8-K: KLX Energy Services Reports Third Quarter 2024 Results, Revenue at Top End of Guidance

KLX Energy Services Holdings, Inc. announced its third quarter 2024 financial results, with revenue reaching $189 million and adjusted EBITDA of $28 million, both at the top end of their guidance range.

Summary

• KLX Energy Services Holdings, Inc. reported a revenue of $189 million for the third quarter of 2024, a 4.8% increase compared to the previous quarter.
• The company experienced a net loss of $(8) million, or $(0.51) per diluted share, but achieved an adjusted EBITDA of $28 million.
• Adjusted EBITDA margin was 15%, while the net loss margin was (4)%.
• The company's cash balance stands at $83 million, with total debt at $285 million and net debt at $203 million.
• Liquidity is reported at $126 million, including $43 million available under their asset-based revolving credit facility.
• Revenue contributions by end market were approximately 21% from drilling, 54% from completion, 16% from production, and 9% from intervention solutions.
• The Rocky Mountains segment saw a 10.6% sequential revenue increase, while the Southwest segment experienced a 2% decrease, and the Northeast/Mid-Con segment saw a 7.2% increase.
• Capital expenditures for the third quarter were $21 million, with full-year 2024 capital expenditures expected to be between $55 million and $60 million.
• The company anticipates a sequential revenue decline of 10% to 14% in the fourth quarter of 2024 due to seasonality and customer budget exhaustion.

Sentiment

Score: 6

Explanation: The sentiment is moderately positive. While the company achieved revenue and EBITDA at the top end of guidance, there is a net loss and a projected revenue decline in the next quarter. The management is cautiously optimistic about 2025.

Positives

• Revenue increased by 4.8% compared to the previous quarter, reaching $189 million.
• Adjusted EBITDA was $28 million, demonstrating strong operational performance.
• The company's revenue and Adjusted EBITDA results were at the top-end of their guidance ranges.
• The company has a solid cash balance of $83 million and total liquidity of $126 million.
• The company is seeing positive momentum for 2025 with both new and existing customers.

Negatives

• The company reported a net loss of $(8) million, or $(0.51) per diluted share.
• The company anticipates a sequential revenue decline of 10% to 14% in the fourth quarter of 2024.
• The Southwest segment experienced a 2% sequential revenue decrease and a significant decrease in operating income and Adjusted EBITDA.
• Corporate and other segment operating loss and Adjusted EBITDA loss increased sequentially.

Risks

• The company faces continued market volatility and consolidation of its customer base.
• There are persistent rig count declines, which could impact future revenue.
• The company anticipates a significant sequential revenue decline in the fourth quarter due to seasonality and customer budget exhaustion.
• The company's debt level is high, with total debt at $285 million and net debt at $203 million.
• The company is exposed to the cyclical nature and volatility of the oil and gas industry.

Future Outlook

The company expects a sequential revenue decline of 10% to 14% in the fourth quarter of 2024 due to seasonality and customer budget exhaustion. However, they are cautiously optimistic about 2025 based on constructive discussions with customers.

Management Comments

• Chris Baker, KLX President and Chief Executive Officer, stated that he is very proud of the team's performance during the third quarter.
• Baker noted that the company generated its third-highest level of quarterly revenue per average US-operated land rig since the KLX-QES merger in 2020.
• Baker mentioned that the third quarter revenue and Adjusted EBITDA results were at the top-end of their guidance ranges.
• Baker stated that the company's geographic and product and service line diversification has driven margin sustainability.
• Baker indicated that discussions with customers on 2025 programs have been constructive, giving them cautious optimism.

Industry Context

The results reflect the ongoing challenges in the oil and gas industry, including market volatility, customer consolidation, and rig count declines. However, KLX's diversification and focus on key service lines appear to be helping them maintain performance relative to the market.

Comparison to Industry Standards

• KLX's performance is being compared to its own historical performance since the KLX-QES merger in 2020, with the third-highest revenue per average US-operated land rig.
• The company's adjusted EBITDA margin of 15% is a key metric used to assess profitability compared to peers in the oilfield services sector, although specific competitor comparisons are not provided in this document.
• The company's focus on extended reach laterals, completion technologies, and production and intervention services is a strategy to differentiate itself from competitors.
• The company's geographic diversification across the Rocky Mountains, Southwest, and Northeast/Mid-Con regions is a common strategy among oilfield service companies to mitigate regional risks.

Stakeholder Impact

• Shareholders will be impacted by the net loss and the projected revenue decline in the fourth quarter.
• Employees may be affected by the anticipated slowdown in activity in the fourth quarter.
• Customers will be impacted by the company's service offerings and pricing.
• Creditors will be interested in the company's debt levels and liquidity.

Next Steps

• The company will conduct a conference call on November 1, 2024, to discuss the results.
• The company is in discussions with customers regarding their 2025 drilling, completion, and production programs.
• The company will continue to build up its cash balance as it navigates through year-end.

Key Dates

Keywords

oilfield services, energy services, drilling, completion, production, intervention, EBITDA, revenue, financial results, KLXE