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]

Company Performance - KLX Energy Services reported a quarterly loss of $0.88 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.62, and compared to a loss of $0.4 per share a year ago, indicating a significant decline in performance [1] - The company posted revenues of $159 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 2.75%, and down from $180.2 million in the same quarter last year [2] - Over the last four quarters, KLX Energy Services has surpassed consensus EPS estimates only once and has topped consensus revenue estimates just once [2] Stock Performance - KLX Energy Services shares have lost approximately 64.5% since the beginning of the year, contrasting sharply with the S&P 500's gain of 7.1% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.69 on revenues of $162.1 million, and for the current fiscal year, it is -$3.36 on revenues of $629.4 million [7] Industry Outlook - The Oil and Gas - Field Services industry, to which KLX Energy Services belongs, is currently ranked in the bottom 8% of over 250 Zacks industries, indicating a challenging environment [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which could impact KLX Energy Services' stock performance [5]

NEWS RELEASE Contacts: KLX Energy Services Holdings, Inc. Keefer M. Lehner, EVP & CFO 832-930-8066 IR@klx.com Dennard Lascar Investor Relations Ken Dennard / Natalie Hairston 713-529-6600 KLXE@dennardlascar.com KLX ENERGY SERVICES HOLDINGS, INC. REPORTS SECOND QUARTER 2025 RESULTS HOUSTON, TX - August 6, 2025 - 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, 2025. Second Quarter 2025 Financia ...

Group 1 - KLX Energy Services Holdings, Inc. will report its 2025 second quarter financial results on August 7, 2025, at 10:00 a.m. Eastern Time [1] - The conference call can be accessed via phone or live webcast, with a replay available until August 21, 2025 [1] - Questions for management can be submitted via email prior to the call [1] Group 2 - KLX is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas exploration and production companies [2] - The company operates over 60 service and support facilities across the United States, focusing on drilling, completion, production, and intervention activities [2] - KLX's services are supported by technically skilled personnel and a broad portfolio of innovative in-house manufacturing, repair, and maintenance capabilities [2]

Revenue Performance - For the three months ended March 31, 2025, total revenue was $154.0 million, a decrease of $20.7 million or 11.8% compared to the same period in 2024[103]. - Revenue from the Rocky Mountains segment increased by $2.2 million or 4.8%, driven entirely by an increase in weighted average volume[103]. - The Southwest segment revenue decreased by $4.2 million or 6.1%, attributed solely to a decrease in weighted average volume[103]. - The Northeast/Mid-Con segment revenue decreased by $18.7 million or 31.3%, with lower weighted average price contributing approximately 13% and lower weighted average volume contributing approximately 87% to the decline[103]. Pricing and Market Conditions - The average daily price of West Texas Intermediate (WTI) increased by approximately 1.4% to $71.78 per barrel during the three months ended March 31, 2025, compared to $70.81 per barrel in the previous quarter[94]. - The company anticipates that customers will continue to cautiously allocate capital and operating expenses due to volatile commodity prices[96]. Financial Performance - For the quarter ended March 31, 2025, cost of sales was $123.8 million, representing 80.4% of sales, a decrease from 82.4% in the prior year period[104]. - Selling, general and administrative expenses (SG&A) were $21.6 million, or 14.0% of revenues, up from 12.4% in the prior year, due to lower revenues[105]. - The total operating loss for the quarter was $17.7 million, compared to a loss of $13.1 million in the prior year, reflecting reduced activity and pricing[107]. - The net loss for the quarter was $27.9 million, an increase from a net loss of $22.2 million in the prior year, primarily due to lower revenues[110]. Liquidity and Capital Structure - As of March 31, 2025, the company had $14.6 million in cash and cash equivalents, with total liquidity of $58.1 million[111]. - The company completed a refinancing on March 12, 2025, issuing approximately $232.2 million in 2030 Senior Notes and exchanging $143.6 million of 2025 Senior Notes[115][126]. - The New ABL Facility has a commitment of $125.0 million and includes a first-in-last-out asset-based credit facility with a $10.0 million commitment[119]. - The effective interest rate under the New ABL Facility was approximately 9.06% as of March 31, 2025[122]. - The company is required to redeem 2.00% per annum of all 2030 Senior Notes outstanding starting March 31, 2025[128]. - The 2030 Senior Notes Indenture includes a maximum total net leverage ratio of not greater than 4.50 to 1.0 for specified test periods[129]. - As of March 31, 2025, the principal amount outstanding under the 2030 Senior Notes was $231.0 million, with total debt related to these notes at $206.0 million after adjustments[132]. - The effective interest rate for the 2030 Senior Notes was approximately 12.83% as of March 31, 2025[132]. Capital Expenditures and Cash Flow - Capital expenditures for the three months ended March 31, 2025, were $15.0 million, an increase from $13.5 million in the same period of 2024, with expectations of total capital expenditures between $40.0 million and $50.0 million for the year ending December 31, 2025[137]. - Cash flows used in operating activities for the three months ended March 31, 2025, were approximately $37.6 million, compared to $10.8 million for the same period in 2024[143]. - The company had $14.6 million in cash and cash equivalents and $8.1 million in restricted cash as of March 31, 2025, reflecting a decrease of $68.9 million in cash on hand[144]. - Net cash used in financing activities was $21.1 million for the three months ended March 31, 2025, compared to $6.6 million for the same period in 2024, influenced by refinancing activities[148]. - The company sold 142,769 shares of common stock during the three months ended March 31, 2025, generating gross proceeds of approximately $0.5 million[141]. - The company expects to incur additional pari passu indebtedness of up to $150.0 million within twelve months of refinancing, subject to certain conditions[131]. - Total letters of credit outstanding under the New ABL Facility were $6.4 million as of March 31, 2025[133]. Strategic Initiatives - The company expects to continue pursuing strategic, accretive acquisitions to strengthen competitive positioning and drive efficiencies[85]. - The company has developed tools covered by 37 patents and 7 pending patent applications, enhancing its competitive edge in the market[90]. - The company is focused on maintaining a solid balance sheet and sufficient operating liquidity while managing capital expenditures prudently[101].

Financial Data and Key Metrics Changes - Q1 2025 revenue was $154 million, a 7% sequential decline and 12% lower than Q1 2024 [12] - Consolidated adjusted EBITDA was $13.8 million with a 9% margin, down from 13.7% in Q4 2024 but up from 7% in Q1 2024 [12] - Adjusted EBITDA margin increased by 208 basis points year-over-year despite a 125% decline in revenue and rig count [6] Business Line Data and Key Metrics Changes - Southwest segment revenue was $65.2 million, with adjusted EBITDA at its highest level since Q3 2023, reflecting a shift towards higher-margin product service lines [15][16] - Rockies segment revenue was $47.8 million, with adjusted EBITDA higher by 524% year-over-year despite a 13% decline in rig count [14] - Northeast Mid Con segment revenue was $41 million, with a sequential decrease of 18% primarily due to operational issues [16] Market Data and Key Metrics Changes - The Southwest represented 42% of Q1 revenue, up from 37% in Q4, while the Northeast Mid Con was 27%, down from 30% [9] - Drilling, completion, and production intervention services contributed approximately 20%, 51%, and 29% of Q1 revenue, respectively [9] Company Strategy and Development Direction - The company is focused on maintaining financial flexibility and navigating market volatility through operational discipline and improved balance sheet flexibility [21] - There is an emphasis on strategic M&A opportunities that align with growth and deleveraging goals, particularly in fragmented markets [24][52] - The company is optimistic about the US natural gas market and its implications for service providers, anticipating increased activity in gas-focused basins [23] Management Comments on Operating Environment and Future Outlook - Management noted that Q1 is typically the toughest quarter, but they delivered improved adjusted EBITDA and margin despite a lower rig count [5] - The macro environment remains volatile, influenced by OPEC+ production increases and US tariff policies, but there are signs of recovery in certain areas [6][21] - The company expects modest sequential revenue growth in Q2, driven by a recovery in the Rockies and the Northeast Mid Con [21][22] Other Important Information - The company ended Q1 with $58.1 million in liquidity, including $14.6 million in cash and $43.5 million available on its revolving credit facility [17] - CapEx for Q1 was $15 million gross, with expectations to reduce full-year CapEx estimates to $40 million to $50 million [19] - The company has implemented cost structure changes that are expected to continue benefiting operations throughout 2025 [13] Q&A Session Summary Question: About the Q2 guidance and recovery in the Rockies - Management acknowledged the uncertainty in providing a full-year guide and indicated that Q2 revenue is expected to increase low to mid single digits [28] Question: Impact of lower oil prices on operations - Management noted that smaller operators are more exposed to commodity price fluctuations and may delay projects, impacting revenue [32] Question: Flexibility of the PIK option and capital allocation - Management explained that the PIK option provides flexibility to manage cash flow, especially during uncertain market conditions [36][38] Question: Positioning for potential gas market improvements - Management confirmed that they are monitoring gas market trends and are well-positioned to relocate assets if necessary [44] Question: M&A opportunities and geographic strategy - Management stated that they are being opportunistic regarding M&A, focusing on deleveraging transactions rather than specific geographic areas [52]

Financial Data and Key Metrics Changes - Q1 2025 revenue was $154 million, a 7% sequential decline and 12% lower than Q1 2024 [12] - Consolidated adjusted EBITDA was $13.8 million with a 9% margin, down from 13.7% in Q4 2024 but up from 7% in Q1 2024 [12] - Adjusted EBITDA margin increased by 208 basis points year-over-year despite a 125% decline in revenue and rig count [6] Business Line Data and Key Metrics Changes - Southwest segment revenue was $65.2 million, with adjusted EBITDA at its highest level since Q3 2023, reflecting a 6% sequential increase [14][16] - Rockies segment revenue was $47.8 million, with adjusted EBITDA up 524% year-over-year despite a 13% decline in rig count [14] - Northeast Mid Con segment revenue was $41 million, with a sequential decrease of 18% primarily due to operational issues [16] Market Data and Key Metrics Changes - The Southwest represented 42% of Q1 revenue, up from 37% in Q4, while the Northeast Mid Con was 27%, down from 30% [9] - Drilling, completion, and production services contributed approximately 20%, 51%, and 29% of Q1 revenue, respectively [9] Company Strategy and Development Direction - The company is focused on cost controls and has implemented changes to its cost structure, expecting lower SG&A levels to continue [13] - KLX is developing a second-generation version of its Oracle SRT tool, which is gaining market acceptance [7] - The company is exploring strategic M&A opportunities to align with growth and deleveraging goals, despite market challenges [24] Management Comments on Operating Environment and Future Outlook - Management noted the macro environment remains volatile due to OPEC+ production increases and tariff policies impacting commodity prices [6] - For Q2 2025, the company anticipates modest revenue growth and margin expansion, particularly in the Southwest segment [21] - The company remains optimistic about the US natural gas market and its implications for service providers [22] Other Important Information - The company ended Q1 with $58.1 million in liquidity, including $14.6 million in cash and $43.5 million available on its revolving credit facility [17] - CapEx for Q1 was $15 million gross, with expectations to reduce full-year CapEx estimates to $40 million to $50 million [19] Q&A Session Summary Question: About the Q2 guidance and recovery in the Rockies - Management indicated that while the guidance may seem conservative, it is based on current forecasts and the unpredictable nature of the market [28] Question: Impact of lower oil prices on rig count - Management noted that smaller operators are more sensitive to commodity prices and may delay projects, impacting overall activity [32] Question: Flexibility of the PIK option and capital allocation - Management explained that the PIK option provides flexibility to manage cash flow, especially during uncertain market conditions [36] Question: Positioning for gas plays and asset relocation - Management confirmed that they are well-positioned for gas plays and can relocate assets if necessary [42] Question: M&A opportunities and geographic strategy - Management stated that they are being opportunistic regarding M&A and are not geographically focused, but rather looking for deleveraging opportunities [52]

Core Viewpoint - KLX Energy Services reported a quarterly loss of $1.27 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.86, indicating a significant earnings surprise of -47.67% [1] Financial Performance - The company posted revenues of $154 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 4.23%, and down from $174.7 million in the same quarter last year [2] - Over the last four quarters, KLX Energy Services has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] Stock Performance - KLX Energy Services shares have declined approximately 60.4% since the beginning of the year, contrasting with the S&P 500's decline of -4.3% [3] - The current consensus EPS estimate for the upcoming quarter is -$0.46 on revenues of $177.1 million, and for the current fiscal year, it is -$2.31 on revenues of $696.9 million [7] Industry Outlook - The Oil and Gas - Field Services industry, to which KLX Energy Services belongs, is currently ranked in the bottom 43% of over 250 Zacks industries, suggesting a challenging environment for the company [8]

[Financial and Operational Overview](index=1&type=section&id=First%20Quarter%202025%20Financial%20and%20Operational%20Highlights) [Q1 2025 Key Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20and%20Operational%20Highlights) In Q1 2025, KLX Energy Services reported revenue of $154 million and a net loss of $(28) million, while increasing Adjusted EBITDA by 15% to $14 million and improving its Adjusted EBITDA margin by 208 basis points due to effective cost controls, with total liquidity at $58 million Q1 2025 Key Financial Highlights | Financial Metric | Q1 2025 | Change vs Q1 2024 | | :--- | :--- | :--- | | Revenue | $154 million | -12% (YoY) | | Net Loss | $(28) million | - | | Diluted Loss per Share | $(1.62) | - | | Adjusted EBITDA | $14 million | +15% (YoY) | | Adjusted EBITDA Margin | 9% | +30% (YoY) | | Total Liquidity | $58 million | - | - The company successfully increased its **Adjusted EBITDA margin by 208 basis points** compared to Q1 2024, primarily due to a company-wide focus on cost controls, which offset the impact of lower revenue and rig count[4](index=4&type=chunk) [Management Commentary and Outlook](index=1&type=section&id=Management%20Commentary%20and%20Outlook) Management highlighted the successful completion of refinancing in March, enhancing financial flexibility and reactivating a share repurchase program with approximately $49 million remaining, while cautiously targeting a modest low to mid-single-digit sequential revenue increase and margin expansion for the remainder of 2025, prudently evaluating share and debt buybacks - The company is targeting a modest sequential revenue increase in the **low to mid-single digits** on a percentage basis, accompanied by margin expansion, based on current schedules[5](index=5&type=chunk) - Following a March refinancing, the company has access to its 2019 share repurchase program, which has approximately **$49 million** of availability remaining, with both share and debt buybacks being considered as capital deployment opportunities[7](index=7&type=chunk) - Management believes the company's strategic positioning, operational excellence, and improved financial flexibility position it to manage market volatility effectively[8](index=8&type=chunk) [Detailed Financial Results](index=2&type=section&id=First%20Quarter%202025%20Financial%20Results) [Consolidated Financial Performance](index=2&type=section&id=First%20Quarter%202025%20Financial%20Results) Q1 2025 revenue was $154.0 million, a 6.9% decrease from Q4 2024, primarily due to a seasonal market slowdown and reduced activity in Mid-Con completions and directional drilling, resulting in a net loss of $(27.9) million and an Adjusted EBITDA of $13.8 million, with completion services contributing 51% of revenue Consolidated Financial Performance Metrics | Metric | Q1 2025 | Q4 2024 | Change (QoQ) | | :--- | :--- | :--- | :--- | | Revenue | $154.0 M | $165.5 M | -6.9% | | Net Loss | $(27.9) M | $(14.7) M | Increased Loss | | Adjusted Net Loss | $(21.9) M | $(13.1) M | Increased Loss | | Adjusted EBITDA | $13.8 M | $22.7 M | -39.2% | | Adjusted EBITDA Margin | 9.0% | 13.7% | -470 bps | - Revenue contribution by product line for Q1 2025 was approximately: **drilling (20%)**, **completion (51%)**, **production (18%)**, and **intervention (11%)**[9](index=9&type=chunk) [Segment Performance Analysis](index=2&type=section&id=First%20Quarter%202025%20Segment%20Results) The Southwest segment showed sequential growth in revenue (6.2%) and Adjusted EBITDA (21.9%), achieving a record-high margin, while the Rocky Mountains segment experienced a seasonal sequential decline but improved year-over-year, and the Northeast/Mid-Con segment saw a significant drop in both revenue (-18.2%) and Adjusted EBITDA (-72.4%) due to reduced activity and a non-recurring operational issue Q1 2025 Segment Performance Summary | Segment | Revenue (Q1 2025) | Adjusted EBITDA (Q1 2025) | | :--- | :--- | :--- | | Rocky Mountains | $47.8 M | $6.7 M | | Southwest | $65.2 M | $11.7 M | | Northeast/Mid-Con | $41.0 M | $2.7 M | | **Segment Total** | **$154.0 M** | **$21.1 M** | [Rocky Mountains](index=2&type=section&id=Rocky%20Mountains) The Rocky Mountains segment reported Q1 revenue of $47.8 million, a seasonal 11.5% decrease sequentially but a 5% increase year-over-year, with Adjusted EBITDA at $6.7 million, down 43.2% sequentially but up 24% from Q1 2024, driven by increased activity in directional drilling and wireline services Rocky Mountains Segment Financials | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Revenue | $47.8 M | $54.0 M | $45.6 M | | Operating Loss | $(0.2) M | $4.7 M | $(1.2) M | | Adjusted EBITDA | $6.7 M | $11.8 M | $5.4 M | - Year-over-year revenue improved by **5%** due to increased activity in directional drilling and wireline product offerings[11](index=11&type=chunk) [Southwest](index=2&type=section&id=Southwest) The Southwest segment delivered strong results with revenue of $65.2 million, a 6.2% sequential increase driven by market share gains in the Permian, and Adjusted EBITDA grew 21.9% sequentially to $11.7 million, with its margin reaching the highest level since the 2020 merger, expected to be the "new normal" for the segment Southwest Segment Financials | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Revenue | $65.2 M | $61.4 M | $69.4 M | | Operating Income | $3.0 M | $1.1 M | $(0.7) M | | Adjusted EBITDA | $11.7 M | $9.6 M | $6.7 M | - The Q1 2025 Adjusted EBITDA margin was the **highest** in the company's recent history (post-2020 merger), driven by a shifting revenue mix[12](index=12&type=chunk) [Northeast/Mid-Con](index=3&type=section&id=Northeast%2FMid-Con) The Northeast/Mid-Con segment's performance declined significantly, with revenue falling 18.2% sequentially to $41.0 million and Adjusted EBITDA plummeting 72.4% to $2.7 million, primarily caused by reduced gas-focused activity and a non-recurring operational challenge within its completions business Northeast/Mid-Con Segment Financials | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Revenue | $41.0 M | $50.1 M | $59.7 M | | Operating Loss | $(8.1) M | $0.3 M | $2.4 M | | Adjusted EBITDA | $2.7 M | $9.8 M | $10.2 M | - The sharp decline was attributed to reduced regional gas-focused activity and a non-recurring operational issue that created excessive white space during the quarter[15](index=15&type=chunk) [Corporate and Other](index=3&type=section&id=Corporate%20and%20other) The Corporate and other segment reported an operating loss of $(12.4) million and an Adjusted EBITDA loss of $(7.3) million for Q1 2025, with the Adjusted EBITDA loss showing sequential improvement from $(8.5) million in Q4 2024 Corporate and Other Segment Financials | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Operating Loss | $(12.4) M | $(11.1) M | $(13.6) M | | Adjusted EBITDA Loss | $(7.3) M | $(8.5) M | $(10.3) M | [Balance Sheet and Liquidity](index=4&type=section&id=Balance%20Sheet%20and%20Liquidity) As of March 31, 2025, KLX had total liquidity of $58.1 million, comprising $14.6 million in cash and $43.5 million in available credit facilities, while Net Working Capital increased substantially by 131% to $59.4 million from the prior quarter, and the company raised approximately $0.5 million in gross proceeds from its at-the-market stock offering program - Total liquidity as of March 31, 2025 was **$58.1 million**, composed of **$14.6 million** in cash, **$38.6 million** available on the ABL Facility, and **$4.9 million** on an undrawn FILO facility[16](index=16&type=chunk) - Net Working Capital increased by **131%** to **$59.4 million** from December 31, 2024, driven by changes in days sales outstanding, days payable outstanding, and accrued liabilities[17](index=17&type=chunk) - In Q1 2025, the company sold **142,769 shares** of common stock for gross proceeds of approximately **$0.5 million** under its at-the-market offering program[18](index=18&type=chunk) [Capital Expenditures and Other Financials](index=4&type=section&id=Other%20Financial%20Information) Capital expenditures for Q1 2025 were $15.0 million, a slight decrease from the previous quarter, primarily directed towards maintenance, with net capital expenditures after asset sales totaling $10.2 million, and the company held $2.3 million in assets for sale at quarter-end - Capital expenditures were **$15.0 million** in Q1 2025, down **2%** from Q4 2024, with net capital expenditures after asset sales at **$10.2 million**[19](index=19&type=chunk) - As of March 31, 2025, the company had **$2.3 million** of assets held for sale, related to a facility and equipment in the Rocky Mountains and Southwest segments[20](index=20&type=chunk) [Financial Statements and Non-GAAP Reconciliations](index=7&type=section&id=Financial%20Statements%20and%20Non-GAAP%20Reconciliations) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported revenues of $154.0 million for Q1 2025, down from $174.7 million in Q1 2024, resulting in an operating loss of $(17.7) million and a net loss of $(27.9) million, or $(1.62) per diluted share, compared to a net loss of $(22.2) million, or $(1.38) per diluted share, in the same period last year Condensed Consolidated Statements of Operations | (In millions, except per share data) | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Revenues | $154.0 | $165.5 | $174.7 | | Operating loss | $(17.7) | $(5.0) | $(13.1) | | Net loss | $(27.9) | $(14.7) | $(22.2) | | Diluted loss per share | $(1.62) | $(0.90) | $(1.38) | [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, the company's balance sheet showed total assets of $379.1 million, a decrease from $456.3 million at year-end 2024, with cash and cash equivalents decreasing to $14.6 million from $91.6 million, total liabilities at $405.7 million, and a total stockholders' deficit of $(26.6) million Condensed Consolidated Balance Sheets | (In millions) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $14.6 | $91.6 | | Total current assets | $167.9 | $233.0 | | Total assets | $379.1 | $456.3 | | **Liabilities & Equity** | | | | Total current liabilities | $111.3 | $140.1 | | Long-term debt | $256.7 | $285.1 | | Total stockholders' deficit | $(26.6) | $(10.5) | [Non-GAAP Financial Measures and Reconciliations](index=9&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations for key non-GAAP metrics used by management, showing Q1 2025 Adjusted EBITDA reconciled to $13.8 million from a consolidated net loss of $(27.9) million, Levered Free Cash Flow as a usage of $(47.8) million, and Net Debt increasing to $238.3 million from $193.5 million at the end of 2024 Reconciliation of Net Loss to Adjusted EBITDA (Q1 2025) | (In millions) | Amount | | :--- | :--- | | Consolidated net loss | $(27.9) | | Interest expense, net | $10.0 | | Income tax expense | $0.2 | | Depreciation and amortization | $24.7 | | One-time net costs | $6.0 | | Non-cash compensation | $0.8 | | **Adjusted EBITDA** | **$13.8** | Free Cash Flow Reconciliation (Q1 2025) | (In millions) | Amount | | :--- | :--- | | Net cash flow used in operating activities | $(37.6) | | Capital expenditures | $(15.0) | | Proceeds from sale of property | $4.8 | | **Levered Free Cash Flow** | **$(47.8)** | Net Debt Reconciliation | (In millions) | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Debt | $261.0 | $285.1 | | Less: Cash & restricted cash | $22.7 | $91.6 | | **Net Debt** | **$238.3** | **$193.5** |