KLX Energy Services(KLXE) - 2025 Q3 - Quarterly Report

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