KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) Q3 2022 Earnings Conference Call November 10, 2022 8:30 AM ET Company Participants Ken Dennard - Dennard Lascar Associates Christopher Baker - President & CEO Keefer Lehner - EVP & CFO Conference Call Participants Luke Lemoine - Piper Sandler Operator Greetings, and welcome to the KLX Energy Services Third Quarter Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, ...

1 Barclays CEO Energy-Power Conference II September 2022 Disclaimer & Forward-looking Statements Cautionary Statement on Forward-looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Such forwardlooking statements involve risks and uncertainties. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currentl ...

PART I - FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and related management discussion [Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) For the six months ended June 30, 2022, KLX Energy Services reported a significant revenue increase to $336.7 million from $202.7 million year-over-year, driven by improved market conditions [Condensed Consolidated Balance Sheets](index=3&type=section&id=Balance%20Sheets%20as%20of%20June%2030%2C%202022%20and%20December%2031%2C%202021) Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $31.5 | $28.0 | | Total current assets | $198.6 | $164.7 | | Total assets | $415.4 | $387.7 | | Total current liabilities | $143.9 | $122.7 | | Long-term debt | $295.4 | $274.8 | | Total liabilities | $484.7 | $444.1 | | Total stockholders' deficit | $(69.3) | $(51.4) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202022%20and%20July%2031%2C%202021) Statement of Operations Highlights (in millions, except per share data) | Metric | Q2 2022 | Q2 2021 (ended Jul 31) | H1 2022 | H1 2021 (ended Jul 31) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $184.4 | $111.9 | $336.7 | $202.7 | | Operating income (loss) | $1.4 | $(16.9) | $(10.1) | $(45.8) | | Net loss | $(7.5) | $(25.0) | $(27.4) | $(61.8) | | Net loss per share-basic | $(0.67) | $(2.98) | $(2.58) | $(7.39) | [Condensed Consolidated Statements of Stockholders' Deficit](index=5&type=section&id=Statements%20of%20Stockholders'%20Deficit%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202022%20and%20July%2031%2C%202021) - The total stockholders' deficit increased from **$(51.4) million** at December 31, 2021, to **$(69.3) million** at June 30, 2022, primarily driven by a net loss of **$27.4 million** for the six-month period, partially offset by the issuance of common stock which added **$8.3 million** to equity[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202022%20and%20July%2031%2C%202021) Cash Flow Summary for the Six Months Ended (in millions) | Cash Flow Activity | June 30, 2022 | July 31, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14.6) | $(37.4) | | Net cash (used in) provided by investing activities | $(7.1) | $2.9 | | Net cash provided by financing activities | $25.2 | $26.8 | | Net increase (decrease) in cash | $3.5 | $(7.7) | | Cash and cash equivalents, end of period | $31.5 | $39.4 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The company provides diversified oilfield services across major US basins, organized into three geographic segments: Rocky Mountains, Southwest, and Northeast/Mid-Con[19](index=19&type=chunk)[58](index=58&type=chunk) - As of June 30, 2022, long-term debt totaled **$295.4 million**, consisting of **$250.0 million** in 11.5% Senior Secured Notes due 2025 and **$50.0 million** outstanding under the ABL Facility, which matures in September 2023[30](index=30&type=chunk)[31](index=31&type=chunk) - The company has an "at the market" (ATM) equity offering program for up to **$50.0 million**, and during the six months ended June 30, 2022, it sold **1.6 million shares** for gross proceeds of approximately **$8.4 million**[47](index=47&type=chunk)[51](index=51&type=chunk) Segment Revenue for Six Months Ended (in millions) | Segment | H1 2022 (ended Jun 30) | H1 2021 (ended Jul 31) | % Change | | :--- | :--- | :--- | :--- | | Rocky Mountains | $96.4 | $57.9 | 66.5% | | Southwest | $111.9 | $81.0 | 38.1% | | Northeast/Mid-Con | $128.4 | $63.8 | 101.3% | | **Total** | **$336.7** | **$202.7** | **66.1%** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 64.8% year-over-year revenue growth in Q2 2022 to a recovery in market demand, driven by higher commodity prices and increased drilling and completion activity [Recent Trends and Outlook](index=19&type=section&id=Recent%20Trends%20and%20Outlook) - Market demand is recovering from COVID-19 pandemic lows, buoyed by stimulus, pent-up demand, and a resurgence in crude oil prices partly due to the Russian invasion of Ukraine[84](index=84&type=chunk) - The U.S. rig count increased by **28.0%** to **750** as of June 30, 2022, compared to December 31, 2021, reflecting increased drilling and completion activity in response to rising oil prices[85](index=85&type=chunk) - The company is experiencing inflationary pressures on costs for goods and labor but has been able to implement price increases with customers to partially offset these impacts[86](index=86&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Q2 2022 vs. Q2 2021 (ended Jul 31) Performance (in millions) | Metric | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $184.4 | $111.9 | 64.8% | | Operating Income (Loss) | $1.4 | $(16.9) | 108.3% | | Net Loss | $(7.5) | $(25.0) | 70.0% | - The significant improvement in Q2 2022 operating results was driven by increased activity and pricing across all segments, with the Northeast/Mid-Con region revenue more than doubling (**+102.0%**)[97](index=97&type=chunk)[103](index=103&type=chunk) - For the first six months of 2022, revenue grew **66.1%** to **$336.7 million**, and the operating loss narrowed to **$10.1 million** from **$45.8 million** in the prior-year period, driven by improved pricing and activity[106](index=106&type=chunk)[111](index=111&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2022, the company had a total available liquidity of **$56.6 million**, comprising **$31.5 million** in cash and **$25.1 million** available under its ABL Facility[116](index=116&type=chunk) - The company's **$100.0 million** ABL Facility matures in September 2023; management is in discussions to refinance it, but failure to do so could result in a 'going concern' qualification in the year-end audit opinion, which would trigger an event of default[121](index=121&type=chunk)[124](index=124&type=chunk) - Capital expenditures for the first six months of 2022 were **$13.6 million**, and the company expects total capital expenditures for the full year 2022 to be between **$25.0 million** and **$30.0 million**[134](index=134&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=30&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 the information for this item - The company is a smaller reporting company and is not required to provide the information required by Item 305 of Regulation S-K[151](index=151&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2022 - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[153](index=153&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[154](index=154&type=chunk) PART II - OTHER INFORMATION This section covers other required disclosures including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in routine legal actions, including a notable claim to recover $4.6 million from Magellan E&P Holdings, which has been fully reserved due to bankruptcy - The company filed a claim to recover **$4.6 million** from Magellan E&P Holdings for services related to an offshore well blowout; Magellan subsequently filed for Chapter 7 bankruptcy[44](index=44&type=chunk)[157](index=157&type=chunk) - The company has prudently reserved the full **$4.6 million** owed by Magellan in light of the bankruptcy proceedings[44](index=44&type=chunk)[157](index=157&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the risk factors previously disclosed in the company's Transition Report on Form 10-K for the fiscal year ended December 31, 2021 - The report refers to the risk factors previously described in the company's Transition Report on Form 10-K for the fiscal year ended December 31, 2021[158](index=158&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended June 30, 2022, the company repurchased 261 shares of its common stock from employees to settle tax withholding obligations - A total of **261 shares** were repurchased during the three months ended June 30, 2022[159](index=159&type=chunk) - The repurchases were from employees to cover income tax withholding obligations from vested restricted stock grants and were not part of a publicly announced buyback program[159](index=159&type=chunk) [Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable - Not applicable[161](index=161&type=chunk) [Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - Not applicable[163](index=163&type=chunk) [Other Information](index=32&type=section&id=Item%205.%20Other%20Information) Not applicable - Not applicable[164](index=164&type=chunk) [Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, executive compensation agreements, and certifications by the CEO and CFO - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by Sarbanes-Oxley Sections 302 and 906[165](index=165&type=chunk) - Interactive Data Files (XBRL) are also filed as part of the exhibits[165](index=165&type=chunk)[166](index=166&type=chunk)

Financial Data and Key Metrics Changes - KLX Energy Services reported Q2 2022 revenue of $184.4 million, a 21% increase from $152.3 million in Q1 2022, exceeding prior guidance [8][15] - Adjusted EBITDA for Q2 was $17.4 million, up $12.5 million sequentially or 255%, with an adjusted EBITDA margin of 9.4%, significantly higher than 3.2% in Q1 [8][16] - The company experienced a strong operating leverage, with a 39% incremental margin from Q1 to Q2 [16] Business Line Data and Key Metrics Changes - Revenue contributions from various product lines remained stable, with drilling at 28%, completion at 50%, production at 12%, and intervention at 10% [15] - Significant increases in activity were noted across all service lines, including directional drilling charge days up 15%, fishing activity up 15%, and wireline revenue days up 25% [10][15] - Pricing improved across all product service lines, with increases ranging from high single to low double-digit percentages sequentially [12] Market Data and Key Metrics Changes - The average U.S. rig count increased by approximately 13% during the quarter, with crude prices averaging over $108 per barrel and natural gas averaging $7.50 per MMBtu [7] - The company noted a favorable macro backdrop with strong demand for its services, indicating the beginning of a multi-year up-cycle in the oilfield services (OFS) industry [7][11] Company Strategy and Development Direction - KLX Energy Services aims to leverage its brand value and operational expertise to maximize free cash flow generation and improve pricing strategies [34] - The company is focused on cross-selling opportunities and deploying assets to maximize profitability in response to market dynamics [34] - Management expressed optimism about Q3 and the second half of 2022, expecting sequential revenue growth of 9% to 13% and adjusted EBITDA margins of 10% to 12% [35] Management's Comments on Operating Environment and Future Outlook - Management highlighted the tight labor market as a benefit, driving improved pricing and operational efficiencies [33] - The company anticipates continued growth in top-line revenue and margin expansion, with an increased full-year revenue guidance of $730 million to $750 million [35][36] - Management emphasized the importance of maintaining liquidity and generating positive levered free cash flow as a priority [31] Other Important Information - KLX Energy Services reported a cash balance increase to $31.5 million, driven by additional borrowings and asset monetization [25] - The company is in advanced discussions with lenders regarding refinancing options for its ABL facility, which matures in the fall of 2023 [30][53] Q&A Session Summary Question: Discussion on idle capacity and deployment - Management noted that there is idle capacity in coiled tubing, wireline, and frac valve rental businesses, with plans to deploy assets as market demand warrants [41] Question: Revenue guidance and seasonality - Management did not provide Q4 guidance but indicated that they are seeing increased RFQs for fourth-quarter activity, suggesting a positive outlook [43] Question: Customer inquiries for 2023 - Management reported ongoing discussions with customers regarding programs for 2023, indicating a strong interest in future service contracts [45] Question: M&A landscape in OFS - Management acknowledged recent non-distressed M&A activity in the OFS sector and expressed confidence in KLX's position to participate in future consolidation [50] Question: ESG initiatives - Management highlighted ongoing efforts in electrifying equipment and developing sustainable practices, including hybrid units and carbon containment initiatives [51] Question: Balance sheet and credit options - Management discussed the improvement in the balance sheet and the strategy to address upcoming maturities, including options for refinancing [52][53] Question: Operating leverage and margins - Management emphasized the significant operating leverage in the business and the focus on crew utilization to drive margins [54]

Revenue Performance - For the quarter ended March 31, 2022, total revenue was $152.3 million, an increase of $61.5 million or 67.7% compared to the prior year period[95]. - Revenue from the Rocky Mountains segment increased by $19.0 million, or 78.2%, while the Southwest segment revenue increased by $13.9 million, or 36.6%[95]. - Northeast/Mid-Con segment revenues saw a significant increase of $28.6 million, or 100.4%, primarily due to a large increase in frac activity in the region[95]. - Drilling, completion, production, and intervention services contributed approximately 28.2%, 50.5%, 11.7%, and 9.6% to total revenue, respectively[96]. Market Conditions - The U.S. rig count increased to 670, reflecting a 14.3% rise since December 31, 2021, driven by rising oil prices and increased drilling activity[84]. - West Texas Intermediate (WTI) prices increased by 33.5% from January 1 to March 31, 2022, contributing to heightened demand for drilling and completion services[84]. - The Producer Price Index increased by 3.9%, leading to higher costs for goods and increased competition for labor in the industry[85]. Cost Management and Profitability - For the quarter ended March 31, 2022, cost of sales was $135.0 million, representing 88.6% of sales, a decrease from 97.7% in the prior year period due to improved pricing[97]. - Selling, general and administrative (SG&A) expenses were $15.0 million, or 9.8% of revenues, down from 16.4% in the prior year, as revenue increased by 67.7%[98]. - The total operating loss for the quarter was $11.5 million, a significant improvement from a loss of $28.9 million in the prior year, driven by higher pricing and activity[99]. - Net loss for the quarter was $19.9 million, compared to $36.8 million in the prior year, attributed to improving industry conditions[102]. Liquidity and Capital Expenditures - As of March 31, 2022, total available liquidity was $54.6 million, consisting of $19.4 million in cash and cash equivalents and $35.2 million available under the ABL Facility[103]. - Capital expenditures for the three months ended March 31, 2022, were $5.8 million, up from $2.2 million in the prior year, with expectations of $25.0 to $30.0 million for the full year 2022[120]. - The company had total outstanding long-term indebtedness of $275.1 million as of March 31, 2022, with $30.0 million outstanding under the ABL Facility[106]. - The effective interest rate under the ABL Facility was approximately 5.0% as of March 31, 2022[111]. Financing Activities - The company entered into an Equity Distribution Agreement allowing for the sale of up to $50.0 million of common stock through an ATM offering[121]. - Cash flow used in operating activities was approximately $6.2 million for the three months ended March 31, 2022, an improvement from $11.3 million used in the same period in 2021[131]. - Net cash provided by financing activities was $0.8 million for the three months ended March 31, 2022, compared to net cash used of $1.8 million in the same period in 2021[133]. - The Company plans to use net proceeds from the ATM Offering for general corporate purposes, including refinancing outstanding indebtedness and funding acquisitions[124]. Challenges and Strategic Initiatives - The ongoing volatility in oil prices due to the COVID-19 pandemic and geopolitical factors may impact the Company's ability to access capital[125]. - The Company is focused on building a leaner and more profitable set of service offerings, which has positively impacted revenue, operating margins, and cash flows[86]. - The company continues to evaluate strategic consolidation opportunities to strengthen its competitive positioning and drive efficiencies[73]. - The Company is currently evaluating the impact of proposed SEC climate-related disclosure rules expected to take effect in December 2022[137].

KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) Q1 2022 Earnings Conference Call May 13, 2022 10:00 AM ET Company Participants Chris Baker – President & Chief Executive Officer Keefer Lehner – Executive Vice President & Chief Financial Officer Ken Dennard – Investor Relations Conference Call Participants Operator Greetings, and welcome to the KLX Energy Services First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow ...

Financial Data and Key Metrics Changes - KLX Energy Services reported pro forma revenue for Q4 2021 of $145 million, a 13% sequential increase from $128.3 million in Q3 2021, and a 74% growth compared to Q4 2020 levels [14][11] - Adjusted EBITDA for Q4 2021 was $6.7 million, up 63% from $4.1 million in Q3 2021, indicating a significant improvement in profitability [17][31] - The company experienced a pro forma adjusted operating loss of $8.9 million for Q4 2021, reflecting ongoing challenges in the operating environment [31] Business Line Data and Key Metrics Changes - In wireline services, stages completed grew by over 12%, and unconventional job count increased by more than 20% [16] - Coiled tubing revenue per operating day increased by over 25%, with plug pricing rising approximately 11% [16] - Revenue contributions from various service lines for Q4 2021 were approximately 29% from drilling, 50% from completion, 12% from production, and 9% from intervention [30] Market Data and Key Metrics Changes - The WTI price, rig count, and frac spread count improved by 55%, 67%, and 76% respectively over the course of 2021 [12] - The company noted a significant decoupling of market activity and commodity prices beginning in Q2 2020, driven by public E&P capital discipline [12] Company Strategy and Development Direction - The company aims to optimize margins through a disciplined pricing strategy and by providing transparency to customers regarding inflationary pressures [20][21] - KLX is focusing on electrification of its equipment fleet and developing ESG-friendly initiatives, positioning itself as a market leader in these areas [23][24] - The company has successfully diversified its customer base, working with 19 of the top 20 operators by rig count in 2021 [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the medium to long-term outlook, despite current geopolitical tensions affecting energy prices [48] - The company expects a 35% to 45% revenue increase in 2022 compared to pro forma calendar 2021, driven by improved market conditions and pricing [52] - Management highlighted the importance of managing inflationary pressures and supply chain issues as key challenges moving forward [18][19] Other Important Information - The company reported a cash balance of $28 million as of December 31, 2021, with total liquidity of $70.4 million [45] - Capital expenditures for Q4 were approximately $3.5 million, with expectations for 2022 CapEx to be in the range of $25 million to $30 million [43] Q&A Session Summary - The Q&A session was not detailed in the provided content, and thus no specific questions and answers can be summarized.

KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) Q3 2021 Results Conference Call December 10, 2021 10:00 AM ET Company Participants Ken Dennard - Investor Relations Chris Baker - President and Chief Executive Officer Keefer Lehner - Executive Vice President and Chief Financial Officer Conference Call Participants John Daniel - Daniel Energy Partners Operator Greetings and welcome to the KLX Energy Services Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. ...

KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) Q2 2021 Earnings Conference Call September 10, 2021 10:00 AM ET Company Participants Ken Dennard - Investor Relations Chris Baker - President and Chief Executive Officer Keefer Lehner - Executive Vice President and Chief Financial Officer Conference Call Participants Ian Macpherson - Piper Sandler John Daniel - Daniel Energy Partners Disclaimer*: This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps wit ...

KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) Q1 2021 Earnings Conference Call June 10, 2021 10:00 AM ET Company Participants Ken Dennard - IR Chris Baker - Chairman and CEO Keefer Lehner - CFO Conference Call Participants Operator Greetings, and welcome to the KLX Energy Services' Fiscal First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this ...