HOUSTON, May 10, 2023
/PRNewswire/ -- KLX Energy Services Holdings, Inc. (Nasdaq:
KLXE) ("KLX", the "Company", "we", "us" or "our") today
reported financial results for the first quarter ended March 31, 2023. Note that the first quarter 2023
results include only a partial month impact post closing the
acquisition of Greene's Energy Group, LLC ("Greene's") on
March 8, 2023. We also make reference
to the three months ended March 31,
2023 including a full quarter of Greene's activity ("Pro
Forma First Quarter 2023").
First Quarter 2023 Financial and Operational
Highlights
- Revenue of $239.6 million,
increased 7% sequentially
- Net income of $9.4 million, net
income margin of 3.9% and diluted earnings per share of
$0.65
- Adjusted net income of $11.5
million
- Adjusted EBITDA of $38.2 million,
increased 2% sequentially
- Adjusted EBITDA margin of 15.9%
- Pro Forma revenue, Adjusted EBITDA, net income and adjusted net
income of $251.9 million,
$40.6 million, $9.4 million and $12.4
million, respectively, when adjusted for a full first
quarter 2023 impact from Greene's1
- Ended the quarter with $84.0
million of available liquidity, consisting of $39.6 million of cash and $44.4 million of available borrowing capacity
under the March 2023 ABL Facility
borrowing base certificate
1 See
disclosure in Unaudited Supplemental Pro Forma Information
herein
|
See "Non-GAAP Financial Measures" at the end of this release
for a discussion of Adjusted EBITDA, Adjusted EBITDA margin,
adjusted net income (loss), adjusted net income (loss) margin, free
cash flow, net debt, net working capital, annualized net leverage
ratio and their reconciliation to the most directly comparable
financial measure calculated and presented in accordance with U.S.
generally accepted accounting principles ("GAAP"). We have not
provided reconciliations of our future expectations as to Adjusted
EBITDA or Adjusted EBITDA margin as such reconciliation is not
available without unreasonable efforts. In addition, for
comparative purposes, we have also presented Pro Forma Operating
Income (Loss), Adjusted EBITDA, adjusted net income (loss) and
adjusted net income (loss) margin for the three months ended
March 31, 2023 including a full
quarter of Greene's activity in the Additional Selected Operating
Data section below.
Chris Baker, KLX President and
Chief Executive Officer, stated, "We overcame seasonal pressures in
the first quarter, including weather, elevated personnel costs from
the January reset of unemployment taxes and two additional payrolls
in the first quarter, along with the well-discussed commodity price
volatility, to report record first quarter results that
exceeded our expectations and guidance across all metrics. The
first quarter of 2023 marked the twelfth consecutive quarter of
sequential revenue improvement for KLX and furthermore we exited
the first quarter generating record monthly levels of revenue and
Adjusted EBITDA.
"We executed on our highly accretive acquisition of Greene's on
March 8th. The operational
fit and integration have been exceptional and cement KLX as a
diverse, scaled and technologically differentiated market leader in
the pressure control space. We believe this transaction is a
blueprint by which KLX can pursue additional tuck-in
consolidation.
"Despite recent volatility in commodity prices and rig count
declines driving short-term dislocation, the market backdrop
remains constructive and the supply and demand fundamentals
continue to favor the services sector. As we enter the second
quarter, we have seen some softening across a few of our product
lines driven by a reduction in Haynesville Shale activity in our
Northeast/Mid-Con Region and an associated impact on adjacent
basins, but the overall market remains tight for many of our
service lines. We believe KLX is well positioned to manage
these disruptions given our competitive positioning and ability to
take a portfolio allocation approach to mobilizing our assets
across a diverse product line and geographic footprint. Looking
forward to the second quarter, we expect continued strong
utilization and margin, plus a full quarter's impact from Greene's,
to drive sequential expansion of quarterly revenue and Adjusted
EBITDA. As we look out to full year 2023, we will continue to
proactively deploy our portfolio of assets to maximize our results
in the face of market volatility and basin rotation with a focus on
generating meaningful free cash flow," concluded Baker.
First Quarter 2023 Financial Results
Revenue for the first quarter of 2023 totaled $239.6 million, an increase of 7% compared to
fourth quarter 2022 revenue of $223.3
million. The increase in revenue reflects the increase in
activity and pricing across all geographic segments and product
service lines. On a product line basis, drilling, completion,
production and intervention services contributed approximately
25.4%, 54.3%, 11.6% and 8.7%, respectively, to revenues for the
first quarter 2023.
Net income for the first quarter of 2023 was $9.4 million, compared to fourth quarter 2022 net
income of $13.2 million. Adjusted
EBITDA for the first quarter of 2023 increased 2% to $38.2 million, compared to fourth quarter 2022
Adjusted EBITDA of $37.3 million.
Adjusted EBITDA margin for the first quarter of 2023 was 15.9%,
which is the strongest first quarter Adjusted EBITDA margin since
the first quarter of 2019.
First Quarter 2023 Segment Results
The Company reports revenue, operating income and Adjusted
EBITDA through three geographic business segments: Rocky Mountains,
Southwest and Northeast/Mid-Con.
- Rocky Mountains: Revenue, operating income and Adjusted EBITDA
for the Rocky Mountains segment was $67.9
million, $9.8 million and
$15.5 million, respectively, for the
first quarter of 2023. First quarter revenue represents a 3%
increase over the fourth quarter of 2022 largely driven by an
increase in activity throughout the DJ Basin, Wyoming and Bakken across almost all
product lines, led by coiled tubing, tech services and
wireline.
- Southwest: Revenue, operating income and Adjusted EBITDA for
the Southwest segment, which includes the Permian and South Texas, was $73.4
million, $4.8 million and
$10.2 million, respectively, for the
first quarter of 2023. First quarter revenue represents a 2%
decrease over the fourth quarter of 2022 largely driven by a
reduction in weighted average pricing driven largely by a shift in
job mix across directional drilling, tech services and
accommodations.
- Northeast/Mid-Con: Revenue, operating income and Adjusted
EBITDA for the Northeast/Mid-Con segment was $98.3 million, $18.7
million and $23.7 million,
respectively, for the first quarter of 2023, all of which are
segment records. First quarter revenue represents a 19% increase
over the fourth quarter of 2022 largely due to sequential
improvement in activity, utilization and weighted average pricing
across pressure pumping, coiled tubing and directional
drilling.
The following is a tabular summary of revenue, operating income
(loss) and Adjusted EBITDA (loss) for the first quarter ended
March 31, 2023 and the fourth quarter ended December 31,
2022 ($ in millions).
|
|
Three Months
Ended
|
|
|
March 31,
2023
|
|
December 31,
2022
|
Revenue:
|
|
|
|
|
Rocky Mountains
|
|
$
67.9
|
|
$
66.1
|
Southwest
|
|
73.4
|
|
74.8
|
Northeast/Mid-Con
|
|
98.3
|
|
82.4
|
Total
Revenue
|
|
$
239.6
|
|
$
223.3
|
|
|
Three Months
Ended
|
|
|
March 31,
2023
|
|
December 31,
2022
|
Operating income
(loss):
|
|
|
|
|
Rocky Mountains
|
|
$
9.8
|
|
$
12.4
|
Southwest
|
|
4.8
|
|
7.7
|
Northeast/Mid-Con
|
|
18.7
|
|
15.4
|
Corporate and
other
|
|
(14.4)
|
|
(13.3)
|
Total operating
income
|
|
$
18.9
|
|
$
22.2
|
|
|
Three Months
Ended
|
|
|
March 31,
2023
|
|
December 31,
2022
|
Adjusted EBITDA
(loss)
|
|
|
|
|
Rocky Mountains
|
|
$
15.5
|
|
$
17.9
|
Southwest
|
|
10.2
|
|
12.4
|
Northeast/Mid-Con
|
|
23.7
|
|
19.7
|
Segment
Total
|
|
49.4
|
|
50.0
|
Corporate and
other
|
|
(11.2)
|
|
(12.7)
|
Total Adjusted
EBITDA(1)
|
|
$
38.2
|
|
$
37.3
|
|
(1) Excludes one-time costs, as
defined in the Reconciliation of Consolidated Net Loss to Adjusted
EBITDA (loss) table below, non-cash compensation expense and
non-cash asset impairment expense.
|
Balance Sheet and Liquidity
Total debt outstanding as of March 31, 2023 was
$283.6 million. As of March 31,
2023, cash and cash equivalents totaled $39.6 million. Available liquidity as of
March 31, 2023 was $84.0
million, including availability of $44.4 million on the March
2023 ABL Facility Borrowing Base Certificate. The Senior
Secured Notes bear interest at an annual rate of 11.5%, payable
semi-annually in arrears on May
1st and November
1st. Accrued interest as of March 31, 2023
was $11.5 million for the Senior
Secured Notes and $0.2 million
related to the ABL Facility.
Net working capital as of March 31,
2023 was $115.1 million, which
was up 60% from December 31, 2022
levels. The increase in net working capital was driven by (i) the
acquisition of Greene's, which contributed $12.3 million of net working capital as of
March 31, 2023; (ii) increased
activity; (iii) customers slow paying at the end of the first
quarter driving a 7% increase in days sales outstanding from
year-end 2022 levels; (iv) accelerated vendor payments in March as
we paid invoices early in preparation for a system implementation
project and (v) two incremental payrolls in the first quarter of
2023 relative to the fourth quarter of 2022. Most of these items
were transitory in nature, and we have seen net working capital and
cash levels normalize so far in the second quarter.
We ended April with a cash balance of approximately $61 million and available liquidity of
approximately $106 million.
Other Financial Information
Capital expenditures were $10.3
million during the first quarter of 2023, an increase of
$0.8 million or 8% compared to
capital expenditures of $9.5 million
in the fourth quarter of 2022. Capital spending during the first
quarter was driven primarily by maintenance capital expenditures
across our segments. As of March 31,
2023, we had $4.9 million of
assets held for sale related to real property and equipment in the
Rocky Mountains and Southwest segments. We expect $2.6 million of these sales to close during the
third quarter of 2023.
2023 Guidance
The Company reaffirms full year 2023 guidance. The below summary
of Company guidance is current as of the time provided and subject
to change.
- Second quarter 2023 revenue of $240 to $250
million
- Second quarter 2023 Adjusted EBITDA margin of 16% to 17%
- Full year 2023 revenue range of $975
million to $1.04 billion
- Full year 2023 Adjusted EBITDA margin of 17% to 19%
- Full year 2023 capital spending of $60 to $70
million
Conference Call Information
KLX has scheduled a conference call for 9:00 a.m. Central Time (10:00 a.m. Eastern Time) on Thursday,
May 11, 2023, to review reported results. You may access the
call by telephone at 1-201-389-0867 and ask for the KLX 2023 First
Quarter Conference Call at least 10 minutes prior to the start
time. The webcast of the call may also be accessed through the
Investor Relations section of the Company's website at
https://investor.klxenergy.com/events-and-presentations/events. For
those who cannot listen to the live call, a replay of the call can
be accessed on the Company's website for 90 days and will be
available by telephone through May 25,
2023, at 1-201-612-7415, access code 13738051#. Please
submit any questions for management prior to the call via email to
KLXE@dennardlascar.com.
About KLX Energy Services Holdings, Inc.
KLX is a growth-oriented provider of diversified oilfield
services to leading onshore oil and natural gas exploration and
production companies operating in both conventional and
unconventional plays in all of the active major basins throughout
the United States. The Company
delivers mission critical oilfield services focused on drilling,
completion, production, and intervention activities for technically
demanding wells from over 60 service and support facilities located
throughout the United States.
KLX's complementary suite of proprietary products and specialized
services is supported by technically skilled personnel and a broad
portfolio of innovative in-house manufacturing, repair and
maintenance capabilities. More information is available at
www.klxenergy.com.
Forward-Looking Statements and Cautionary
Statements
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements to encourage companies
to provide prospective information to investors. This news release
(and any oral statements made regarding the subjects of this
release, including on the conference call announced herein)
includes forward-looking statements that reflect our current
expectations and projections about our future results, performance
and prospects. Forward-looking statements include all statements
that are not historical in nature and are not current facts. When
used in this news release (and any oral statements made regarding
the subjects of this release, including on the conference call
announced herein), the words "believe," "expect," "plan," "intend,"
"anticipate," "estimate," "predict," "potential," "continue,"
"may," "might," "should," "could," "will" or the negative of these
terms or similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain such identifying words. These forward-looking
statements are based on our current expectations and assumptions
about future events and are based on currently available
information as to the outcome and timing of future events with
respect to, among other things: our operating cash flows; the
availability of capital and our liquidity; our ability to renew and
refinance our debt; our future revenue, income and operating
performance; our ability to sustain and improve our utilization,
revenue and margins; our ability to maintain acceptable pricing for
our services; future capital expenditures; our ability to finance
equipment, working capital and capital expenditures; our ability to
execute our long-term growth strategy and to integrate our
acquisitions; our ability to successfully develop our research and
technology capabilities and implement technological developments
and enhancements; and the timing and success of strategic
initiatives and special projects.
Forward-looking statements are not assurances of future
performance and actual results could differ materially from our
historical experience and our present expectations or projections.
These forward-looking statements are based on management's current
expectations and beliefs, forecasts for our existing operations,
experience, expectations and perception of historical trends,
current conditions, anticipated future developments and their
effect on us and other factors believed to be appropriate. Although
management believes the expectations and assumptions reflected in
these forward-looking statements are reasonable as and when made,
no assurance can be given that these assumptions are accurate or
that any of these expectations will be achieved (in full or at
all). Our forward-looking statements involve significant risks,
contingencies and uncertainties, most of which are difficult to
predict and many of which are beyond our control. Known material
factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not
limited to, risks associated with the following: a decline in
demand for our services, including due to the COVID-19 pandemic,
declining commodity prices, overcapacity and other competitive
factors affecting our industry; the cyclical nature and volatility
of the oil and gas industry, which impacts the level of
exploration, production and development activity and spending
patterns by oil and natural gas exploration and production
companies; a decline in, or substantial volatility of, crude oil
and gas commodity prices, which generally leads to decreased
spending by our customers and negatively impacts drilling,
completion and production activity; inflation; increases in
interest rates; the ongoing war in Ukraine and its continuing effects on global
trade; supply chain issues; and other risks and uncertainties
listed in our filings with the U.S. Securities and Exchange
Commission, including our Current Reports on Form 8-K that we file
from time to time, Quarterly Reports on Form 10-Q and Annual Report
on Form 10-K. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
We undertake no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as
a result of new information, future events or otherwise, except as
required by law.
Unaudited Supplemental Pro Forma Information
The unaudited supplemental pro forma financial information
included herein has been provided for illustrative purposes only
and does not purport to be indicative of the actual results that
would have been achieved by combining the companies for the periods
presented, or of the results that may be achieved by the combined
companies in the future. Further, actual results may vary
significantly from the results reflected in the following unaudited
supplemental pro forma financial information because of future
events and transactions, as well as other factors.
Prior to the business combination closing on March 8, 2023, our financial results included in
this release include only the results of KLX. For the period from
March 8, 2023 to March 31, 2023, our financial results include the
combined operations of KLX and Greene's. The Company has presented
certain specified financial results on a "pro forma basis" as it
believes it provides more meaningful information to investors, but
these pro forma results are not prepared consistent with Article 11
of Regulation S-X. Financial information presented on a "pro forma
basis" is the sum of the historical financial results of the
Company for the full period shown and Greene's for periods prior to
the business combination closing date. The supplemental pro forma
financial information does not include adjustments to reflect the
impact of other cost savings or synergies that may result from the
acquisition. Please see the KLX Form 10-Q for the quarter ended
March 31, 2023 filed with the
Securities and Exchange Commission for additional details.
KLX Energy Services
Holdings, Inc
Condensed
Consolidated Statements of Operations
(In millions of
U.S. dollars and shares, except per share
amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
Pro
Forma(1)
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
March 31,
2023
|
Revenues
|
$
239.6
|
|
$
223.3
|
|
$
152.3
|
|
$
251.9
|
Costs and
expenses:
|
|
|
|
|
|
|
|
Cost of
sales
|
180.9
|
|
166.6
|
|
135.0
|
|
188.3
|
Depreciation and amortization
|
16.5
|
|
14.9
|
|
13.7
|
|
18.1
|
Selling,
general and administrative
|
26.2
|
|
19.4
|
|
15.0
|
|
29.6
|
Research
and development costs
|
0.3
|
|
0.2
|
|
0.1
|
|
0.3
|
Bargain
purchase gain
|
(3.2)
|
|
—
|
|
—
|
|
(3.2)
|
Operating income
(loss)
|
18.9
|
|
22.2
|
|
(11.5)
|
|
18.8
|
Non-operating
expense:
|
|
|
|
|
|
|
|
Interest
expense, net
|
9.3
|
|
9.0
|
|
8.3
|
|
9.2
|
Net income (loss)
before income tax
|
9.6
|
|
13.2
|
|
(19.8)
|
|
9.6
|
Income tax
expense
|
0.2
|
|
—
|
|
0.1
|
|
0.2
|
Net income
(loss)
|
$
9.4
|
|
$
13.2
|
|
$
(19.9)
|
|
$
9.4
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share:
|
|
|
|
|
|
|
|
Basic
|
$
0.66
|
|
$
1.07
|
|
$
(1.98)
|
|
$
0.66
|
Diluted
|
$
0.65
|
|
$
1.06
|
|
$
(1.98)
|
|
$
0.65
|
|
|
|
|
|
|
|
|
Weighted average common
shares:
|
|
|
|
|
|
|
|
Basic
|
14.2
|
|
12.3
|
|
10.1
|
|
14.2
|
Diluted
|
14.4
|
|
12.5
|
|
10.1
|
|
14.4
|
|
(1) The
pro forma condensed consolidated statement of operations for the
three months ended March 31, 2023 reflects the results of KLX for
the period presented and the results of Greene's assuming the
acquisition occurred on January 1, 2022, see Unaudited Supplemental
Pro Forma Information.
|
KLX Energy Services
Holdings, Inc
Condensed
Consolidated Balance Sheets
(In millions of
U.S. dollars and shares, except per share data)
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
(Unaudited)
|
|
|
ASSETS
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
39.6
|
|
$
57.4
|
Accounts
receivable–trade, net of allowance of $5.9 and $5.7
|
193.2
|
|
154.3
|
Inventories,
net
|
27.2
|
|
25.7
|
Prepaid expenses and
other current assets
|
17.2
|
|
17.3
|
Total current
assets
|
277.2
|
|
254.7
|
Property and equipment,
net
|
197.5
|
|
168.1
|
Operating lease
assets
|
34.7
|
|
37.4
|
Intangible assets,
net
|
2.0
|
|
2.1
|
Other assets
|
4.5
|
|
3.6
|
Total
assets
|
$
515.9
|
|
$
465.9
|
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
93.7
|
|
$
84.2
|
Accrued
interest
|
11.7
|
|
4.8
|
Accrued
liabilities
|
28.8
|
|
41.0
|
Current portion of
operating lease obligations
|
14.3
|
|
14.2
|
Current portion of
finance lease obligations
|
12.2
|
|
10.2
|
Total current
liabilities
|
160.7
|
|
154.4
|
Long-term
debt
|
283.6
|
|
283.4
|
Long-term operating
lease obligations
|
20.1
|
|
22.8
|
Long-term finance lease
obligations
|
23.3
|
|
20.3
|
Other non-current
liabilities
|
0.7
|
|
0.8
|
Commitments,
contingencies and off-balance sheet arrangements
|
|
|
|
Stockholders' equity
(deficit):
|
|
|
|
Common stock, $0.01 par
value; 110.0 authorized; 16.8 and 14.3 issued
|
0.1
|
|
0.1
|
Additional paid-in
capital
|
551.9
|
|
517.3
|
Treasury stock, at
cost, 0.4 shares and 0.4 shares
|
(5.3)
|
|
(4.6)
|
Accumulated
deficit
|
(519.2)
|
|
(528.6)
|
Total stockholders'
equity (deficit)
|
27.5
|
|
(15.8)
|
Total liabilities and
stockholders' equity (deficit)
|
$
515.9
|
|
$
465.9
|
KLX Energy Services
Holdings, Inc
Condensed
Consolidated Statements of Cash Flows
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
March 31,
2022
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
9.4
|
|
$
(19.9)
|
Adjustments to
reconcile net income (loss) to net cash flows used in operating
activities
|
|
|
|
Depreciation and
amortization
|
16.5
|
|
13.7
|
Non-cash
compensation
|
0.7
|
|
0.7
|
Amortization of
deferred financing fees
|
0.4
|
|
0.3
|
Provision for
inventory reserve
|
—
|
|
0.1
|
Gain on disposal of
property, equipment and other
|
(4.4)
|
|
(2.0)
|
Bargain purchase
gain
|
(3.2)
|
|
—
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(22.0)
|
|
(3.8)
|
Inventories
|
(1.5)
|
|
(2.0)
|
Prepaid
expenses and other current and non-current assets
|
3.7
|
|
4.2
|
Accounts
payable
|
2.4
|
|
(1.5)
|
Other
current and non-current liabilities
|
(10.7)
|
|
4.0
|
Other
|
0.1
|
|
—
|
Net cash flows used in
operating activities
|
(8.6)
|
|
(6.2)
|
Cash flows from
investing activities:
|
|
|
|
Purchases of property
and equipment
|
(10.3)
|
|
(5.8)
|
Proceeds from sale of
property and equipment
|
5.0
|
|
2.6
|
Cash from
acquisition
|
1.7
|
|
—
|
Net cash flows used in
investing activities
|
(3.6)
|
|
(3.2)
|
Cash flows from
financing activities:
|
|
|
|
Purchase of treasury
stock
|
(0.7)
|
|
(0.3)
|
Proceeds from stock
issuance, net of costs
|
(0.1)
|
|
3.0
|
Payments on finance
lease obligations
|
(3.1)
|
|
(1.5)
|
Change in financed
payables
|
(1.7)
|
|
(0.4)
|
Net cash flows (used in)
provided by financing activities
|
(5.6)
|
|
0.8
|
Net change in cash and cash
equivalents
|
(17.8)
|
|
(8.6)
|
Cash and cash
equivalents, beginning of period
|
57.4
|
|
28.0
|
Cash and cash
equivalents, end of period
|
$
39.6
|
|
$
19.4
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
Cash paid during period
for:
|
|
|
|
Income taxes paid, net
of refunds
|
$
(0.1)
|
|
$
—
|
Interest
|
2.0
|
|
0.7
|
Supplemental
schedule of non-cash activities:
|
|
|
|
Change in deposits on
capital expenditures
|
$
0.9
|
|
$
—
|
Change in accrued
capital expenditures
|
3.9
|
|
1.3
|
KLX Energy Services Holdings,
Inc.
Additional Selected Operating
Data
(Unaudited)
Non-GAAP Financial Measures
This release includes Adjusted EBITDA, adjusted net income
(loss), free cash flow, net working capital, net debt and
annualized net leverage ratio measures. Each of the metrics are
"non-GAAP financial measures" as defined in Regulation G of the
Securities Exchange Act of 1934.
Adjusted EBITDA is a supplemental non-GAAP financial measure
that is used by management and external users of our financial
statements, such as industry analysts, investors, lenders and
rating agencies. Adjusted EBITDA is not a measure of net earnings
or cash flows as determined by GAAP. We define Adjusted EBITDA as
net earnings (loss) before interest, taxes, depreciation and
amortization, further adjusted for (i) goodwill and/or long-lived
asset impairment charges, (ii) stock-based compensation expense,
(iii) restructuring charges, (iv) transaction and integration costs
related to acquisitions, (v) costs incurred related to the COVID-19
pandemic and (vi) other expenses or charges to exclude certain
items that we believe are not reflective of the ongoing performance
of our business. Adjusted EBITDA is used to calculate the Company's
leverage ratio, consistent with the terms of the Company's ABL
Facility.
We believe Adjusted EBITDA is useful because it allows us to
more effectively evaluate our operating performance and compare the
results of our operations from period to period without regard to
our financing methods or capital structure. We exclude the items
listed above in arriving at Adjusted EBITDA because these amounts
can vary substantially from company to company within our industry
depending upon accounting methods and book values of assets,
capital structures and the method by which the assets were
acquired. Adjusted EBITDA should not be considered as an
alternative to, or more meaningful than, net income as determined
in accordance with GAAP, or as an indicator of our operating
performance or liquidity. Certain items excluded from Adjusted
EBITDA are significant components in understanding and assessing a
company's financial performance, such as a company's cost of
capital and tax structure, as well as the historic costs of
depreciable assets, none of which are components of Adjusted
EBITDA. Our computations of Adjusted EBITDA may not be comparable
to other similarly titled measures of other companies.
We define adjusted net income (loss) as consolidated net income
(loss) adjusted for (i) goodwill and/or long-lived asset impairment
charges, (ii) restructuring charges, (iii) transaction and
integration costs related to acquisitions, (iv) costs incurred
related to the COVID-19 pandemic and (v) other expenses or charges
to exclude certain items that we believe are not reflective of the
ongoing performance of our business. We believe adjusted net income
(loss) is useful because it allows us to exclude non-recurring
items in evaluating our operating performance.
We define free cash flow as net cash provided by operating
activities less capital expenditures and proceeds from sale of
property and equipment. Our management uses free cash flow to
assess the Company's liquidity and ability to repay maturing debt,
fund operations and make additional investments. We believe that
free cash flow provides useful information to investors because it
is an important indicator of the Company's liquidity, including its
ability to reduce net debt, make strategic investments and
repurchase stock.
Net working capital is calculated as current assets, excluding
cash, less current liabilities, excluding accrued interest and
finance lease obligations. We believe that net working capital
provides useful information to investors because it is an important
indicator of the Company's liquidity.
We define net debt as total debt less cash and cash equivalents.
We believe that net debt provides useful information to investors
because it is an important indicator of the Company's
indebtedness.
We define annualized net leverage ratio as total debt less cash
and cash equivalents, divided over four multiplied by Adjusted
EBITDA. We believe that annualized net leverage ratio because it is
an important indicator of the Company's indebtedness in relation to
its operating performance.
The following tables present a reconciliation of the non-GAAP
financial measures of Adjusted EBITDA and Adjusted EBITDA margin to
the most directly comparable GAAP financial measure for the periods
indicated:
KLX Energy Services
Holdings, Inc
Reconciliation of
Consolidated Net Income (Loss) to Adjusted EBITDA
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
Pro
Forma(3)
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
March 31,
2023
|
Consolidated net income
(loss)(2)
|
$
9.4
|
|
$
13.2
|
|
$
(19.9)
|
|
$
9.4
|
Income tax
expense
|
0.2
|
|
—
|
|
0.1
|
|
0.2
|
Interest
expense, net
|
9.3
|
|
9.0
|
|
8.3
|
|
9.2
|
Operating income
(loss)
|
18.9
|
|
22.2
|
|
(11.5)
|
|
18.8
|
Bargain
purchase gain
|
(3.2)
|
|
—
|
|
—
|
|
(3.2)
|
One-time
costs, excluding bargain purchase gain(1)
|
5.3
|
|
(0.5)
|
|
2.0
|
|
6.2
|
Adjusted operating
income (loss)
|
21.0
|
|
21.7
|
|
(9.5)
|
|
21.8
|
Depreciation and amortization
|
16.5
|
|
14.9
|
|
13.7
|
|
18.1
|
Non-cash
compensation
|
0.7
|
|
0.7
|
|
0.7
|
|
0.7
|
Adjusted
EBITDA
|
$
38.2
|
|
$
37.3
|
|
$
4.9
|
|
$
40.6
|
*Previously announced
quarterly numbers may not sum to the year-end total due to
rounding.
|
(1) The
one-time costs during the first quarter of 2023 relate to $3.3 in
retention bonus costs, $1.2 in costs related to the Greene's
acquisition and $0.8 in non-recurring legal costs.
|
(2)
Quarterly cost of sales includes $2.1 of lease expense associated
with five coiled tubing unit leases.
|
(3) The pro
forma amounts for the three months ended March 31, 2023 reflect the
results of KLX for the period presented and the results of Greene's
assuming the acquisition occurred on January 1, 2022, see Unaudited
Supplemental Pro Forma Information.
|
KLX Energy Services
Holdings, Inc
Consolidated Net
Income (Loss) Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
Pro
Forma(2)
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
March 31,
2023
|
Consolidated net income
(loss)
|
$
9.4
|
|
$
13.2
|
|
$
(19.9)
|
|
$
9.4
|
Revenue
|
239.6
|
|
223.3
|
|
152.3
|
|
251.9
|
Consolidated net income
(loss) margin percentage
|
3.9 %
|
|
5.9 %
|
|
(13.1) %
|
|
3.7 %
|
|
(1)
Consolidated Net Income (Loss) Margin is defined as the quotient of
consolidated net income (loss) and total revenue.
|
(2) The pro
forma amounts for the three months ended March 31, 2023 reflect the
results of KLX for the period presented and the results of Greene's
assuming the acquisition occurred on January 1, 2022, see Unaudited
Supplemental Pro Forma Information.
|
KLX Energy Services
Holdings, Inc
Consolidated
Adjusted EBITDA Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
Pro
Forma(2)
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
March 31,
2023
|
Adjusted
EBITDA
|
$
38.2
|
|
$
37.3
|
|
$
4.9
|
|
$
40.6
|
Revenue
|
239.6
|
|
223.3
|
|
152.3
|
|
251.9
|
Adjusted EBITDA Margin
Percentage
|
15.9 %
|
|
16.7 %
|
|
3.2 %
|
|
16.1 %
|
|
(1) Adjusted EBITDA Margin is defined
as the quotient of Adjusted EBITDA and total revenue. Adjusted
EBITDA is operating income (loss) excluding one-time costs (as
defined above), depreciation and amortization expense, non-cash
compensation expense and non-cash asset impairment
expense.
|
(2) The
pro forma amounts for the three months ended March 31, 2023 reflect
the results of KLX for the period presented and the results of
Greene's assuming the acquisition occurred on January 1, 2022, see
Unaudited Supplemental Pro Forma Information.
|
Reconciliation of
Rocky Mountains Operating Income (Loss) to Adjusted
EBITDA
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Rocky Mountains
operating income (loss)
|
$
9.8
|
|
$
12.4
|
|
$
(0.8)
|
One-time
costs(1)
|
—
|
|
—
|
|
0.1
|
Adjusted
operating income (loss)
|
9.8
|
|
12.4
|
|
(0.7)
|
Depreciation and amortization expense
|
5.7
|
|
5.5
|
|
5.4
|
Rocky Mountains
Adjusted EBITDA
|
$
15.5
|
|
$
17.9
|
|
$
4.7
|
|
(1) One-time costs are defined in the
Reconciliation of Consolidated Net Income (Loss) to Adjusted EBITDA
table above. For purposes of segment reconciliation, one-time costs
also includes impairment and other charges.
|
Reconciliation of
Southwest Operating Income (Loss) to Adjusted EBITDA
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Southwest operating
income (loss)
|
$
4.8
|
|
$
7.7
|
|
$
(0.4)
|
One-time
costs(1)
|
—
|
|
0.1
|
|
0.1
|
Adjusted
operating income (loss)
|
4.8
|
|
7.8
|
|
(0.3)
|
Depreciation and amortization expense
|
5.4
|
|
4.6
|
|
4.5
|
Southwest Adjusted
EBITDA
|
$
10.2
|
|
$
12.4
|
|
$
4.2
|
|
(1) One-time costs are defined in the
Reconciliation of Consolidated Net Income (Loss) to Adjusted EBITDA
table above. For purposes of segment reconciliation, one-time costs
also includes impairment and other charges.
|
Reconciliation of
Northeast/Mid-Con Operating Income (Loss) to Adjusted
EBITDA
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Northeast/Mid-Con
operating income (loss)
|
$
18.7
|
|
$
15.4
|
|
$
(0.8)
|
One-time
costs(1)
|
—
|
|
0.1
|
|
0.1
|
Adjusted
operating income (loss)
|
18.7
|
|
15.5
|
|
(0.7)
|
Depreciation and amortization expense
|
5.0
|
|
4.2
|
|
3.4
|
Northeast/Mid-Con
Adjusted EBITDA
|
$
23.7
|
|
$
19.7
|
|
$
2.7
|
|
(1) One-time costs are defined in the
Reconciliation of Consolidated Net Income (Loss) to Adjusted EBITDA
table above. For purposes of segment reconciliation, one-time costs
also includes impairment and other charges.
|
KLX Energy Services
Holdings, Inc
Segment Operating
Income (Loss) Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Rocky
Mountains
|
|
|
|
|
|
Operating income
(loss)
|
$
9.8
|
|
$
12.4
|
|
$
(0.8)
|
Revenue
|
67.9
|
|
66.1
|
|
43.3
|
Segment operating
income (loss) margin percentage
|
14.4 %
|
|
18.8 %
|
|
(1.8) %
|
Southwest
|
|
|
|
|
|
Operating income
(loss)
|
4.8
|
|
7.7
|
|
(0.4)
|
Revenue
|
73.4
|
|
74.8
|
|
51.9
|
Segment operating
income (loss) margin percentage
|
6.5 %
|
|
10.3 %
|
|
(0.8) %
|
Northeast/Mid-Con
|
|
|
|
|
|
Operating income
(loss)
|
18.7
|
|
15.4
|
|
(0.8)
|
Revenue
|
98.3
|
|
82.4
|
|
57.1
|
Segment operating
income (loss) margin percentage
|
19.0 %
|
|
18.7 %
|
|
(1.4) %
|
|
(1) Segment
Operating Income (Loss) Margin is defined as the quotient of
segment operating income (loss) and segment revenue.
|
KLX Energy Services
Holdings, Inc
Segment Adjusted
EBITDA Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Rocky
Mountains
|
|
|
|
|
|
Adjusted
EBITDA
|
$
15.5
|
|
$
17.9
|
|
$
4.7
|
Revenue
|
67.9
|
|
66.1
|
|
43.3
|
Adjusted EBITDA Margin
Percentage
|
22.8 %
|
|
27.1 %
|
|
10.9 %
|
Southwest
|
|
|
|
|
|
Adjusted
EBITDA
|
10.2
|
|
12.4
|
|
4.2
|
Revenue
|
73.4
|
|
74.8
|
|
51.9
|
Adjusted EBITDA Margin
Percentage
|
13.9 %
|
|
16.6 %
|
|
8.1 %
|
Northeast/Mid-Con
|
|
|
|
|
|
Adjusted
EBITDA
|
23.7
|
|
19.7
|
|
2.7
|
Revenue
|
98.3
|
|
82.4
|
|
57.1
|
Adjusted EBITDA Margin
Percentage
|
24.1 %
|
|
23.9 %
|
|
4.7 %
|
|
(1) Segment
Adjusted EBITDA Margin is defined as the quotient of Segment
Adjusted EBITDA and total segment revenue. Segment Adjusted EBITDA
is segment operating income (loss) excluding one-time costs (as
defined above), non-cash compensation expense and non-cash asset
impairment expense.
|
The following tables present a reconciliation of the non-GAAP
financial measure of adjusted net income (loss) and adjusted net
income (loss) margin to the most directly comparable GAAP financial
measure for the periods indicated:
KLX Energy Services
Holdings, Inc
Reconciliation of
Consolidated Net Income (Loss) to Adjusted Net Income
(Loss)
(In millions of
U.S. dollars and shares, except per share
amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
Pro
Forma(3)
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
March 31,
2023
|
Consolidated net income
(loss)(2)
|
$
9.4
|
|
$
13.2
|
|
$
(19.9)
|
|
$
9.4
|
Bargain
purchase gain
|
(3.2)
|
|
—
|
|
—
|
|
(3.2)
|
One-time
costs, excluding bargain purchase gain(1)
|
5.3
|
|
(0.5)
|
|
2.0
|
|
6.2
|
Adjusted net income
(loss)
|
$
11.5
|
|
$
12.7
|
|
$
(17.9)
|
|
$
12.4
|
|
*Previously announced
quarterly numbers may not sum to the year-end total due to
rounding.
|
(1) The
one-time costs during the first quarter of 2023 relate to $3.3 in
retention bonus costs, $1.2 in costs related to the Greene's
acquisition and $0.8 in non-recurring legal costs.
|
(2) Quarterly cost of sales includes
$2.1 of lease expense associated with five coiled tubing unit
leases.
|
(3) The
pro forma amounts for the three months ended March 31, 2023 reflect
the results of KLX for the period presented and the results of
Greene's assuming the acquisition occurred on January 1, 2022, see
Unaudited Supplemental Pro Forma Information.
|
KLX Energy Services
Holdings, Inc
Adjusted Net Income
(Loss) Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
Pro
Forma(2)
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
March 31,
2023
|
Adjusted net income
(loss)
|
$
11.5
|
|
$
12.7
|
|
$
(17.9)
|
|
$
12.4
|
Revenue
|
239.6
|
|
223.3
|
|
152.3
|
|
251.9
|
Adjusted net income
(loss) margin percentage
|
4.8 %
|
|
5.7 %
|
|
(11.8) %
|
|
4.9 %
|
|
(1) Adjusted net income (loss) margin
is defined as the quotient of adjusted net income (loss) and total
revenue.
|
(2) The
pro forma amounts for the three months ended March 31, 2023 reflect
the results of KLX for the period presented and the results of
Greene's assuming the acquisition occurred on January 1, 2022, see
Unaudited Supplemental Pro Forma Information.
|
The following table presents a reconciliation of the non-GAAP
financial measure of free cash flow to the most directly comparable
GAAP financial measure for the periods indicated:
KLX Energy Services
Holdings, Inc
Reconciliation of
Net Cash Flow Provided by (Used in) Operating Activities to Free
Cash Flow
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
Net cash flow provided
by (used in) operating activities
|
$
(8.6)
|
|
$
11.8
|
|
$
(6.2)
|
Capital
expenditures
|
(10.3)
|
|
(9.5)
|
|
(5.8)
|
Proceeds from sale of
property and equipment
|
5.0
|
|
5.1
|
|
2.6
|
Levered free cash
flow
|
$
(13.9)
|
|
$
7.4
|
|
$
(9.4)
|
Less: Interest
expense
|
9.3
|
|
9.0
|
|
8.3
|
Unlevered free cash
flow
|
$
(4.6)
|
|
$
16.4
|
|
$
(1.1)
|
The following table presents a reconciliation of the non-GAAP
financial measure of net working capital to the most directly
comparable GAAP financial measure for the periods indicated:
KLX Energy Services
Holdings, Inc
Reconciliation of
Current Assets and Current Liabilities to Net Working
Capital
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
As of
|
|
March 31,
2023
|
|
December 31,
2022
|
Current
assets
|
$
277.2
|
|
$
254.7
|
Less: Cash
|
39.6
|
|
57.4
|
Net current
assets
|
237.6
|
|
197.3
|
Current
liabilities
|
160.7
|
|
154.4
|
Less: Accrued
interest
|
11.7
|
|
4.8
|
Less: Operating lease
obligations
|
14.3
|
|
14.2
|
Less: Finance lease
obligations
|
12.2
|
|
10.2
|
Net current
liabilities
|
122.5
|
|
125.2
|
Net Working
Capital
|
$
115.1
|
|
$
72.1
|
The following table presents a reconciliation of the non-GAAP
financial measure of net debt:
KLX Energy Services
Holdings, Inc
Reconciliation of
Net Debt(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
As of March 31,
2023
|
|
As of
December 31, 2022
|
Total Debt
|
$
283.6
|
|
$
283.4
|
Cash
|
39.6
|
|
57.4
|
Net Debt
|
$
244.0
|
|
$
226.0
|
|
(1) Net
debt is defined as total debt less cash and cash
equivalents.
|
The following table presents a reconciliation of the non-GAAP
financial measure of annualized net leverage ratio:
KLX Energy Services
Holdings, Inc
Reconciliation of
Annualized Net Leverage Ratio(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
As of March 31,
2023
|
|
As of
December 31, 2022
|
Adjusted
EBITDA
|
$
38.2
|
|
$
37.3
|
Multiply by four
quarters
|
4
|
|
4
|
Quarterly Annualized
Adjusted EBITDA
|
152.8
|
|
149.2
|
Net Debt
|
244.0
|
|
226.0
|
Quarterly Annualized
Net Leverage Ratio
|
1.6
|
|
1.5
|
|
(1) Annualized net leverage ratio is
defined as net debt divided by Quarterly Annualized Adjusted
EBITDA.
|
KLX Energy Services
Holdings, Inc
Consolidated
SG&A Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
|
|
|
|
|
|
Pro
Forma(2)
|
|
Three Months
Ended
|
|
Three Months
Ended
|
|
March 31,
2023
|
|
December 31,
2022
|
|
March 31,
2022
|
|
March 31,
2023
|
Selling, general and
administrative expenses
|
$
26.2
|
|
$
19.4
|
|
$
15.0
|
|
$
29.6
|
Revenue
|
239.6
|
|
223.3
|
|
152.3
|
|
251.9
|
SG&A Margin
Percentage
|
10.9 %
|
|
8.7 %
|
|
9.8 %
|
|
11.8 %
|
|
(1) SG&A Margin is defined as the
quotient of selling, general and administrative expenses and total
revenue.
|
(2) The pro
forma amounts for the three months ended March 31, 2023 reflect the
results of KLX for the period presented and the results of Greene's
assuming the acquisition occurred on January 1, 2022, see Unaudited
Supplemental Pro Forma Information.
|
Contacts:
KLX Energy Services Holdings, Inc.
Keefer M. Lehner, EVP & CFO
832-930-8066
IR@klxenergy.com
Dennard Lascar Investor
Relations
Ken Dennard / Natalie Hairston
713-529-6600
KLXE@dennardlascar.com
View original
content:https://www.prnewswire.com/news-releases/klx-energy-services-holdings-inc-reports-record-first-quarter-2023-results-301821399.html
SOURCE KLX Energy Services Holdings, Inc.