KLXE - Earnings call transcript Q3 2024 | KLX Energy Services Holdings, Inc.

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Operator

Greetings, and welcome to the KLX Energy Services 2024 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard, with Investor Relations. Thank you. Mr. begin. may you Dennard,

Ken Dennard

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

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

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

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

non-GAAP also will include today measures. financial comments The certain

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

Christopher Baker

market for Thanks where good our outlook. Thank results will morning, discuss quarter you, joining and everyone. third we on call, our Ken, and trends color KLX's QX provide and

results, another Starting report to QX quarter with KLX. our we for pleased are strong

trends, market increased Our exemplary, ranges. end previously specifically, mix, strength $XX guidance EBITDA overall second included results continues revenue, further and million XX%, million EBITDA of our third mix, We to the strong high offerings consolidated geographic margin came quarter team's results product broader over of positioning. our experienced in execution market adjusted at results, in in demonstrating our QX our the quarter adjusted macro customer market further and our in service $XXX and current outperforming the of be improvement

Despite was KLX X% X% to land another average another sequential able active a sequential U.S. and in quarter. strong quarterly the U.S. consecutive decline deliver to rigs operated frac navigate in decline market spreads,

land challenges managed $XXX,XXX industry our our across since KLX starting to continued the market metric of In and ongoing nondiversified relationships that various conditions. demonstrating U.S. fact, leveraging operated merits strength from peers, third of and diversification customer per By to the generate we began third average per rig, metric highest revenue the approximately strong merger. rig post and geographic track the out quarter strategy stands backdrop differentiates ability and market against position, also of effectively execute our KLX to the our our average

the revenue in steady Southwest of Northeast/Mid-Con to our compared QX. QX. QX performance Northeast/Mid-Con And The Rockies the in compared XX% represented compared to Geographically, to in XX% in business, illustrating continued compared XX% in XX% XX% a Rockies Southwest sharp rebound the of and XX% represented to strength the QX. revenue represented QX, revenue in of

to of and approximately XX% half up continues flat accounted quarterly an Production QX XX% and and revenue, down solutions. had XX%, saw directed in intervention continued QX. drilling drove activity production across our of of improved completion-focused perspective, from intervention strength XX% XX% in from and market QX. QX our utilization QX drove end an for calendar drive revenue From completions to and revenue,

Additionally, differentiated of market-leading and downhole assets offerings, we fleet positive with completions performance. momentum technology rental our experienced KLX continued

in record with largest, These now continued most combined incident spanning continues and KLX expertise results industry-leading, active our rates. our safety competitive customers be record-low in in Our Keefer to greater the Keefer? recordable return to best-in-class to positioning geographic review detail to to contribute our call for will XXXX. with outlook discuss financial and the later capabilities, with turn total footprint market. basins, key the I'll operational call technological and the optimism over our

Keefer Lehner

everyone. morning, Good Chris. Thanks,

of As QX Chris X% from QX. increase reported sequential mentioned, a revenue we $XXX representing million,

EBITDA product QX with consolidated sequential adjusted the the service adjusted majority X% sequentially, basis, crew an from On consistent a the which increase and lines XX%, contributions was margin in drove with our up increased And improved was EBITDA revenue driven Our utilization was QX. those, sequential a of of and by million, and improvement, consolidated with Rockies coiled tubing higher activity Northeast/Mid-Con pumping within pressure respectively. segments. $XX.X

and our contributed led and by segments frac coiled product service rentals drilling XX% led drilling, revenue, and in lines, and directional pumping, accommodations tubing, and rentals XX%, and directional respectively, offerings. by services. of The the the pressure tech rentals contributed XX% QX Southwest our in The Northeast/Mid-Con Rockies Mid-Con Southwest by

XXXX the professional related in third-party QX. remainder expected QX adjusted $XX.X been revenue. quarterly us was fees you benefit out million. and implemented structure Cost and expense in SG&A or expense we X.X% would These million continued back beyond. QX $XX.X costs, of continue nonrecurring for changes are IT QX SG&A to for cost reductions just of insurance, to Total to through have When

to our segment results. Now moving

by EBITDA and of sequential million Mountain adjusted and $XX.X over that incremental quarter the and to EBITDA PSL expect shift largely pricing and due sequentially the relocation For revenue, X% underlying asset XXXX, and a rentals respectively, income along quarter customer XX.X% $XX.X going activity by in movement income activity costs slightly due including quarter decreased on income and for short-term represents driven the depending reduced a In the to to Operating mixed forward. do XXXX. in second largely X%, and increase operating Southwest not $XX.X $XXX,XXX we on were revenue related PSL. elevated Rocky region, million, respectively, adjusted $X.X scheduling third million, segment, of were redeployment respectively, million, third the million, for This operating the which includes XXXX. issues, adjusted with EBITDA Eagle Permian and $X.X Ford, the and mix, of revenue,

solutions, operating rig EBITDA decreased slight of respectively. a slightly which and and frac represents outpaced by largely underlying and mix decline revenue, in sequential increased approximately income count X% reduced adjusted This XX% revenue in in and from XX%, due a our regional completion, shift Segment and to offset including customer respectively, count solutions. by scheduling, short-term production spread our PSL XX%, decrease driven intervention drilling the X% revenue by across

were This in and Segment space the operating operational levels, efficiencies XXX% by revenue, cost and reduced adjusted of income EBITDA due higher completions represents and completions million, and adjusted sequential within million, our by of largely EBITDA a operating segment, X% the white respectively, Northeast/Mid-Con million the revenue and management activity. successful income driven $XX largely increase For PSLs for increased implementation $XX.X our respectively, quarter $X to and segment. within XXXX. third increased activity XX%,

levels QX $XX.X is EBITDA Corporate, respectively. forward. similar million, were million Corporate expected and At adjusted remain $X.X operating our loss EBITDA at loss to for going and adjusted

our balance availability million XXXX capitalization. cash the cash borrowing Turning September not million ended $XX million, We on to our a sheet, quarter liquidity of borrowed balance flow of $XXX and with certificate. of $XX base and including

ABL The on Our X, secured of ABL and or in a senior XXXX August and both mature notes secured XXXX. September matures maturity the the senior XXXX. in either springing mature November fall notes based

QX at orders of level. this defined not lumpy timing of XXXX million our premium less we our due performance strong and and CapEx around million, for $XX.X CapEx, optimism activity level and capital approximately ratio given quarterly in early Now away normalized below that leverage a the capital quarter manner. has actively Net CapEx operating sales QX mainly of structure to highest will and expenditures are a was options were to be KLX Xx, for asset is the our fallen constructive our momentum, refinance indicative a $XX QX annualized net as CapEx XXXX quarter. considering call

be of is asset $XX full XX% expect Looking XXXX range the for maintenance year be net year $XX is million million, approximately which sales we ahead, period only to of of of maintenance CapEx in CapEx earmarked oriented. the CapEx $XX full year-to-date $XX approximately with to million million, to expenses. for

Overall, Our capital financial the generating focus cash allocation base outlook Chris remains it the maximizing now for most effectively supports challenging while spending I'll meet flexibility to our proprietary maintaining ensure to our prudent can our margins, deleveraging via disciplined maintaining strategy. product we execute customers' demands free projects. our our hand concluding asset high-return existing and of further to necessary lines flow, remarks. back and his strategy on

Christopher Baker

Thanks, Keefer.

As look ahead, business the and well diversified positioned have model believe portfolio market. we we adaptable our to navigate us

our launched dedication to demonstrated few refocused performance team. share our delivered cutting-edge scale, on consistently customers upgraded the into ensure The realigned it the basins the on XXXX. Building improved execution. well operations over journey. market-leading and right and we've years technology of driving positioned in-basin is in hard with right results reflecting capturing successfully continue are KLX the fleet, our past and We asset base, to the worth customer demonstrate and work market We've foundation, this proprietary our performance strong

softened to QX differentiated activity in financial conditions have levels peers count during the from and XXXX. also when time compared the rig market delivered industry peak performance of We've a

over XX%. EBITDA generated KLX For net and trailing over perspective, $XXX debt the of reduced million XX-month period, adjusted approximately by

trends. we and the the and important activity. volatility, of Despite support gas for to oil about should capital natural continue market broader industry current investment it's future and to As consider near-term dynamics, sustained longer-term outlook levels think

have gains observing potential onshore completion While those in U.S. market, the drilling efficiencies and a improvements. year-to-date we're driven plateau efficiency in productivity

is partly there this in due to noted, these have of an an part peers gains. from year, our later budget As impact and of seasonality outsized the efficiency exhaustion expectation

likely based a for necessarily in potential making it suggest it continued activity, the on to current anticipate challenging the However, envision efficiency gains growth. This but production in does XXXX, indicate increases doesn't U.S. activity are we uptick stabilize, set. to dramatic

will side, gas-directed gas incremental LNG to believe and demand export continue the data activity. On to that center-driven lead we

exposure to KLX unwavering believe market positioned is evolving our adapt excellence we and our larger our drivers, proven these quickly focus on outsized due the operational well conditions. to to Given to operators, ability

slower QX Looking ahead XXXX. seasonally our and to into

sequential to is while -- For range was budget QX margin QX we between seasonal December XXXX. the QX late was of during the EBITDA an exhaustion. XX% winter a holidays decline Adjusted due September expect QX, decline our by the slowdown, month quarter led and to XX% expected upcoming year. and to approximately of anticipate strongest we XX%, primarily and strongest revenue and break we X% our in activity of encouraged are year the Thanksgiving extended about customer

existing We free engaged on safety with cash are QX XXXX. should plans, expected an with been conversations This, and growth, and indicate momentum strong flow actively of and weather have customers underpin steady commercial and incremental nonrecurrence along positive new constructive expanding year-over-year events margins very for expanded XXXX XXXX generation. a these the and

transitory Excluding $XXX market the and our combined approximately softness. adjusted QX impacted KLX's EBITDA earning the illustrating capacity million, QX, QX despite totaled annualized recent

commodity corresponding and and macro patterns. know tensions, remain customer this latest feedback market we XXXX, underpinned view volatility about optimistic the ongoing and are customer today, by price spending is such in about we geopolitical shifts as vigilant volatility what We

able and As conditions. responsive be is I to KLX and more to earlier, market nimble much mentioned proactive

our With would your thank their geographic we with take Operator? apart environments. to of and execution. capabilities, continued that, for their market central customers stands record support various summary, from offerings combined shareholders position. now such, role are best-in-class offerings, our we members In and KLX cost job peers premier exemplary As These our and KLX our our and footprint, team better collective our we'll manage I our to performance-driven differentiated contribute structure competitive technologically importantly, across with like successes. for questions. its able believe safety most in to

Operator

today our the Steve first Company. from question Sidoti with is of [Operator Ferazani & Instructions] And line

Steve Ferazani

completion Northeast/Mid-Con. I direction me, start been wanted rig count with that and in trending surprise X -- Obviously, the following in had the to to your several strength quarters for activity. positive was

you question saw The we better specifically Any sequentially us is, how around a is? quarter? quarter, commentary This the from anything one-off, that of margins. was much sustainable in give revenue kind can Northeast/Mid-Con

Christopher Baker

rentals. by up remarks, And Yes. we and I driven question, margin Keefer To your the pressure predominantly, revenue his prepared appreciate I a was Steve. mentioned point, lot in X%. flowback was definitely pumping, frac of think It expansion. saw

kind earlier continued X of kind I of the was tale operation. rightsizing Haynesville of tapes. think our in year It that's of a

is And revenue then overall expansion. it

business If QX white in you actually between We slice some and also Northeast, than calendar Mid-Con saw less the the QX. did it just Northeast in the completions the geo QX. had in space issues

was think fairly course, it in the Mid-Con, business well. up So I And materially normalized. more held then definitely And our in was pressure pumping quarter-over-quarter. of accommodations likewise,

Steve Ferazani

switch Perfect. a that really know I Rockies, you And maybe shift? bit a positive about in this bit little the you to mix, Can down where little then shifted quarter. XQ, a talk had

Christopher Baker

Yes.

to actually down there I transitory the had of issues which just, in some wasn't rentals stand we mix by pent-up et tubing that demand, and Rockies much. QX DD, a margin right, of lower safety your inherently in platform the driven are out in your the the think our held point, really It our with of that predominantly But to downs, tech lot QX. saw services It's cetera, flat. QX incremental more was point, shift. wireline, well. lines. product revenue and The coiled was coming

in the just slight revenue. incrementals incremental the You see didn't

Steve Ferazani

elevated your weather this in All you're quarter. your to right. When a -- terms of obviously, you about get on XQ? cash in actually you how positively, would CapEx thinking close us the been of think help in target if this flow quarter quarter, out you year-end the cash have for Could we can outside what's way breaks breakeven good pretty flow

Christopher Baker

specifically, reporting bit clearly a XQ to this than year regards we're with look, normal this earlier think, I quarter. So

is the on with caveats CLX rolled last similar, midweek Christmas a line So wider Wednesday. we I range sequentially XX% holidays This some a year being our than bit estimate a think maybe usual. with top got year. bit of seems

know, said, roll we a services off you drilling prone drilling little operators see holiday is than bit more severely the continue holding production been and kind completions thus of forecast really days. What usual. look, the typically this than as pressure bit intervention the well. taking P&I has can first well, to holding is warmer being stay to far rigs Rockies more That side services The which in a roll So are and our X extended exceptionally PSL, year, and the margins. on active, Rockies

Keefer, be anything on candidly so a margin conservative. And flow? on I free think bit our cash range may else But

Keefer Lehner

side, there. cash Yes, related flow just starting on the to CapEx

As you bit was of QX reflective activity. in market lumpy level not spending It CapEx elevated little outsized. this there. an of level capital noted, was at view as I a think what the And the as discussed we prepared normalized remarks, we that's for is

kind to guided do of Implicitly, XXXX we see $XX CapEx to of QX. QX in expect full guiding the the spending to normalization million range $X million capital So a we're get into we've that to to number year to.

November coupon as And you cash point payment do the out a I'd we on have thing other think that is X. flow QX then only about

fourth So as quarter that does well. hit in the

trends we're his Chris up. you as thinking think And get you year, next probably growth get to both from prepared and we thinking in perspective constructive about little are about about flow it flow transition cash bit a I expecting as into free cash top clear think think and as XXXX. remarks, line the XXXX, I a but will

Steve Ferazani

production about thinking your the XXXX, for the of Maybe That of you How CapEx a year, timing season Excellent. in that's power next a go that's you off and you, an that being is challenging? points capacity -- optimism, plateauing. said, a pushing ticked plan lot when the consumption people very LNG I you And expectation is there how improvement question efficiency start export to coming, knowing into that's last terms Chris, my you for share that as rising. the for remains of the of lot planning right is do bit. that budget recovery are sort coming, positive

Christopher Baker

Yes.

think I that stool. to X there's different legs probably

talked for already KLX plus just quarters annualized rate million transitory QX rate, year. this the omit adjusted $XXX you if EBITDA annualized is run on and First, look at we've QX about QX run

shift that's look this, KLX, believe, about, last we of performance as some we product I and When QX is we've revenue it with operated operating strategic and talked for quarter, some about America. position you and in of at per KLX. mix realignment. We line And That's third the rig $XXX,XXX generated average QES of average the North highest rig since almost $XX,XXX per merger per EBITDA generated rig. adjusted talked

as exceptionally that done here to has episodic. team the roll today, think forward, you sit when your has crude I So And point, pricing we been well.

it is quick yesterday the said, being due softened cetera. a rebounded pricing That forward you get in of as some center, next you It facility as that hasn't plus, LNG stays around a market. all you data LNG, X far but the in handle referenced, with gas strip way the of year to everybody et see reasons can out constructive with the And the news The delays, corner. out as demand not some thought if the for cetera, of of strip as when late, handle. is to the and highly as gas X et recovered midpoint

rig Haynesville kind I'm high of adds year. of in And next the in so quarter the and already single-digit aware January early of fourth count

many on you customer And that and we're year an and up so a as that the year going quarter note. first had wins view kind in other couple off next basins, with we add overall, start of PSLs to when think in the that numerous high we of our we've oil

really drive take we geographic it and oil-directed incremental doesn't and our with from free demand much to as activity incremental about, flow. drilling cash completion talked diversification So our footprint

we now, And announcement. we probably minimum. we'll margins And quarter kind XXXX into for our of type up up fourth XXXX when XX%, believe to expect to QX fairly as be revenue of that affirm QX and guidance so get we a are year. normalized And X%

it's And very to point, Keefer's early.

budget $XX range. incremental finalized in a process somewhere to it But be we of million stretch. CapEx And We by up given stand we've kicking lot We're probably we any just would the maintenance to yet haven't last don't real CapEx date, investments to assets. your time. $XX the pent-up need have to expect XXXX million off made to gross question,

fruition. And very come if come to to ready does incremental up when so go we're that I -- think and activity

Steve Ferazani

Fantastic. Appreciate all the detail.

Operator

the line Energy is next with from Our Blake question of Partners. Daniel McLean

Unknown Analyst

Yes.

So your cautious color for optimism for on sort 'XX. all great thanks of the

One of that you things guys efficiency been seeing D&C and and I'd has little improvements stabilization love about that's obviously, the rip a on there. deeper and you're what in dig gains. for a headwind, bit us? little And maybe plateauing been to for just you talking a

Christopher Baker

you Yes. it's Look, think in X. say day, right? you you question. can't drill Or about of complete we a or we've that. seen -- a drill always think kind When them a well can't great well And I in a

And gains service some to receiving out the to as the them of online, relative bring wells of you're you just it's and drill know, production efficiency and days those also time are but complete not the well.

when as et trying we frac, our out tubing cetera. et think candidly so simul stretch exceptionally And positioned you lateral coming we're coiled cetera, length, situations additional, non-core whether think to about operators we think platform, about well of it's

are we're in others, up think time, discussions next incremental and probably of properly And performance done efficiencies get so I this customers KPI, data outreach think for go. And the certain by with be DSOs, sets first of internally and well. candidly candidly, and year price the of And we've gains -- show our there's the those in them we're and off efficiency the those I room performance has business try for we conversations show efficiency conversations. and certain them all lines move opportunity to about is And having can drive customer to and and assist team that compensated to that part based around part In those exceptionally gains. the to delivering. talked partner pricing to the strategy to our

Unknown Analyst

us of other it. it. sense. question consolidation we've could That Got unique around you and -- then are makes you which larger some or color higher-spec the had, a give on your Maybe there? edge And these you my focusing with in things give maybe was the to of how they're headwind point would an another Got you equipment some entities. guys other position is there. in terms technology might consolidated or conversations that on or upstream Anything safety

Christopher Baker

we but won't think reasons. I It's mention a service our in great PSL here just a one provider were choice question. competitive we prepared named of specific for We recently had in that -- I it remarks,

and our one redundancy our high scores to seen the safety For deliver of year. spec with North to due due across of spec equipment blue-chip our ability and all this to majors primarily in that safety we've America capabilities initiatives

host seen we've their of to and that of when is providers. the general like the service number to a that's number of the providers a comes number ability consensus with larger bundle services E&P so And whole invoices, see point, to for consolidators, more. rather the all too bring you're your space, a takeaway familiar think consolidators packages. and in the than would together that fewer it I reasons And to And of service

in the the [indiscernible] prior way company those et Rockies, a we service talked specifically is equipment. eliminate the your ability last we're that efficiencies. in seeing and you -- so we requirement drive standdowns today to bring in is about I spec That more to you saw of those to what ability way or uptime have like and more But year, efficiencies drive safety question can cetera, that think technology, NPT, only eliminate bring

from rig selling an candidly think their of position to that space face has and make our we're they've well that lack but metric candidly, a seen to KLX which of what's driving we've as more shifted with M&A And that's of up some the OFS topic count insurance counterparty as capital the reasons clients. along the to of on pressures so X market that revenue of us product into inflationary garner point the a space declines, of positioned it's X in smaller lines. we in outside we And certain the within demands per focus consolidator I positioned. quarters just been very share, well think mom-and-pops deploy a and equity also And that and exceptionally private is firms

Unknown Analyst

Well, good more for? going a stuff. Since let sneak deal? consolidation you opportunities about do marketplace you forward, X the approaching think How in there you went a at end, me how looking think What do good about you in. just good the for deal? are makes the What's M&A deals? What

Christopher Baker

Yes.

kind makes So strategic questions. different value. deal a of What I think of X hopefully good logic synergy industrial bit and a fit is

-- landscape it's 'XX, across As we've deem seen dead more would the been 'XX bit a at what deals early high-quality surprising. I really and looked we've in this and late companies, year, the

think opportunities you I as there's get So still XXXX. a out into number to of reengage there

bid-ask issues, of a reasons, of we And saw cetera. the were year, spread tied those kind to for throughout host whole et but predominantly deals dead

I shares. it really think deal estimates for there take share a rolled. pent-up utilizing able the their time our post refi, be price to counterparties will have deleveraging, share set, M&A a value, is, of in up KLX price that's and OFS be an if look, equity exit that's extract multiples consensus well accretive opportunity as sets post somewhat counterparty there's you our to opportunity have And lot of of expanded KLX's capitulation kind as pitch in to market a

blueprint to going they deal We've counterparties all-cash it with acquirers. We're so up X We'd be time and on to be are set success not lack to align time in of of or that we an said the lever the over We're that's up next space. outcome to for X the the seen going years, equity, acquirer. aligned We've not and sets. kind how with rather again. X of opportunity

Operator

you. concludes will Baker call. to now question-and-answer the Thank closing portion I remarks. hand the This for Chris the call back of

Christopher Baker

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

Operator

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

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

KLX Energy Services (KLXE) 1 Nov 242024 Q3 Earnings call transcript