Core Insights - KLX Energy (KLXE) is identified as a US small-cap oil and gas service provider with a focus on onshore operations [1] - The rig count for onshore drilling, particularly for oil rigs, has seen a significant decline over recent years [1] Company Overview - KLX Energy operates primarily in the oil and gas service sector, catering to onshore drilling needs [1] - The company is positioned within a challenging market environment due to the reduction in oil rig counts [1] Industry Context - The overall trend in the oil and gas industry indicates a substantial decrease in the number of operational oil rigs, impacting service providers like KLX Energy [1]

Industry Overview - The Oil/Energy sector faced significant challenges in 2025, with oil prices remaining under pressure and the sector lagging behind the broader market, which saw the S&P 500 increase by approximately 20% [1][3] - Crude oil prices fell below $60 per barrel, representing a decline of about 20% for the year, driven by oversupply concerns and a lack of strong upward momentum [3] Market Sentiment - Negative sentiment in the energy sector led to many equities falling out of favor, despite some companies performing well [5] - Stocks trading at least 35% below their highs can attract investor interest, particularly when the declines are driven by macroeconomic factors rather than company-specific issues [6][7] Investment Opportunities - Historical patterns suggest that periods of deep pessimism can create opportunities for contrarian investors looking ahead to potential recoveries in 2026 [1][5] - Companies like Drilling Tools International (DTI), KLX Energy Services Holdings (KLXE), and W&T Offshore (WTI) are highlighted as potential investment opportunities due to their strong fundamentals despite significant stock price declines [2][9][14] Company Highlights - **Drilling Tools International (DTI)**: Specializes in downhole tools and has a projected earnings growth of 650% for 2026, with its stock trading 38% below its 2025 highs [8][11] - **KLX Energy Services Holdings (KLXE)**: Provides a range of services to onshore oil and gas producers and is positioned for a 14.5% earnings growth in 2026, with shares nearly 80% off their peak [12][14] - **W&T Offshore (WTI)**: An independent oil and natural gas producer with a strong cash flow and a drilling success rate near 90%, its stock remains over 35% below its October peak [15][17]

Core Viewpoint - KLX Energy Services Holdings, Inc. has appointed Geoffrey C. Stanford as Interim Chief Financial Officer effective January 7, 2026, following the resignation of Keefer M. Lehner, which is not related to any operational or financial issues within the company [1]. Group 1: Leadership Changes - Geoffrey C. Stanford, currently Senior Vice President and Chief Accounting Officer, will take over as Interim CFO [1]. - Keefer M. Lehner will resign from his position as Executive Vice President and CFO effective January 7, 2026 [1]. - The resignation of Lehner is confirmed to be unrelated to any issues with the company's operations, financial reporting, or controls [1]. Group 2: Background of Geoffrey C. Stanford - Stanford joined KLX in 2018 as Vice President and Chief Accounting Officer and was promoted to Senior Vice President in December 2020 [2]. - Prior to KLX, he held positions at Amedisys Home Health & Hospice and Willbros Construction, focusing on corporate accounting initiatives [2]. - Stanford is a licensed Certified Public Accountant with an MBA from Tulane University and bachelor's degrees in Accounting and Finance from Louisiana State University [2]. Group 3: Company Overview - KLX is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas exploration and production companies [4]. - The company operates in all major active basins in the United States, delivering critical services focused on drilling, completion, production, and intervention activities [4]. - KLX has over 60 service and support facilities across the United States, supported by skilled personnel and a broad portfolio of innovative in-house manufacturing, repair, and maintenance capabilities [4].

Core Viewpoint - KLX Energy Services Holdings, Inc. will participate in the Emerging Growth Conference on December 10, 2025, with a presentation by CEO Chris Baker [1]. Group 1: Company Overview - KLX is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas exploration and production companies across all major basins in the United States [3]. - The company offers mission-critical oilfield services focused on drilling, completion, production, and intervention activities for technically demanding wells [3]. - KLX operates over 60 service and support facilities throughout the United States, supported by technically skilled personnel and a broad portfolio of innovative in-house manufacturing, repair, and maintenance capabilities [3]. Group 2: Event Details - The presentation by Chris Baker is scheduled for 12:35 p.m. EST on December 10, 2025, and participants can register in advance [1]. - Following the presentation, there will be a Q&A session, and participants are encouraged to submit questions in advance [2]. - An archived webcast of the event will be available on EmergingGrowth.com and the Emerging Growth YouTube Channel after the conference [2].

Financial Performance - Revenue for Q3 2025 totaled $166.7 million, a 5% increase from Q2 2025 revenue of $159.0 million[8] - Adjusted EBITDA for Q3 2025 was $21.1 million, a 14% increase from Q2 2025 Adjusted EBITDA of $18.5 million[9] - Net loss for Q3 2025 was $(14.3) million, an improvement from a net loss of $(19.9) million in Q2 2025[9] - Adjusted EBITDA margin for Q3 2025 was 13%, up from 12% in Q2 2025, reflecting improved operational efficiency[9] - Revenues for the three months ended September 30, 2025, were $166.7 million, a decrease of 11.7% compared to $188.9 million for the same period in 2024[22] - The net loss for the three months ended September 30, 2025, was $14.3 million, compared to a net loss of $8.2 million for the same period in 2024, representing a year-over-year increase in net loss of 74.4%[22] - Adjusted EBITDA for the three months ended September 30, 2025, was $21.1 million, with an Adjusted EBITDA margin of 12.7%, compared to $27.8 million and 14.7% for the same period in 2024[39] - The consolidated net loss margin for the three months ended September 30, 2025, was (8.6)%, an improvement from (12.5)% in the previous quarter[37] Segment Performance - The Northeast/Mid-Con segment saw a 29% sequential revenue increase to $59.3 million, driven by improved completions utilization[10] - The Rocky Mountains segment reported a revenue decrease of 6% sequentially to $50.8 million, impacted by lower utilization[10] - The Southwest segment had an adjusted EBITDA of $5.1 million for the three months ended September 30, 2025, down from $7.2 million in the previous quarter[52] - The Northeast/Mid-Con segment achieved an adjusted EBITDA of $14.5 million, significantly up from $7.2 million in the previous quarter[52] - The Rocky Mountains segment reported a revenue of $50.8 million with an operating income of $1.8 million, resulting in an operating income margin of 3.5%[51] - The Northeast/Mid-Con segment's revenue increased to $59.3 million, with an operating income margin of 11.1% for the three months ended September 30, 2025[51] Liquidity and Capital Structure - Total liquidity as of September 30, 2025, was $65 million, consisting of approximately $8 million in cash and $57 million in available borrowing capacity[6] - Net working capital as of September 30, 2025, was $50.1 million, a 9% increase from June 30, 2025[14] - Total assets decreased to $358.2 million as of September 30, 2025, down from $456.3 million as of December 31, 2024[24] - Cash and cash equivalents significantly decreased to $8.3 million from $91.6 million as of December 31, 2024[24] - Long-term debt decreased to $254.7 million as of September 30, 2025, compared to $285.1 million as of December 31, 2024[24] - Total debt as of September 30, 2025, was $259.2 million, with net debt standing at $250.8 million after accounting for cash and cash equivalents[59] Costs and Expenses - Capital expenditures in Q3 2025 were $12.0 million, a 6% decrease compared to Q2 2025[15] - The company incurred one-time costs of $0.3 million during the third quarter of 2025, primarily related to legal and operational expenses[37] - The company reported levered free cash flow of $5.7 million for the three months ended September 30, 2025, compared to $8.0 million in the previous quarter[56] Future Outlook - The company anticipates a mid-single-digit revenue decline in Q4 2025 due to typical seasonality and customer budget exhaustion[7] - The adjusted diluted loss per share for the three months ended September 30, 2025, was $0.73, compared to $0.88 in the previous quarter[54] - The company reported a basic net loss per common share of $(0.74) for the three months ended September 30, 2025, compared to $(0.51) for the same period in 2024[22]

Revenue Performance - For the three months ended September 30, 2025, total revenue was $166.7 million, a decrease of $22.2 million or 11.8% compared to $188.9 million in the same period of 2024[101] - Revenue from the Rocky Mountains segment decreased by $17.1 million or 25.2%, primarily due to lower weighted average volume[101] - The Southwest segment revenue decreased by $12.0 million or 17.5%, with lower weighted average price contributing approximately 33% to the decline[101] - The Northeast/Mid-Con segment revenue increased by $6.9 million or 13.2%, driven entirely by higher weighted average price[101] - For the nine months ended September 30, 2025, total revenue was $479.7 million, a decrease of $64.1 million, or 11.8%, compared to the prior year[110] - The Rocky Mountains segment revenue decreased by $22.2 million, or 12.7%, while the Southwest segment revenue decreased by $27.3 million, or 13.1%[110] Cost and Expenses - Cost of sales for the quarter was $130.5 million, representing 78.3% of sales, compared to $142.3 million or 75.3% of sales in the prior year[102] - Labor costs per employee increased by 0.5% compared to the same period in 2024, while repair and maintenance costs as a percentage of revenues increased by 4.1%[102] - Cost of sales for the nine months ended September 30, 2025, was $379.9 million, or 79.2% of sales, up from 77.7% in the prior year[111] - For the quarter ended September 30, 2025, SG&A expenses were $15.6 million, or 9.4% of revenues, down from $21.2 million, or 11.2% of revenues in the prior year[103] Operating Performance - The total operating loss for the quarter was $3.0 million, compared to an operating income of $1.1 million in the prior year, reflecting a decline in activity and pricing[105] - For the nine months ended September 30, 2025, net loss was $62.1 million, compared to a net loss of $38.4 million in the prior year[117] - Operating loss for the Rocky Mountains segment was $4.9 million, down from $19.0 million in the prior year, a decrease of 74.2%[114] Liquidity and Capital Structure - As of September 30, 2025, the company had $8.3 million in cash and cash equivalents, with total liquidity of $65.2 million[118] - The company completed a refinancing of long-term indebtedness on March 12, 2025, issuing approximately $232.2 million in 2030 Senior Notes[123] - The 2030 Senior Notes will mature on March 12, 2030, and bear a floating interest rate based on Term SOFR plus an applicable margin[124] - As of September 30, 2025, the outstanding principal amount under the 2030 Senior Notes was $241.7 million, with total debt related to these notes at $219.2 million after accounting for unamortized costs[130] - The effective interest rate for the 2030 Senior Notes was approximately 12.67% as of September 30, 2025[130] - The Company incurred capital expenditures of $39.7 million during the nine months ended September 30, 2025, down from $49.8 million in the same period of 2024[142] - The Company expects total capital expenditures for the year ending December 31, 2025, to be between $42.5 million and $47.5 million[142] Cash Flow - Cash flows used in operating activities for the nine months ended September 30, 2025, were approximately $5.0 million, compared to $28.2 million provided in the same period of 2024[149] - The Company had $8.3 million in cash and cash equivalents as of September 30, 2025, a decrease of $83.2 million from the previous period[150] - Net cash used in financing activities was $49.1 million for the nine months ended September 30, 2025, compared to $17.4 million in the same period of 2024[154] - The New ABL Facility has a total commitment of $125.0 million and an effective interest rate of approximately 9.02% as of September 30, 2025[136] - The Company had $40.0 million in borrowings outstanding under the New ABL Facility as of September 30, 2025[136] Financial Metrics and Reporting - The company evaluates its financial condition based on GAAP-compliant condensed consolidated financial statements, which involve estimates and assumptions that may lead to materially different reported amounts under varying conditions[155] - Adjusted EBITDA is utilized as a key performance indicator, allowing the company to assess operating performance without regard to financing methods or capital structure[158] - Adjusted EBITDA is defined as net earnings (loss) before interest, taxes, depreciation, and amortization, adjusted for specific items such as goodwill impairment and stock-based compensation[159] - The company recognizes the cyclical nature of its business and emphasizes the importance of metrics to measure operational trends and set performance baselines[157] - Adjusted EBITDA Margin is calculated as Adjusted EBITDA expressed as a percentage of revenue, providing insight into profitability relative to sales[159] - The company continues to evaluate recently issued accounting pronouncements for future adoption, indicating a proactive approach to compliance[156] - The financial performance measures are designed to provide a clearer picture of the company's ongoing operations, excluding items that may not reflect current performance[158] - The company acknowledges that actual results may differ from estimates and assumptions used in financial statement preparation, highlighting the inherent uncertainties in financial reporting[155] - The company’s Adjusted EBITDA calculations may not be directly comparable to similar measures used by other companies in the industry[160] - As a smaller reporting company, the company is not required to disclose certain market risk information, which may limit the available data for investors[161] Strategic Initiatives - The company plans to pursue strategic, accretive acquisitions to strengthen its competitive positioning and drive long-term stockholder value[83] - The company has developed tools covered by 39 patents and 6 pending patent applications, enhancing its competitive edge in the market[88]

Financial Data and Key Metrics Changes - KLX Energy Services reported Q3 2025 revenue of $167 million, a 5% increase from Q2 2025, but 12% lower than Q3 2024 [5][10] - Adjusted EBITDA for Q3 2025 was $21 million, up 14% from Q2 2025, with an adjusted EBITDA margin improving to 13% [5][10] - Revenue and adjusted EBITDA per rig were $318,000 and $40,000 respectively, significantly above levels from Q4 2021 by 20% and 227% [6] Business Line Data and Key Metrics Changes - The Northeast Mid-con segment saw a 29% revenue increase quarter-over-quarter, contributing $59.3 million to total revenue [5][10] - The Southwest segment represented 34% of Q3 revenue, down from 37% in Q2, with revenue decreasing 4% due to reduced activity [8][12] - The Rockies segment accounted for 30% of revenue, down from 34% in Q2, with revenue of $50.8 million, reflecting a 6% sequential decrease [8][12] Market Data and Key Metrics Changes - The average US land rig count declined by 6% and the average frac spread count decreased by 12% during the quarter [5][10] - By end market, drilling, completion, and production intervention services contributed approximately 15%, 60%, and 25% of Q3 revenue respectively [9] Company Strategy and Development Direction - KLX is focusing on operational discipline, margin optimization, and proactive capital stewardship to navigate market volatility [17][19] - The company anticipates a mid-single-digit revenue decline from Q3 to Q4, indicating a less pronounced reduction compared to previous years [17][31] - KLX expects to benefit from increased natural gas demand and new LNG export capacity, positioning itself for growth in 2026 [19][20] Management's Comments on Operating Environment and Future Outlook - Management noted that the operating environment remains challenging due to OPEC Plus supply growth and depressed rig counts [6] - There are signs of stabilization in rig activity and incremental activity in natural gas basins, which could support future growth [17][19] - The company is optimistic about maintaining stable adjusted EBITDA margins despite anticipated revenue declines [18] Other Important Information - KLX ended Q3 with approximately $65 million in liquidity, including $8.3 million in cash and $56.9 million available on its revolving credit facility [13] - Total debt as of September 30 was $259.2 million, with compliance to debt covenants maintained [13] Q&A Session Summary Question: Performance of Northeast Mid-con - Management highlighted that the Northeast Mid-con segment's strong performance was driven by rentals and fishing, with less white space contributing to margin expansion [25][26] Question: Rockies Market Performance - Management noted that the Rockies segment was generally flat, with episodic completion programs impacting revenue due to fixed cost structures [28][29] Question: Year-End Slowdown and Future Outlook - Management indicated a mid-single-digit revenue decline for Q4, which is less severe than previous years, and expressed optimism for 2026 based on gas market stability [31][34] Question: Balance Sheet and Liquidity - Management discussed the balance sheet's strength, with $65 million in liquidity and a focus on managing PIK versus cash decisions to maintain flexibility [36][37]

Core Points - KLX Energy Services Holdings, Inc. will report its 2025 third quarter financial results on November 6, 2025, at 10:00 a.m. Eastern Time [1][2] - The conference call can be accessed via phone or live webcast, with a replay available until November 20, 2025 [2] Company Overview - KLX is a growth-oriented provider of diversified oilfield services, focusing on drilling, completion, production, and intervention activities for technically demanding wells [3] - The company operates over 60 service and support facilities across the United States, catering to both conventional and unconventional oil and natural gas exploration and production companies [3] - KLX's services are supported by technically skilled personnel and a broad portfolio of innovative in-house manufacturing, repair, and maintenance capabilities [3]

PART I - FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the company's business, accounting policies, debt structure, segment performance, and other financial details for the periods ended June 30, 2025, and December 31, 2024 [Balance Sheets as of June 30, 2025 and December 31, 2024](index=3&type=section&id=Balance%20Sheets%20as%20of%20June%2030%2C%202025%20and%20December%2031%2C%202024) As of June 30, 2025, total assets decreased to $369.5 million from $456.3 million at December 31, 2024, primarily due to a significant reduction in cash and cash equivalents | Metric | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 16.7 | 91.6 | (74.9) | | Total current assets | 172.7 | 233.0 | (60.3) | | Total assets | 369.5 | 456.3 | (86.8) | | Total current liabilities | 139.1 | 140.1 | (1.0) | | Long-term debt | 254.2 | 285.1 | (30.9) | | Total liabilities and stockholders' deficit | 369.5 | 456.3 | (86.8) | | Total stockholders' deficit | (47.2) | (10.5) | (36.7) | [Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024](index=4&type=section&id=Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the three and six months ended June 30, 2025, the company reported increased net losses compared to the prior year periods, driven by lower revenues and higher interest expenses | Metric | 3 Months Ended June 30, 2025 (Millions USD) | 3 Months Ended June 30, 2024 (Millions USD) | Change (%) | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | 159.0 | 180.2 | (11.8)% | 313.0 | 354.9 | (11.8)% | | Operating (loss) income | (8.7) | 1.4 | NM | (26.4) | (11.7) | (125.6)% | | Interest expense | 11.0 | 9.8 | 12.2% | 21.3 | 19.4 | 9.8% | | Net loss | (19.9) | (8.0) | (148.8)% | (47.8) | (30.2) | (58.3)% | | Net loss per share-basic | (1.04) | (0.49) | (112.2)% | (2.63) | (1.86) | (41.4)% | | Net loss per share-diluted | (1.04) | (0.49) | (112.2)% | (2.63) | (1.86) | (41.4)% | [Statements of Stockholders' Equity for the Six Months Ended June 30, 2025 and 2024](index=5&type=section&id=Statements%20of%20Stockholders%27%20Equity%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) The company's total stockholders' deficit increased significantly from $10.5 million at December 31, 2024, to $47.2 million at June 30, 2025, primarily due to net losses and treasury stock purchases, partially offset by warrant issuances and restricted stock | Metric | Balance at Dec 31, 2024 (Millions USD) | Balance at June 30, 2025 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Additional Paid-in Capital | 557.5 | 569.0 | 11.5 | | Treasury Stock | (5.8) | (6.2) | (0.4) | | Accumulated Deficit | (562.4) | (610.2) | (47.8) | | Total Stockholders' Deficit | (10.5) | (47.2) | (36.7) | - Issuance of warrants contributed **$11.0 million** to additional paid-in capital during the six months ended June 30, 2025[14](index=14&type=chunk) - Net loss for the six months ended June 30, 2025, was **$47.8 million**, significantly impacting accumulated deficit[14](index=14&type=chunk) [Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024](index=6&type=section&id=Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the six months ended June 30, 2025, the company experienced a net cash outflow of $74.3 million, a significant deterioration from the prior year, primarily driven by cash used in operating and financing activities, including debt refinancing costs | Metric | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Net cash flows (used in) provided by operating activities | (18.5) | 11.4 | (29.9) | | Net cash flows used in investing activities | (21.3) | (22.2) | 0.9 | | Net cash flows used in financing activities | (34.5) | (14.8) | (19.7) | | Net change in cash and cash equivalents and restricted cash | (74.3) | (25.6) | (48.7) | | Cash and cash equivalents and restricted cash, end of period | 17.3 | 86.9 | (69.6) | - Cash paid for interest decreased to **$14.9 million** for the six months ended June 30, 2025, from $18.7 million in the prior year[17](index=17&type=chunk) - The company used **$8.5 million** for payments of debt issuance costs during the six months ended June 30, 2025, related to the refinancing[17](index=17&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context and detail for the condensed consolidated financial statements, covering the company's business, significant accounting policies, recent pronouncements, and specific breakdowns of inventories, property and equipment, debt, fair value measurements, commitments, equity, income taxes, and segment performance [NOTE 1 - Description of Business and Basis of Presentation](index=7&type=section&id=NOTE%201%20-%20Description%20of%20Business%20and%20Basis%20of%20Presentation) KLX Energy Services is a growth-oriented provider of diversified oilfield services to onshore oil and natural gas E&P companies in the U.S., offering a complementary suite of proprietary products and specialized services across drilling, completion, production, and intervention activities - KLXE provides diversified oilfield services to onshore oil and natural gas E&P companies in major active basins throughout the United States[19](index=19&type=chunk) - The company offers services including coiled tubing, directional drilling, fishing, flowback, fluid pumping, hydraulic fracturing rentals, pressure control, pressure pumping, rig-assisted snubbing, special situation services, thru-tubing, and wireline[20](index=20&type=chunk) - The financial statements are unaudited and prepared in accordance with GAAP for interim financial information, and results are not necessarily indicative of the full year 2025[21](index=21&type=chunk) [NOTE 2 - Recent Accounting Pronouncements](index=7&type=section&id=NOTE%202%20-%20Recent%20Accounting%20Pronouncements) The company evaluated ASU 2023-09, Income Taxes (Topic 740), effective January 1, 2025, and does not expect it to have a material impact on its consolidated financial statements - ASU 2023-09, Income Taxes (Topic 740), effective January 1, 2025, is **not expected to materially impact** the company's financial statements[23](index=23&type=chunk) [NOTE 3 - Inventories, Net](index=8&type=section&id=NOTE%203%20-%20Inventories%2C%20Net) Net inventories increased slightly to $32.0 million at June 30, 2025, from $31.0 million at December 31, 2024, with spare parts and plugs being the largest components | Inventory Category | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :--- | :--- | :--- | | Spare parts | 19.7 | 20.5 | | Plugs | 9.4 | 8.0 | | Consumables | 4.6 | 3.9 | | Other | 1.9 | 1.8 | | Total inventories, net | 32.0 | 31.0 | - Inventories are valued at the lower of cost or net realizable value and are reported net of an inventory reserve of **$3.6 million** at June 30, 2025[25](index=25&type=chunk) [NOTE 4 - Property and Equipment, Net](index=8&type=section&id=NOTE%204%20-%20Property%20and%20Equipment%2C%20Net) Net property and equipment decreased to $171.1 million at June 30, 2025, from $197.1 million at December 31, 2024, primarily due to accumulated depreciation, despite an increase in total property and equipment before depreciation | Metric | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :--- | :--- | :--- | | Total property and equipment (gross) | 661.9 | 652.6 | | Accumulated depreciation | (496.4) | (461.1) | | Total property and equipment, net | 171.1 | 197.1 | - Depreciation expense for non-leased fixed assets was **$37.9 million** for the six months ended June 30, 2025, up from $32.9 million in the prior year[26](index=26&type=chunk) - Assets held for sale amounted to **$2.2 million** at June 30, 2025, representing two operational facilities and select equipment, recorded at the lower of carrying value or fair value less costs to sell[27](index=27&type=chunk) [NOTE 5 - Debt](index=9&type=section&id=NOTE%205%20-%20Debt) The company completed a significant refinancing on March 12, 2025, replacing its 2025 Senior Notes and Prior ABL Facility with new 2030 Senior Notes and a New ABL Facility, resulting in a shift in debt structure and maturity profile | Debt Type | June 30, 2025 (Millions USD) | December 31, 2024 (Millions USD) | | :--- | :--- | :--- | | 2025 Senior Notes | — | 236.3 | | 2030 Senior Notes | 236.9 | — | | Prior ABL Facility | — | 50.0 | | New ABL Facility | 45.0 | — | | Total principal outstanding | 281.9 | 286.3 | | Total debt (net) | 258.7 | 285.1 | - The refinancing involved issuing **$232.2 million in 2030 Senior Notes** and warrants, partially in exchange for $143.6 million of 2025 Senior Notes and $78.4 million in cash[30](index=30&type=chunk) - The 2030 Senior Notes mature on March 12, 2030, bear a floating interest rate (Term SOFR plus Applicable Margin), and require quarterly redemptions of **2.00% per annum**[34](index=34&type=chunk)[36](index=36&type=chunk) - The New ABL Facility provides a **$125.0 million revolving credit facility** and a **$10.0 million FILO facility**, maturing in 2028, and was used to repay the Prior ABL Facility[41](index=41&type=chunk)[43](index=43&type=chunk) [NOTE 6 - Fair Value Information](index=12&type=section&id=NOTE%206%20-%20Fair%20Value%20Information) The fair value of the 2030 Senior Notes was $214.2 million at June 30, 2025, categorized as Level 3, while the 2025 Senior Notes were valued at $231.2 million (Level 2) at December 31, 2024 | Financial Instrument | Date | Fair Value (Millions USD) | Fair Value Hierarchy Level | | :--- | :--- | :--- | :--- | | 2030 Senior Notes | June 30, 2025 | 214.2 | Level 3 | | 2025 Senior Notes | Dec 31, 2024 | 231.2 | Level 2 | | Assets Held for Sale | June 30, 2025 | 2.2 | Level 2 | | Assets Held for Sale | Dec 31, 2024 | 2.3 | Level 2 | - The company recognized a before-tax loss of **$0.4 million** related to Assets Held for Sale for the three and six months ended June 30, 2025[51](index=51&type=chunk) [NOTE 7 - Commitments, Contingencies and Off-Balance-Sheet Arrangements](index=13&type=section&id=NOTE%207%20-%20Commitments%2C%20Contingencies%20and%20Off-Balance-Sheet%20Arrangements) The company is subject to environmental regulations and various legal actions in the normal course of business, but management believes these will not have a material adverse effect on its financial statements - Management believes current environmental violations or liabilities will **not have a material adverse effect** on financial statements[52](index=52&type=chunk) - The company is involved in various legal actions, but management does **not expect a material adverse effect** on financial statements[53](index=53&type=chunk)[54](index=54&type=chunk) - The company has indemnities, commitments, and guarantees, but the maximum liability is not estimable and is **not expected to be material**[55](index=55&type=chunk) [NOTE 8 - Equity and Stock-Based Compensation](index=14&type=section&id=NOTE%208%20-%20Equity%20and%20Stock-Based%20Compensation) The company continues to utilize its Equity Distribution Agreement (ATM Offering) to sell common stock for general corporate purposes, including debt refinancing and capital expenditures - The Equity Distribution Agreement (ATM Offering) allows the company to sell up to **$57.8 million** of common stock, with proceeds used for general corporate purposes, including debt refinancing and capital expenditures[56](index=56&type=chunk)[59](index=59&type=chunk) - Unrecognized compensation cost related to restricted stock awards was **$4.5 million** at June 30, 2025[63](index=63&type=chunk) | Metric | 3 Months Ended June 30, 2025 (Millions USD) | 3 Months Ended June 30, 2024 (Millions USD) | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | | :--- | :--- | :--- | :--- | :--- | | Gross proceeds from Common Stock sales (ATM Offering) | 0.1 | 0.0 | 0.6 | 0.0 | | Stock-based compensation expense | 0.6 | 1.0 | 1.4 | 1.9 | [NOTE 9 - Income Taxes](index=15&type=section&id=NOTE%209%20-%20Income%20Taxes) Income tax expense remained consistent at $0.4 million for the six months ended June 30, 2025 and 2024, primarily due to state and local taxes | Metric | 3 Months Ended June 30, 2025 (Millions USD) | 3 Months Ended June 30, 2024 (Millions USD) | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | | :--- | :--- | :--- | :--- | :--- | | Income tax expense | 0.2 | 0.2 | 0.4 | 0.4 | - The company has a **full valuation allowance** against its net deferred tax assets, preventing recognition of federal tax benefits on losses[64](index=64&type=chunk) - The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, is **not expected to materially impact** the financial statements due to the full valuation allowance[65](index=65&type=chunk) [NOTE 10 - Segment Reporting](index=15&type=section&id=NOTE%2010%20-%20Segment%20Reporting) The company operates in three reportable geographic segments: Rocky Mountains, Southwest, and Northeast/Mid-Con, with all segments experiencing revenue declines for the six months ended June 30, 2025 - The company's three reportable segments are **Rocky Mountains, Southwest, and Northeast/Mid-Con**[67](index=67&type=chunk)[69](index=69&type=chunk) | Segment | 3 Months Ended June 30, 2025 (Millions USD) | 3 Months Ended June 30, 2024 (Millions USD) | Change (%) | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Revenues** | | | | | | | | Rocky Mountains | 54.2 | 61.5 | (11.9)% | 102.1 | 107.2 | (4.8)% | | Southwest | 59.0 | 70.2 | (15.9)% | 124.4 | 139.9 | (11.0)% | | Northeast/Mid-Con | 46.2 | 49.0 | (5.7)% | 87.2 | 108.9 | (19.8)% | | Total Revenues | 159.0 | 180.2 | (11.8)% | 313.0 | 354.9 | (11.8)% | | **Segment Operating Income (Loss)** | | | | | | | | Rocky Mountains | 3.3 | 10.5 | (68.6)% | 3.1 | 9.3 | (66.7)% | | Southwest | (1.7) | 2.6 | NM | 1.3 | 1.9 | (31.6)% | | Northeast/Mid-Con | (1.3) | (2.5) | 48.0% | (9.4) | (0.1) | (9,300.0)% | | Service Offering | 3 Months Ended June 30, 2025 (Millions USD) | 3 Months Ended June 30, 2024 (Millions USD) | Change (%) | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Drilling | 25.8 | 38.0 | (32.1)% | 56.4 | 80.0 | (29.5)% | | Completion | 88.5 | 92.6 | (4.4)% | 166.6 | 186.0 | (10.4)% | | Production | 28.3 | 30.7 | (7.8)% | 56.0 | 53.9 | 3.9% | | Intervention | 16.4 | 18.9 | (13.2)% | 34.0 | 35.0 | (2.9)% | | Segment | Total Assets (June 30, 2025, Millions USD) | Total Assets (Dec 31, 2024, Millions USD) | | :--- | :--- | :--- | | Rocky Mountains | 100.8 | 114.0 | | Southwest | 153.7 | 152.3 | | Northeast/Mid-Con | 97.7 | 98.4 | | Unallocated assets | 17.3 | 91.6 | | Total assets | 369.5 | 456.3 | | Segment | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | | :--- | :--- | :--- | | Total capital expenditures | 27.7 | 28.8 | [NOTE 11 - Net Loss Per Common Share](index=19&type=section&id=NOTE%2011%20-%20Net%20Loss%20Per%20Common%20Share) Basic and diluted net loss per common share increased significantly for both the three and six months ended June 30, 2025, reflecting the higher net losses reported | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss per share-basic | (1.04) | (0.49) | (2.63) | (1.86) | | Net loss per share-diluted | (1.04) | (0.49) | (2.63) | (1.86) | | Basic weighted average common shares (millions) | 19.2 | 16.2 | 18.2 | 16.2 | - Approximately **0.8 million and 0.7 million shares** were excluded from diluted EPS calculation for the three and six months ended June 30, 2025, respectively, due to their anti-dilutive effect[75](index=75&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed discussion of the company's financial condition, results of operations, and liquidity for the three and six months ended June 30, 2025, compared to the prior year, highlighting the impact of market volatility and strategic initiatives [Company History](index=22&type=section&id=Company%20History) KLX Energy Services was formed through a series of acquisitions from 2013-2019, including Quintana Energy Services (QES) in 2020 and Greene's Energy Group in 2023, to become a leading provider of asset-light oilfield solutions - KLXE was formed from seven private oilfield service companies (2013-2014) and expanded through acquisitions, including **QES in Q2 2020** and **Greene's Energy Group in March 2023**[84](index=84&type=chunk)[86](index=86&type=chunk) - The QES Merger increased scale, leveraged coiled tubing and wireline assets, and established KLXE as a leading diversified provider of drilling, completions, and production services[85](index=85&type=chunk) - The company plans to pursue **opportunistic, strategic, accretive acquisitions** to strengthen its competitive positioning and capital structure[87](index=87&type=chunk) [Company Overview](index=22&type=section&id=Company%20Overview) The company serves leading onshore oil and natural gas E&P companies in the U.S. across three geographic segments, deploying assets dynamically to optimize utilization and profitability, and offering differentiated, engineered solutions with proprietary tools and R&D - KLXE serves major independent and oil and gas companies in the U.S. onshore basins from over **60 service facilities** across Rocky Mountains, Southwest, and Northeast/Mid-Con regions[88](index=88&type=chunk) - The company provides engineered solutions across the well lifecycle, focusing on streamlining operations, reducing non-productive time, and developing cost-effective, customized tools for complex wells[91](index=91&type=chunk) - KLXE differentiates itself through technical competence, specialized tools, proprietary equipment, and an in-house R&D organization with **37 patents and 8 pending applications**[92](index=92&type=chunk) [Recent Trends and Outlook](index=24&type=section&id=Recent%20Trends%20and%20Outlook) The oil and natural gas industry remains cyclical and volatile, with WTI prices decreasing in Q2 2025 due to tariffs and increased OPEC+ production - WTI average daily price **decreased by approximately 10.0% to $64.57 per Bbl** in Q2 2025, compared to $71.78 per Bbl in Q1 2025, influenced by tariffs and OPEC+ production increases[96](index=96&type=chunk) - U.S. land rig count **decreased by 7.0% to 533** as of June 30, 2025, compared to 573 at December 31, 2024[96](index=96&type=chunk) - The company expects customers to **cautiously allocate capital** due to volatile commodity prices and increasing global oil supply, despite prices remaining above break-even for most operators[97](index=97&type=chunk) [How We Generate Revenue and the Costs of Conducting Our Business](index=24&type=section&id=How%20We%20Generate%20Revenue%20and%20the%20Costs%20of%20Conducting%20Our%20Business) KLXE aims for attractive returns by providing differentiated services, prudently applying cash flow to high-return opportunities, and efficiently utilizing capital for new product development and asset maintenance - The business strategy focuses on generating **attractive returns on capital** by providing differentiated services and prudently applying cash flow to targeted opportunities with high returns and short payback periods[100](index=100&type=chunk) - The company's services generally require **less expensive equipment to maintain** and smaller staff compared to other oilfield service providers[100](index=100&type=chunk) - Maintenance capital expenditures are lower due to the **asset-light nature of services**, lower average age of assets, and ability to charge back a portion of asset maintenance to customers[103](index=103&type=chunk) [Results of Operations (Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024)](index=26&type=section&id=Results%20of%20Operations%20(Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024)) Revenues decreased by 11.8% to $159.0 million, primarily due to lower activity, pricing, and volume, leading to an operating loss of $8.7 million | Metric | 3 Months Ended June 30, 2025 (Millions USD) | 3 Months Ended June 30, 2024 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | 159.0 | 180.2 | (11.8)% | | Cost of sales | 125.6 (79.0% of sales) | 136.0 (75.5% of sales) | (7.6)% | | SG&A expenses | 18.0 (11.3% of revenues) | 19.3 (10.7% of revenues) | (6.8)% | | Operating (loss) income | (8.7) | 1.4 | NM | | Net loss | (19.9) | (8.0) | (148.8)% | - The decrease in revenues was attributed to **lower weighted average price (19%)** and **lower weighted average volume (81%)**[105](index=105&type=chunk) - Cost of sales as a percentage of revenues increased due to lower leverage of fixed costs, and repair & maintenance costs as a percentage of revenues **increased by 2.8%**[106](index=106&type=chunk) [Results of Operations (Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024)](index=28&type=section&id=Results%20of%20Operations%20(Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024)) Revenues decreased by 11.8% to $313.0 million, leading to an operating loss of $26.4 million, a substantial increase from the prior year's operating loss | Metric | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | 313.0 | 354.9 | (11.8)% | | Cost of sales | 249.4 (79.7% of sales) | 280.0 (78.9% of sales) | (10.9)% | | SG&A expenses | 39.6 (12.7% of revenues) | 40.9 (11.5% of revenues) | (3.2)% | | Operating (loss) income | (26.4) | (11.7) | (125.6)% | | Net loss | (47.8) | (30.2) | (58.3)% | - The revenue decrease was driven by **lower weighted average price (33%)** and **lower weighted average volume (67%)**[114](index=114&type=chunk) - Cost of sales as a percentage of revenues increased due to lower leverage of fixed costs, while repair & maintenance costs as a percentage of revenues **decreased by (4.3)%** due to lower utilization[115](index=115&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position at June 30, 2025, was $65.4 million, comprising cash and New ABL Facility availability [Overview](index=29&type=section&id=Overview) The company's liquidity at June 30, 2025, was $65.4 million, consisting of $16.7 million in cash and $48.7 million available under the New ABL Facility | Metric | June 30, 2025 (Millions USD) | | :--- | :--- | | Cash and cash equivalents | 16.7 | | Available on New ABL Facility | 48.7 | | Total liquidity position | 65.4 | - The company has improved liquidity through QES Merger efficiencies, ATM Offering equity issuances, debt-for-equity exchanges, and non-core asset monetization[123](index=123&type=chunk) - Management believes current cash, ABL availability, and cash flows will **fund operations for at least the next twelve months**[125](index=125&type=chunk) [Refinancing](index=30&type=section&id=Refinancing) On March 7, 2025, the company entered into a Securities Purchase Agreement to issue $232.2 million in 2030 Senior Notes and warrants, exchanging $143.6 million of 2025 Senior Notes and receiving $78.4 million in cash - The company issued **$232.2 million in 2030 Senior Notes** and warrants in exchange for $143.6 million of 2025 Senior Notes and $78.4 million cash[126](index=126&type=chunk) - The refinancing was consummated on **March 12, 2025**[126](index=126&type=chunk) [ABL Facilities](index=30&type=section&id=ABL%20Facilities) The Prior ABL Facility was repaid in full and terminated on March 12, 2025, using proceeds from the new $125.0 million Revolving Facility and $10.0 million FILO Facility under the New ABL Facility, which matures in 2028 - The Prior ABL Facility was **repaid in full and terminated** on March 12, 2025[127](index=127&type=chunk) - The New ABL Facility, entered into on March 7, 2025, includes a **$125.0 million Revolving Facility** and a **$10.0 million FILO Facility**, maturing in 2028[128](index=128&type=chunk)[130](index=130&type=chunk) - As of June 30, 2025, borrowings outstanding under the New ABL Facility were **$45.0 million**, with an effective interest rate of approximately **9.06%**[131](index=131&type=chunk) [Senior Secured Notes](index=31&type=section&id=Senior%20Secured%20Notes) The 2025 Senior Notes were fully redeemed by March 30, 2025, through an exchange and cash deposit - The 2025 Senior Notes were **fully redeemed by March 30, 2025**, through an exchange of $143.6 million and a cash deposit of $97.1 million[133](index=133&type=chunk) - The 2030 Senior Notes, with **$236.9 million principal outstanding** at June 30, 2025, mature on March 12, 2030, and have an effective interest rate of approximately **13.81%**[134](index=134&type=chunk)[140](index=140&type=chunk) - The 2030 Senior Notes Indenture includes financial covenants, such as a **maximum total net leverage ratio** (stepping down from 4.50:1.0 to 2.50:1.0 by 2029) and restrictions on capital expenditures[137](index=137&type=chunk)[138](index=138&type=chunk) [Other debt-related items](index=32&type=section&id=Other%20debt-related%20items) The company had $6.2 million in outstanding letters of credit under the New ABL Facility and $4.9 million in short-term indebtedness for insurance premiums as of June 30, 2025 - Total letters of credit outstanding under the New ABL Facility were **$6.2 million** at June 30, 2025[141](index=141&type=chunk) - Short-term indebtedness of **$4.9 million** related to insurance premiums was outstanding as of June 30, 2025[142](index=142&type=chunk) [Indemnities, Commitments and Guarantees](index=33&type=section&id=Indemnities%2C%20Commitments%20and%20Guarantees) The company has various indemnities, commitments, and guarantees in the normal course of business, but management believes any related liability would not be material to its financial statements - The company's management believes that any liability from indemnities, commitments, and guarantees would **not be material** to its financial statements[143](index=143&type=chunk) [Capital Expenditures](index=33&type=section&id=Capital%20Expenditures) Capital expenditures for the six months ended June 30, 2025, were $27.7 million, slightly down from the prior year | Metric | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | Change (%) | | :--- | :--- | :--- | :--- | | Capital expenditures | 27.7 | 28.8 | (3.8)% | - The company expects total capital expenditures for the year ending December 31, 2025, to be between **$40.0 million and $50.0 million**[145](index=145&type=chunk) - Capital expenditures are comprised of maintenance spending and discretionary growth initiatives, which are continually evaluated based on industry activity and company initiatives[145](index=145&type=chunk) [Equity Distribution Agreement](index=33&type=section&id=Equity%20Distribution%20Agreement) The company continues to sell common stock through its ATM Offering, generating $0.6 million in gross proceeds for the six months ended June 30, 2025, for general corporate purposes - The ATM Offering allows the company to sell common stock up to an aggregate offering price of approximately **$57.75 million**[146](index=146&type=chunk) - For the six months ended June 30, 2025, the company sold 167,769 shares of common stock, generating **$0.6 million in gross proceeds**[150](index=150&type=chunk) - Net proceeds from the ATM Offering are used for general corporate purposes, including debt refinancing, acquisitions, capital expenditures, and working capital[149](index=149&type=chunk) [Cash Flows](index=35&type=section&id=Cash%20Flows) Net cash used in operating activities was $18.5 million for the six months ended June 30, 2025, a significant shift from $11.4 million provided in the prior year | Metric | 6 Months Ended June 30, 2025 (Millions USD) | 6 Months Ended June 30, 2024 (Millions USD) | Change (Millions USD) | | :--- | :--- | :--- | :--- | | Net cash flows (used in) provided by operating activities | (18.5) | 11.4 | (29.9) | | Net cash flows used in investing activities | (21.3) | (22.2) | 0.9 | | Net cash flows used in financing activities | (34.5) | (14.8) | (19.7) | - **Negative operating cash flows** were attributed to the net loss position and an increase in days receivable outstanding[154](index=154&type=chunk) - Financing activities included **significant cash outlays** for refinancing the 2025 Senior Notes and Prior ABL Facility, partially offset by proceeds from the ATM Offering[156](index=156&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) The company's financial statements rely on estimates and assumptions that affect reported amounts, and actual results may differ - Financial statements require management to make estimates and assumptions, and **actual results could differ**[157](index=157&type=chunk)[158](index=158&type=chunk) - Critical accounting policies are **consistent with those outlined in the 2024 Annual Report** on Form 10-K[158](index=158&type=chunk) [Recent Accounting Pronouncements](index=36&type=section&id=Recent%20Accounting%20Pronouncements) The company continues to evaluate recently issued accounting pronouncements for future adoption - The company is evaluating recently issued accounting pronouncements for future adoption[159](index=159&type=chunk) [How We Evaluate Our Operations](index=36&type=section&id=How%20We%20Evaluate%20Our%20Operations) The company uses key financial performance indicators, including Revenue, Operating Income, Adjusted EBITDA, and Adjusted EBITDA Margin, to measure operational trends and assess management performance [Key Financial Performance Indicators](index=36&type=section&id=Key%20Financial%20Performance%20Indicators) Key performance indicators include Revenue, Operating Income, Adjusted EBITDA, and Adjusted EBITDA Margin, which are used to evaluate operating performance and compare results - Key financial performance indicators include **Revenue, Operating income, Adjusted EBITDA, and Adjusted EBITDA Margin**[160](index=160&type=chunk)[162](index=162&type=chunk) - **Adjusted EBITDA** is a non-GAAP measure defined as net earnings (loss) before interest, taxes, depreciation, and amortization, further adjusted for goodwill/long-lived asset impairment, stock-based compensation, restructuring, transaction/integration costs, and other non-recurring items[162](index=162&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, KLX Energy Services is not required to provide detailed quantitative and qualitative disclosures about market risk - As a smaller reporting company, KLX Energy Services is **exempt from providing detailed market risk disclosures**[163](index=163&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were effective as of June 30, 2025 [Evaluation of Disclosure Controls and Procedures](index=37&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025 - The company's disclosure controls and procedures were evaluated and **deemed effective** as of June 30, 2025[165](index=165&type=chunk) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) There have been no material changes in the company's internal control over financial reporting during the period covered by this Quarterly Report - **No material changes** in internal control over financial reporting occurred during the reporting period[166](index=166&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions, including a claim against Magellan E&P Holdings, Inc, from which it expects to recover additional funds in 2025 - The company is a party to various legal actions, but management does **not expect a material adverse effect** on its consolidated financial statements[167](index=167&type=chunk) - In a claim against Magellan E&P Holdings, Inc, the company expects to receive an additional **$1.0 million to $1.3 million in 2025** following a settlement in December 2024[168](index=168&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Investors should carefully consider the risk factors outlined in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - Investors should consider risk factors from the **2024 Annual Report on Form 10-K** and this Quarterly Report[169](index=169&type=chunk) - Key risk factors include general economic conditions, crude oil demand and prices, operational inefficiencies, regulatory changes, competition, and the ability to maintain acceptable pricing[78](index=78&type=chunk)[81](index=81&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During April 2025, the company repurchased 1,574 shares of common stock at an average price of $3.31 per share, primarily for tax settlement related to restricted stock grants | Period | Total shares purchased | Average price paid per share | Approximate dollar value of shares that may yet be purchased under plans or programs (Millions USD) | | :--- | :--- | :--- | :--- | | April 1, 2025 - April 30, 2025 | 1,574 | $3.31 | 48.9 | | May 1, 2025 - May 31, 2025 | — | — | 48.9 | | June 1, 2025 - June 30, 2025 | — | — | 48.9 | - Shares were purchased from employees for income tax and benefit withholding obligations from restricted stock vesting[170](index=170&type=chunk) - A **$50.0 million share repurchase program** was authorized in August 2019[171](index=171&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company - This item is **not applicable**[172](index=172&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is **not applicable**[173](index=173&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the company - This item is **not applicable**[174](index=174&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report, including organizational documents, certifications of principal officers, and XBRL interactive data files - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Certifications of Principal Executive and Financial Officers, and XBRL Instance Documents[175](index=175&type=chunk) SIGNATURES The report is signed by Christopher J. Baker (President, CEO, and Director), Keefer M. Lehner (Executive Vice President and CFO), and Geoffrey C. Stanford (Senior Vice President and Chief Accounting Officer) on August 7, 2025 - The report was signed by Christopher J. Baker (President, CEO, and Director), Keefer M. Lehner (EVP and CFO), and Geoffrey C. Stanford (SVP and Chief Accounting Officer) on **August 7, 2025**[178](index=178&type=chunk)

Financial Data and Key Metrics Changes - For Q2 2025, KLX Energy Services reported revenue of $159 million, a 3% increase from Q1 2025, and adjusted EBITDA of $19 million, up 34% from Q1 [5][12] - Adjusted EBITDA margin improved by 260 basis points sequentially to 12%, despite a 7% decline in the US land rig count and a 14% drop in frac spread count [6][8] - The company ended Q2 with $16.7 million in cash and reduced restricted cash from $8.1 million in Q1 to $600,000 [17] Business Line Data and Key Metrics Changes - The Rockies segment revenue was $54.1 million, with adjusted EBITDA of $10.4 million, reflecting a sequential increase of 1355% driven by normalized seasonal operating levels [14] - The Southwest segment revenue decreased by 10% sequentially to $58.8 million, with an adjusted EBITDA of $7.2 million, down 38% due to reduced activity and extended completion holidays [14] - The Northeast Mid Con segment saw a 12% sequential revenue increase to $46.1 million, with adjusted EBITDA more than doubling, driven by higher utilization and reduced white space [15] Market Data and Key Metrics Changes - Q2 revenue and adjusted EBITDA per rig were $286,000 and $33,000 respectively, which were 8% and 172% ahead of results in 2021 [9] - The Rockies represented 34% of Q2 revenue, up from 31% in Q1, while the Southwest accounted for 37%, down from 42% [10] - By end market, drilling, completion, production, and intervention services contributed approximately 16%, 56%, and 28% of Q2 revenue respectively [11] Company Strategy and Development Direction - The company aims to pass along increased costs where possible and adjust sourcing to mitigate risks associated with the evolving tariff landscape [11] - KLX is focused on operational discipline, balance sheet flexibility, and proactive risk mitigation to navigate the volatile market environment [21] - The company is optimistic about long-term fundamentals for US natural gas, particularly in gas-focused basins, as new LNG export capacity ramps up [22] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment remains challenging due to OPEC plus production increases, tariff policy overhangs, and recession risks [8] - For Q3, KLX expects to see sequential revenue growth in the low to mid single digits, with continued margin expansion [21] - The company remains committed to deleveraging its balance sheet and pursuing strategic M&A opportunities [22][24] Other Important Information - Total SG&A expense for Q2 was $18 million, with adjusted SG&A expense down 12% year-over-year and 8% sequentially [13] - The company ended Q2 with approximately $65 million in liquidity, an increase of 13% from Q1 [17] - CapEx for Q2 was $12.7 million gross, with expectations for gross CapEx in 2025 to be in the range of $40 to $50 million [19] Q&A Session Summary Question: Concerns about hitting Q3 revenue growth guidance given rig count decline - Management acknowledged the question and noted that while rig count is factored in, unexpected white space from customers could impact results. However, they observed strength in June and expect all three months of Q3 to be base loaded [30][31] Question: Opportunities in gas basins, specifically Haynesville and Marcellus - Management reported a 25% increase in Haynesville revenue quarter-over-quarter and noted stability in the Northeast, with opportunities for incremental work as gas rig count expands [32][33] Question: Cash flow expectations and potential asset sales or cost cuts - Management indicated that while they did not provide explicit guidance on free cash flow, they generated nearly $12 million of unlevered free cash flow in Q2 and expect liquidity to continue improving [34][36] Question: Drivers of elevated M&A discussions - Management attributed the increase in M&A discussions to capitulation among smaller service companies struggling in the current environment, leading to more realistic valuation expectations [43] Question: Impact of SOPs on various OFS service lines - Management emphasized the significance of SOPs and HSE requirements for larger operators, noting that smaller operators may not face the same level of scrutiny [44][46] Question: Expectations for seasonal impact in Q4 gas markets - Management expressed that while visibility is limited, they do not anticipate significant budget exhaustion in the Haynesville, although there may be concerns regarding the Marcellus Utica [48][50]