaking. going in

Christopher Baker

talked you some capitulation of that sure We're We the with last gassier where about in seeing basins. way. the call there'd mom-and-pops, especially think be that

With the seeing in particular QX both of dislocation with results XQ outlook rebounding peer confident what look to the pretty side in and and rebounding and the business, we're group, into I between material the completion there's our if shape Rockies pretty our our and you we're XQ, production Rockies quarterly your point, of at trajectory. think guidance. and

do capital think and back Do I earnings to schedule? what with by manage production they it in customers, have their I get you've how to QX that's comes some you a think aligned mom-and-pops I extract and But TBD. as they gaps improves, et XQ seen And whipsawed ride the and an value, et just are weather of point, discipline, that some XQ whether upcoming brakes of take cetera. that as review opportunities your and think is key or large. and in upside market will, starts and cetera, kind market smaller if take of flattish take the abate or to you and to to opportunity equity the through tuck-in not

John Daniel

is you records? Okay. last to do on to -- those drive tubing, coiled what get the did highlights had to for that The earlier. one to those differently, hit you the anything you got me steps, To have

Christopher Baker

would I the made what optimal incredible other. So We're I the you're engineering, is whether the the concert tip in of modeling, reality field in team you the precise well, true at effort. the bits, takes is, strides say stream the BHA, by commercial backstopped execution, the well friction design, very as opportunity mills, everything that to motor, time ERT, proud as any for mean, each selection the has it fluid it's a very know, look, coil. work we've expanding with very, of spear,

beyond If you you all never to with a Pre-COVID, preaching roll people take you'd CT well. the the pipe. clock we by the have back too pipe, of way, going get and stick this stick know laterals you lot would and And to over. what's quarter, saying X-mile I'm add

BOPs. We have

We the look, of capacity coiled competitive our last size candidly. to couple not as we have and capacity the carrying strengths I'm can we tubing what And seen achievements, going we've a regarding this little think agnostic, be over specific expansion of are tremendous snubbing So in disclose right? well, where years. units

and acceptable That at mile ROP being we said, still what I is headway locked were up lateral X.X and [ yet. not making tell reached you the had ] in will

see to So willingness length the lateral and extreme we'll clearly experiment with coil in go? deeper with think continue ecstatic, sure, operators And I'm say, I tubing. results. wait to we're but we're much see, rabbit our how I would to not hole continuing

Operator

Research. our from Marsh take David we'll And from next Singular question

David Marsh

on cut it's to mostly be across P&L Keefer, terms a would you you cost impacting your just -- impact SG&A? of us cutting. realize can is sold? that proposed And whether your just sense going of to that Could Or with order you kind start give be get that of here? cost think cost going you give going wanted any magnitude you to the side I your of to sense fixed in of to could that's us could how it

Christopher Baker

today I'll in and number can Keefer initiated decline answer Yes. continues we to of David, actions those extend a in Short I'd name count QX, it. reality actions corporate adjustments Chris. The to and really fixed costs jump then is through and this yes. and include as is insurance is level Look, way the backfill. those frame would vendors to of is those cost numerous modifications accounting, rig you it. IT, legal,

And an the fixed we've revenue. same monitored try forecasted so the for always head cost capacity levels cost maintaining of crew we really with attack to May, utilization July the ledger. side June, of At aisle count time,

figure disclosed date. So dollar the to we haven't

However, quarter of in realization is quarter and kind a earnest April, of what partial the say in a benefit XQ would full from it those receive I cuts QX. expecting we're we'll through March in started

Keefer Lehner

evenly to But I'd obviously, G&A thing to it's more there see both you'll fixed COGS more only G&A to those of and a point, at the is between line. roll line And of to fixed variable start Chris' through. with the variable, buckets, mix be it's the both and of that frankly, guess and probably, going mix question I split, COGS add split. your cost a

Operator

turn concludes to back this question-and-answer our the session. for Chris floor closing And I'll Baker remarks.

Christopher Baker

to next with this your again KLX. in and on us for call quarter. forward again you interest look you once for speaking Thank We joining

Operator

does your and Ladies this today's We participation. gentlemen, for conclude Thank thank teleconference. you. you

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

KLX Energy Services (KLXE) 8 May 242024 Q1 Earnings call transcript