Regional and Product Service Line
diversification drives higher adjusted EBITDA, adjusted EBITDA
margin and free cash flow
HOUSTON, Aug. 9, 2023
/PRNewswire/ -- KLX Energy Services Holdings, Inc. (Nasdaq:
KLXE) ("KLX", the "Company", "we", "us" or "our") today
reported financial results for the second quarter ended
June 30, 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.
Second Quarter 2023 Financial and Operational
Highlights
- Revenue of $234.0 million
- Net income of $11.4 million, net
income margin of 4.9%, diluted earnings per share of $0.71
- Adjusted net income of $13.1
million and adjusted diluted earnings per share of
$0.81
- Adjusted EBITDA of $39.7 million,
increased 4% sequentially
- Adjusted EBITDA margin of 17.0%, increased 7% sequentially
- Cash balance of $82.1 million,
increased $42.5 million sequentially
and $50.6 million compared to Q2
2022
- Ended the quarter with $143.7
million of available liquidity, consisting of $82.1 million of cash and $61.6 million of available borrowing capacity
under the June 2023 ABL Facility
borrowing base certificate
- Ended the quarter with a total debt balance of $283.8 million and reduced net debt 17%
sequentially, ending the quarter with a net debt balance of
$201.7 million and a LTM Net Leverage
Ratio of 1.3x
- Amended, extended and upsized our asset-based revolving credit
facility (the "ABL Facility")
- Integration of Greene's acquisition is substantially
complete
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,
adjusted diluted earnings per share, levered and unlevered free
cash flow, net working capital, net debt, 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.
Chris Baker, KLX President and
Chief Executive Officer, stated, "We are pleased with our second
quarter performance, despite a weakening macro environment driven
by continued commodity price volatility and rig count declines. KLX
experienced a lower topline decline when compared to the rig count
decline, and we saw strong results and improvements in net income,
adjusted net income, adjusted EBITDA, and adjusted EBITDA margin.
In addition, we generated $47.3
million in levered free cash flow during the second quarter
and reduced net debt 17% sequentially. We attribute this
performance to the strength of our team in the field and our
regional and product line diversification. Despite an almost 11%
rig count decline, we saw a rotation to and strength in our
comprehensive suite of Completion and Production & Intervention
product lines.
"Additionally, we are pleased to have substantially completed
our integration of the Greene's acquisition," said Baker. "This
four-month integration process has been exceptional, and this
acquisition strengthens our position 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 consolidation opportunities.
Strategically, we will continue to focus on free cash flow
generation, net debt reduction and accretive consolidation.
"Looking to the future, we remain constructive on the U.S.
onshore drilling, completion and production markets in which we
operate. Commodity prices have shown recent strength and are at
levels which should ultimately drive meaningful improvement in
customer results and underlying activity. We expect some operators
to begin to ramp their drilling and completion activities in late
2023 and into 2024," concluded Baker.
Second Quarter 2023 Financial Results
Revenue for the second quarter of 2023 totaled $234.0 million, a decrease of 2% compared to
first quarter 2023 revenue of $239.6
million. The slight sequential decrease in revenue reflects
the slowdown in activity in our Rocky Mountains and
Northeast/Mid-Con business segments. On a product line basis,
drilling, completion, production and intervention services
contributed approximately 24.7%, 53.6%, 12.2% and 9.5%,
respectively, to revenues for the second quarter 2023.
Net income for the second quarter of 2023 was $11.4 million, compared to first quarter 2023 net
income of $9.4 million. Adjusted net
income for the second quarter of 2023 was $13.1 million, compared to first quarter 2023
adjusted net income of $11.5 million.
Adjusted EBITDA for the second quarter of 2023 increased 4%
sequentially to $39.7 million,
compared to first quarter 2023 adjusted EBITDA of $38.2 million. Adjusted EBITDA margin for the
second quarter of 2023 was 17.0%, which is the strongest quarterly
adjusted EBITDA margin since the second quarter of 2019. The
sequential and year-over-year increase in net income and adjusted
EBITDA was driven by a shift in product service mix, a full
quarterly impact from the Greene's acquisition and the roll-off of
payroll and unemployment taxes that have an outsized burden on the
first quarter cost structure.
Second 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 $66.4
million, $11.9 million and
$17.0 million, respectively, for the
second quarter of 2023. Second quarter revenue represents a 2%
decrease over the first quarter of 2023 largely driven by an
increase in activity in the Bakken offset by a decrease in activity
in the DJ Basin and Wyoming.
Segment operating income and adjusted EBITDA increased 21% and 10%
sequentially, driven by reduced seasonality and white space; a
shift in product service mix, with a greater contribution from frac
rentals, pressure pumping and rentals; and the roll-off of payroll
and unemployment taxes that have an outsized burden on first
quarter 2023 margins.
- Southwest: Revenue, operating income and adjusted EBITDA for
the Southwest segment, which includes the Permian and South Texas, was $86.3
million, $8.1 million and
$14.8 million, respectively, for the
second quarter of 2023. Second quarter revenue represents a 18%
increase over the first quarter of 2023 largely driven by a shift
in product service mix and a full quarter contribution from
Greene's.
- Northeast/Mid-Con: Revenue, operating income and adjusted
EBITDA for the Northeast/Mid-Con segment was $81.3 million, $12.6
million and $18.0 million,
respectively, for the second quarter of 2023. Second quarter
revenue represents a 17% decrease over the first quarter of 2023
and operating income and adjusted EBITDA declined 33% and 24%
respectively, largely due to increased white space for our drilling
and completions businesses and a 48% decrease in Haynesville
completions revenue but was partially offset by a shift towards
more pump-only work in our frac service line.
The following is a tabular summary of revenue, operating income
(loss) and adjusted EBITDA (loss) for the second quarter ended
June 30, 2023, the first quarter ended March 31, 2023 and
the second quarter ended June 30, 2022 ($ in millions).
|
|
Three Months
Ended
|
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Revenue:
|
|
|
|
|
|
|
Rocky Mountains
|
|
$
66.4
|
|
$
67.9
|
|
$
53.1
|
Southwest
|
|
86.3
|
|
73.4
|
|
60.0
|
Northeast/Mid-Con
|
|
81.3
|
|
98.3
|
|
71.3
|
Total
Revenue
|
|
$
234.0
|
|
$
239.6
|
|
$
184.4
|
|
|
Three Months
Ended
|
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Operating income
(loss):
|
|
|
|
|
|
|
Rocky Mountains
|
|
$
11.9
|
|
$
9.8
|
|
$
4.0
|
Southwest
|
|
8.1
|
|
4.8
|
|
2.0
|
Northeast/Mid-Con
|
|
12.6
|
|
18.7
|
|
7.3
|
Corporate and
other
|
|
(13.0)
|
|
(14.4)
|
|
(11.9)
|
Total operating
income
|
|
$
19.6
|
|
$
18.9
|
|
$
1.4
|
|
|
Three Months
Ended
|
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Adjusted EBITDA
(loss)
|
|
|
|
|
|
|
Rocky Mountains
|
|
$
17.0
|
|
$
15.5
|
|
$
9.3
|
Southwest
|
|
14.8
|
|
10.2
|
|
6.4
|
Northeast/Mid-Con
|
|
18.0
|
|
23.7
|
|
11.1
|
Segment
Total
|
|
49.8
|
|
49.4
|
|
26.8
|
Corporate and
other
|
|
(10.1)
|
|
(11.2)
|
|
(9.4)
|
Total adjusted
EBITDA(1)
|
|
$
39.7
|
|
$
38.2
|
|
$
17.4
|
|
|
(1)
Excludes one-time costs, as defined in
the Reconciliation of Consolidated Net Income (Loss) to adjusted
EBITDA (loss) table below, non-cash compensation expense and
non-cash asset impairment expense.
|
ABL Amendment
On June 20, 2023, the Company entered into a Fourth
Amendment to the ABL Facility, with certain of its subsidiaries
party thereto, as guarantors, with JPMorgan Chase Bank, N.A., as
administrative agent, collateral agent and an issuing lender, and
the other lenders and issuing lenders party thereto from time to
time (the "ABL Amendment").
The ABL Amendment, among other things, (i) extends the maturity
date of the ABL Facility from September 15,
2024 to the earlier of (A) September 15, 2025 or (B)
August 1, 2025, if the Company's senior secured notes are
still outstanding as of such date and (ii) increases the revolving
credit commitment by 20%, from $100
million to $120 million.
Balance Sheet and Liquidity
Total debt outstanding as of June 30, 2023 was $283.8 million. As of June 30, 2023, cash
and cash equivalents totaled $82.1
million. Available liquidity as of June 30, 2023 was
$143.7 million, including
availability of $61.6 million on the
June 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
June 30, 2023 was $4.5 million
for the senior secured notes and $0.1
million related to the ABL Facility.
Net working capital as of June 30, 2023 was $76.1 million, which was down 34% from
March 31, 2023 levels. The decrease in net working capital was
driven largely by a normalization of our days sales outstanding and
days payables outstanding relative to the first quarter of 2023,
when we experienced customers slow paying at the end of the
quarter, accelerated vendor payments in preparation for a system
implementation project and incremental payrolls.
KLX sold no shares under our at-the-market offering program in
both the second quarter and six months ended June 2023.
Other Financial Information
Capital expenditures were $16.2
million during the second quarter of 2023. Capital spending
during the second quarter was driven primarily by maintenance
capital expenditures across our segments. As of June 30, 2023,
we had $2.3 million of assets held
for sale related to real property and equipment in the Rocky
Mountains and Southwest segments.
Greene's Integration
KLX's integration of Greene's was substantially complete as of
the date of this release. We expect to realize the full annualized
impact of the $2 to $3 million in annual synergies beginning in
August 2023.
2023 Guidance
In light of current market conditions, the Company is deferring
capital projects and lowering full year capital spending guidance
to approximately $45 to $55 million from $60 to $70 million.
Correspondingly, the Company is updating the full year guidance
below. The below summary of Company guidance is current as of the
time provided and subject to change.
- Third quarter 2023 revenue of $215
million to $230 million
- Third quarter 2023 adjusted EBITDA margin of 14% to 16%
- Full year 2023 revenue range of $900
million to $950 million
- Full year 2023 adjusted EBITDA margin of 15% to 17%
Conference Call Information
KLX has scheduled a conference call for 9:00 a.m. Central Time (10:00 a.m. Eastern Time) on Thursday,
August 10, 2023, to review reported results. You may access
the call by telephone at 1-201-389-0867 and ask for the KLX 2023
Second 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 August 24,
2023, at 1-201-612-7415, access code 13738976#. 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.
KLX Energy Services
Holdings, Inc.
Condensed
Consolidated Statements of Operations
(In millions of
U.S. dollars and shares, except per share
amounts)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Revenues
|
$
234.0
|
|
$
239.6
|
|
$
184.4
|
Costs and
expenses:
|
|
|
|
|
|
Cost of
sales
|
173.3
|
|
180.9
|
|
150.9
|
Depreciation and amortization
|
17.6
|
|
16.5
|
|
14.0
|
Selling,
general and administrative
|
22.0
|
|
26.2
|
|
18.0
|
Research
and development costs
|
0.3
|
|
0.3
|
|
0.1
|
Bargain
purchase gain
|
1.2
|
|
(3.2)
|
|
—
|
Operating
income
|
19.6
|
|
18.9
|
|
1.4
|
Non-operating
expense:
|
|
|
|
|
|
Interest
expense, net
|
8.5
|
|
9.3
|
|
8.7
|
Net income (loss)
before income tax
|
11.1
|
|
9.6
|
|
(7.3)
|
Income tax
expense
|
(0.3)
|
|
0.2
|
|
0.2
|
Net income
(loss)
|
$
11.4
|
|
$
9.4
|
|
$
(7.5)
|
|
|
|
|
|
|
Net income (loss) per
common share:
|
|
|
|
|
|
Basic
|
$
0.71
|
|
$
0.66
|
|
$
(0.67)
|
Diluted
|
$
0.71
|
|
$
0.65
|
|
$
(0.67)
|
|
|
|
|
|
|
Weighted average common
shares:
|
|
|
|
|
|
Basic
|
16.0
|
|
14.2
|
|
11.2
|
Diluted
|
16.1
|
|
14.4
|
|
11.2
|
KLX Energy Services
Holdings, Inc.
Condensed
Consolidated Balance Sheets
(In millions of
U.S. dollars and shares, except per share data)
|
|
|
June 30,
2023
|
|
December 31,
2022
|
|
(Unaudited)
|
|
|
ASSETS
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
82.1
|
|
$
57.4
|
Accounts
receivable–trade, net of allowance of $6.1 and $5.7
|
161.8
|
|
154.3
|
Inventories,
net
|
31.0
|
|
25.7
|
Prepaid expenses and
other current assets
|
13.6
|
|
17.3
|
Total current
assets
|
288.5
|
|
254.7
|
Property and equipment,
net
|
199.0
|
|
168.1
|
Operating lease
assets
|
32.1
|
|
37.4
|
Intangible assets,
net
|
2.0
|
|
2.1
|
Other assets
|
4.9
|
|
3.6
|
Total
assets
|
$
526.5
|
|
$
465.9
|
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
96.8
|
|
$
84.2
|
Accrued
interest
|
4.7
|
|
4.8
|
Accrued
liabilities
|
33.5
|
|
41.0
|
Current portion of
operating lease obligations
|
14.4
|
|
14.2
|
Current portion of
finance lease obligations
|
13.2
|
|
10.2
|
Total current
liabilities
|
162.6
|
|
154.4
|
Long-term
debt
|
283.8
|
|
283.4
|
Long-term operating
lease obligations
|
17.1
|
|
22.8
|
Long-term finance lease
obligations
|
22.8
|
|
20.3
|
Other non-current
liabilities
|
0.5
|
|
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
|
552.7
|
|
517.3
|
Treasury stock, at
cost, 0.4 shares and 0.4 shares
|
(5.3)
|
|
(4.6)
|
Accumulated
deficit
|
(507.8)
|
|
(528.6)
|
Total stockholders'
equity (deficit)
|
39.7
|
|
(15.8)
|
Total
liabilities and stockholders' equity
|
$
526.5
|
|
$
465.9
|
KLX Energy Services Holdings,
Inc.
Additional Selected Operating
Data
(Unaudited)
Non-GAAP Financial Measures
This release includes adjusted EBITDA, adjusted EBITDA margin,
adjusted net income (loss), adjusted net income (loss) margin,
adjusted diluted earnings per share, unlevered and levered free
cash flow, net working capital, net debt and 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.
Adjusted EBITDA margin 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 margin is not a measure of net
earnings or cash flows as determined by GAAP. Adjusted EBITDA
margin is defined as the quotient of adjusted EBITDA and total
revenue. We believe adjusted EBITDA margin 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, as a
percentage of revenues.
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 adjusted net income (loss) margin as the quotient of
adjusted net income (loss) and total revenue. We believe adjusted
net income (loss) margin is useful because it allows us to exclude
non-recurring items in evaluating our operating performance.
We define adjusted diluted earnings per share as the quotient of
adjusted net income (loss) and diluted weighted average common
shares. We believe that adjusted diluted earnings per share
provides useful information to investors because it allows us to
exclude non-recurring items in evaluating our operating performance
on a diluted per share basis.
We define unlevered free cash flow as net cash provided by
operating activities less capital expenditures and proceeds from
sale of property and equipment plus interest expense. Our
management uses unlevered free cash flow to assess the Company's
liquidity and ability to repay maturing debt, fund operations and
make additional investments. We believe that unlevered 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.
We define levered free cash flow as net cash provided by
operating activities less capital expenditures and proceeds from
sale of property and equipment. Our management uses levered free
cash flow to assess the Company's liquidity and ability to repay
maturing debt, fund operations and make additional investments. We
believe that levered 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 net leverage ratio as net debt divided by quarterly
annualized adjusted EBITDA or adjusted EBITDA over the last twelve
months. We believe that net leverage ratio provides useful
information to investors 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)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Consolidated net income
(loss)(2)
|
$
11.4
|
|
$
9.4
|
|
$
(7.5)
|
Income tax
expense
|
(0.3)
|
|
0.2
|
|
0.2
|
Interest
expense, net
|
8.5
|
|
9.3
|
|
8.7
|
Operating
income
|
19.6
|
|
18.9
|
|
1.4
|
Bargain
purchase gain
|
1.2
|
|
(3.2)
|
|
—
|
One-time
costs(1)
|
0.5
|
|
5.3
|
|
1.2
|
Adjusted operating
income
|
21.3
|
|
21.0
|
|
2.6
|
Depreciation and amortization
|
17.6
|
|
16.5
|
|
14.0
|
Non-cash
compensation
|
0.8
|
|
0.7
|
|
0.8
|
Adjusted
EBITDA
|
$
39.7
|
|
$
38.2
|
|
$
17.4
|
|
*Previously announced
quarterly numbers may not sum to the year-end total due to
rounding.
|
(1)
The one-time costs during the second
quarter of 2023 relate to $0.3 in professional costs related to the
Greene's acquisition and $0.2 in severance.
|
(2) Quarterly cost of sales includes $2.1 of lease
expense associated with five coiled tubing unit leases.
|
KLX Energy Services
Holdings, Inc.
Consolidated Net
Income (Loss) Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Consolidated net income
(loss)
|
$
11.4
|
|
$
9.4
|
|
$
(7.5)
|
Revenue
|
234.0
|
|
239.6
|
|
184.4
|
Consolidated net income
(loss) margin percentage
|
4.9 %
|
|
3.9 %
|
|
(4.1) %
|
|
|
(1)
Consolidated net income (loss) margin is
defined as the quotient of consolidated net income (loss) and total
revenue.
|
KLX Energy Services
Holdings, Inc.
Consolidated
Adjusted EBITDA Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Adjusted
EBITDA
|
$
39.7
|
|
$
38.2
|
|
$
17.4
|
Revenue
|
234.0
|
|
239.6
|
|
184.4
|
Adjusted EBITDA Margin
Percentage
|
17.0 %
|
|
15.9 %
|
|
9.4 %
|
|
(1) Adjusted
EBITDA margin is defined as the quotient of adjusted EBITDA and
total revenue. Adjusted EBITDA is operating income excluding
one-time costs (as defined in the Reconciliation of Consolidated
Net Income (Loss) to adjusted EBITDA table above), depreciation and
amortization expense, non-cash compensation expense and non-cash
asset impairment expense.
|
Reconciliation of
Rocky Mountains Operating Income to Adjusted EBITDA
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Rocky Mountains
operating income
|
$
11.9
|
|
$
9.8
|
|
$
4.0
|
One-time
costs(1)
|
—
|
|
—
|
|
0.1
|
Adjusted
operating income
|
11.9
|
|
9.8
|
|
4.1
|
Depreciation and amortization expense
|
5.1
|
|
5.7
|
|
5.2
|
Rocky Mountains
adjusted EBITDA
|
$
17.0
|
|
$
15.5
|
|
$
9.3
|
|
(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 to Adjusted EBITDA
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Southwest operating
income
|
$
8.1
|
|
$
4.8
|
|
$
2.0
|
One-time
costs(1)
|
—
|
|
—
|
|
(0.2)
|
Adjusted
operating income
|
8.1
|
|
4.8
|
|
1.8
|
Depreciation and amortization expense
|
6.7
|
|
5.4
|
|
4.6
|
Southwest adjusted
EBITDA
|
$
14.8
|
|
$
10.2
|
|
$
6.4
|
|
(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 to Adjusted
EBITDA
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Northeast/Mid-Con
operating income
|
$
12.6
|
|
$
18.7
|
|
$
7.3
|
One-time
costs(1)
|
—
|
|
—
|
|
0.1
|
Adjusted
operating income
|
12.6
|
|
18.7
|
|
7.4
|
Depreciation and amortization expense
|
5.4
|
|
5.0
|
|
3.6
|
Non-cash
compensation
|
—
|
|
—
|
|
0.1
|
Northeast/Mid-Con
adjusted EBITDA
|
$
18.0
|
|
$
23.7
|
|
$
11.1
|
|
(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 Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Rocky
Mountains
|
|
|
|
|
|
Operating
income
|
$
11.9
|
|
$
9.8
|
|
$
4.0
|
Revenue
|
66.4
|
|
67.9
|
|
53.1
|
Segment operating
income margin percentage
|
17.9 %
|
|
14.4 %
|
|
7.5 %
|
Southwest
|
|
|
|
|
|
Operating
income
|
8.1
|
|
4.8
|
|
2.0
|
Revenue
|
86.3
|
|
73.4
|
|
60.0
|
Segment operating
income margin percentage
|
9.4 %
|
|
6.5 %
|
|
3.3 %
|
Northeast/Mid-Con
|
|
|
|
|
|
Operating
income
|
12.6
|
|
18.7
|
|
7.3
|
Revenue
|
81.3
|
|
98.3
|
|
71.3
|
Segment operating
income margin percentage
|
15.5 %
|
|
19.0 %
|
|
10.2 %
|
|
(1) Segment
operating income margin is defined as the quotient of segment
operating income and segment revenue.
|
KLX Energy Services
Holdings, Inc.
Segment Adjusted
EBITDA Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Rocky
Mountains
|
|
|
|
|
|
Adjusted
EBITDA
|
$
17.0
|
|
$
15.5
|
|
$
9.3
|
Revenue
|
66.4
|
|
67.9
|
|
53.1
|
Adjusted EBITDA Margin
Percentage
|
25.6 %
|
|
22.8 %
|
|
17.5 %
|
|
|
|
|
|
|
Southwest
|
|
|
|
|
|
Adjusted
EBITDA
|
14.8
|
|
10.2
|
|
6.4
|
Revenue
|
86.3
|
|
73.4
|
|
60.0
|
Adjusted EBITDA Margin
Percentage
|
17.1 %
|
|
13.9 %
|
|
10.7 %
|
|
|
|
|
|
|
Northeast/Mid-Con
|
|
|
|
|
|
Adjusted
EBITDA
|
18.0
|
|
23.7
|
|
11.1
|
Revenue
|
81.3
|
|
98.3
|
|
71.3
|
Adjusted EBITDA Margin
Percentage
|
22.1 %
|
|
24.1 %
|
|
15.6 %
|
|
(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 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), adjusted net
income (loss) margin and adjusted diluted earnings per share 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) and
Adjusted Diluted Earnings per Share
(In millions of
U.S. dollars and shares, except per share
amounts)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Consolidated net income
(loss)(2)
|
$
11.4
|
|
$
9.4
|
|
$
(7.5)
|
Bargain
purchase gain
|
1.2
|
|
(3.2)
|
|
—
|
One-time
costs(1)
|
0.5
|
|
5.3
|
|
1.2
|
Adjusted net income
(loss)
|
$
13.1
|
|
$
11.5
|
|
$
(6.3)
|
Diluted
weighted average common shares
|
16.1
|
|
14.4
|
|
11.2
|
Adjusted diluted
earnings per share(3)
|
$
0.81
|
|
$
0.80
|
|
$
(0.56)
|
|
*Previously announced
quarterly numbers may not sum to the year-end total due to
rounding.
|
(1) The
one-time costs during the second quarter of 2023 relate to $0.3 in
professional costs related to the Greene's acquisition and $0.2 in
severance.
|
(2) Quarterly cost of sales includes
$2.1 of lease expense associated with five coiled tubing unit
leases.
|
(3) Adjusted diluted earnings per
share is defined as the quotient of adjusted net income (loss) and
diluted weighted average common shares.
|
KLX Energy Services
Holdings, Inc.
Adjusted Net Income
(Loss) Margin(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Three Months
Ended
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Adjusted net income
(loss)
|
$
13.1
|
|
$
11.5
|
|
$
(6.3)
|
Revenue
|
234.0
|
|
239.6
|
|
184.4
|
Adjusted net income
(loss) margin percentage
|
5.6 %
|
|
4.8 %
|
|
(3.4) %
|
|
(1) Adjusted net income (loss) margin
is defined as the quotient of adjusted net income (loss) and total
revenue.
|
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
|
|
June 30,
2023
|
|
March 31,
2023
|
|
June 30,
2022
|
Net cash flow provided
by (used in) operating activities
|
$
60.0
|
|
$
(8.6)
|
|
$
(8.4)
|
Capital
expenditures
|
(16.2)
|
|
(10.3)
|
|
(7.8)
|
Proceeds from sale of
property and equipment
|
3.5
|
|
5.0
|
|
3.9
|
Levered free cash
flow
|
$
47.3
|
|
$
(13.9)
|
|
$
(12.3)
|
Add: Interest
expense
|
8.5
|
|
9.3
|
|
8.7
|
Unlevered free cash
flow
|
$
55.8
|
|
$
(4.6)
|
|
$
(3.6)
|
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
|
|
June 30,
2023
|
|
March 31,
2023
|
|
December 31,
2022
|
Current
assets
|
$
288.5
|
|
$
277.2
|
|
$
254.7
|
Less: Cash
|
82.1
|
|
39.6
|
|
57.4
|
Net current
assets
|
206.4
|
|
237.6
|
|
197.3
|
Current
liabilities
|
162.6
|
|
160.7
|
|
154.4
|
Less: Accrued
interest
|
4.7
|
|
11.7
|
|
4.8
|
Less: Operating lease
obligations
|
14.4
|
|
14.3
|
|
14.2
|
Less: Finance lease
obligations
|
13.2
|
|
12.2
|
|
10.2
|
Net current
liabilities
|
130.3
|
|
122.5
|
|
125.2
|
Net working
capital
|
$
76.1
|
|
$
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 June 30,
2023
|
|
As of March 31,
2023
|
|
As of
December 31, 2022
|
Total Debt
|
$
283.8
|
|
$
283.6
|
|
$
283.4
|
Cash
|
82.1
|
|
39.6
|
|
57.4
|
Net Debt
|
$
201.7
|
|
$
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 net leverage ratio:
KLX Energy Services
Holdings, Inc.
Reconciliation of
Net Leverage Ratio(1)
(In millions of
U.S. dollars)
(Unaudited)
|
|
|
Quarter
Annualized
|
|
Last Twelve
Months
|
|
As of June 30,
2023
|
|
As of March 31,
2023
|
|
Ended June 30,
2023
|
Adjusted
EBITDA
|
$
39.7
|
|
$
38.2
|
|
$
152.3
|
Multiply by four
quarters
|
4
|
|
4
|
|
N/A
|
Annualized Adjusted
EBITDA
|
158.8
|
|
152.8
|
|
152.3
|
Net Debt
|
201.7
|
|
244.0
|
|
201.7
|
Net Leverage
Ratio
|
1.3
|
|
1.6
|
|
1.3
|
|
(1) Net
leverage ratio is defined as net debt divided by quarterly
annualized adjusted EBITDA or adjusted EBITDA over the last twelve
months
|
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
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content:https://www.prnewswire.com/news-releases/klx-energy-services-holdings-inc-reports-second-quarter-2023-results-301897253.html
SOURCE KLX Energy Services Holdings, Inc.