KLX Energy Services(KLXE) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (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 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 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 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] - Net loss for the six months ended June 30, 2025, was $47.8 million, significantly impacting accumulated deficit[14] Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 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] - 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] Notes to Condensed Consolidated Financial Statements 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 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] - 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] - 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] NOTE 2 - Recent Accounting Pronouncements 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] NOTE 3 - Inventories, Net 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] NOTE 4 - Property and Equipment, Net 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] - 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] NOTE 5 - Debt 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] - 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][36] - 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][43] NOTE 6 - Fair Value Information 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] NOTE 7 - Commitments, Contingencies and Off-Balance-Sheet Arrangements 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] - The company is involved in various legal actions, but management does not expect a material adverse effect on financial statements[53][54] - The company has indemnities, commitments, and guarantees, but the maximum liability is not estimable and is not expected to be material[55] NOTE 8 - Equity and Stock-Based Compensation 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][59] - Unrecognized compensation cost related to restricted stock awards was $4.5 million at June 30, 2025[63] | 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 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] - 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] NOTE 10 - Segment Reporting 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][69] | 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 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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][86] - 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] - The company plans to pursue opportunistic, strategic, accretive acquisitions to strengthen its competitive positioning and capital structure[87] Company Overview 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] - 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] - 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] Recent Trends and Outlook 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] - U.S. land rig count decreased by 7.0% to 533 as of June 30, 2025, compared to 573 at December 31, 2024[96] - 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] How We Generate Revenue and the Costs of Conducting Our Business 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] - The company's services generally require less expensive equipment to maintain and smaller staff compared to other oilfield service providers[100] - 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] Results of Operations (Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024) 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] - 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] Results of Operations (Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024) 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] - 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] Liquidity and Capital Resources The company's liquidity position at June 30, 2025, was $65.4 million, comprising cash and New ABL Facility availability 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] - Management believes current cash, ABL availability, and cash flows will fund operations for at least the next twelve months[125] 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] - The refinancing was consummated on March 12, 2025[126] ABL Facilities 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] - 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][130] - 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] Senior Secured Notes 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] - 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][140] - 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][138] Other debt-related items 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] - Short-term indebtedness of $4.9 million related to insurance premiums was outstanding as of June 30, 2025[142] Indemnities, Commitments and Guarantees 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] Capital Expenditures 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] - Capital expenditures are comprised of maintenance spending and discretionary growth initiatives, which are continually evaluated based on industry activity and company initiatives[145] Equity Distribution Agreement 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] - 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] - Net proceeds from the ATM Offering are used for general corporate purposes, including debt refinancing, acquisitions, capital expenditures, and working capital[149] Cash Flows 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] - 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] Critical Accounting Estimates 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][158] - Critical accounting policies are consistent with those outlined in the 2024 Annual Report on Form 10-K[158] Recent Accounting Pronouncements The company continues to evaluate recently issued accounting pronouncements for future adoption - The company is evaluating recently issued accounting pronouncements for future adoption[159] How We Evaluate Our Operations 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 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][162] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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 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] Changes in Internal Control over Financial Reporting 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] PART II - OTHER INFORMATION Item 1. Legal Proceedings 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] - 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] Item 1A. Risk Factors 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] - 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][81] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - A $50.0 million share repurchase program was authorized in August 2019[171] Item 3. Defaults Upon Senior Securities This item is not applicable to the company - This item is not applicable[172] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[173] Item 5. Other Information This item is not applicable to the company - This item is not applicable[174] Item 6. Exhibits 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] 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]