KLX Energy Services(US:KLXE)2023-08-10 20:12Revenue and Financial Performance - For the three months ended June 30, 2023, total revenue was $234.0 million, an increase of $49.6 million or 26.9% compared to the same period in 2022[99]. - Revenue from the Southwest segment increased by $26.3 million or 43.8%, driven by a 52% contribution from increased weighted average price and 48% from increased weighted average volume[99]. - For the six months ended June 30, 2023, total revenue was $473.6 million, an increase of 40.7% from $336.7 million in the prior year period, reflecting recovery in economic activity and increased demand[108]. - Total operating income for the quarter ended June 30, 2023, was $19.6 million, a significant increase of 1300.0% from $1.4 million in the prior year period, driven by improvements in activity and pricing[103]. - Total operating income for the six months ended June 30, 2023, was $38.5 million, compared to an operating loss of $10.1 million in the prior year period, reflecting significant improvements across all segments[112]. - Net income for the quarter ended June 30, 2023, was $11.4 million, compared to a net loss of $7.5 million in the prior year period, primarily due to improved operating income[106]. Costs and Expenses - Cost of sales for the quarter was $173.3 million, representing 74.1% of sales, a decrease from 81.8% in the prior year, primarily due to improved pricing[100]. - Cost of sales for the six months ended June 30, 2023, was $354.2 million, or 74.8% of sales, down from 84.9% in the prior year period, due to improved pricing[109]. - For the quarter ended June 30, 2023, SG&A expenses were $22.0 million, or 9.4% of revenues, compared to $18.0 million, or 9.8% of revenues in the prior year period[101]. - Labor costs per employee increased by 12.3% compared to the same quarter in 2022, despite the overall decrease in cost of sales as a percentage of revenues[100]. Liquidity and Debt - As of June 30, 2023, the company had $82.1 million in cash and cash equivalents and $61.6 million available on the ABL Facility, resulting in total available liquidity of $143.7 million[116]. - The company had total outstanding long-term indebtedness of $283.8 million as of June 30, 2023, which includes borrowings under the ABL Facility and Senior Secured Notes[119]. - The ABL Facility was amended to increase the revolving credit commitment from $100.0 million to $120.0 million and extend the maturity date to September 2025[126]. - The company expects that its liquidity will improve based on current forecasts and operational results, although it cannot guarantee this increase[118]. - The company issued $250.0 million principal amount of 11.5% senior secured notes due 2025, with total debt related to these notes at $233.8 million as of June 30, 2023[129]. Capital Expenditures and Cash Flow - Capital expenditures for the six months ended June 30, 2023, were $26.5 million, up from $13.6 million in the same period of 2022, with expectations of total capital expenditures between $45.0 million and $55.0 million for the year ending December 31, 2023[134]. - Cash flows provided by operating activities for the six months ended June 30, 2023, were approximately $51.4 million, compared to cash used in operating activities of approximately $14.6 million for the same period in 2022[141]. - Net cash used in investing activities was $16.9 million for the six months ended June 30, 2023, compared to $7.1 million for the same period in 2022[146]. - The company incurred $9.8 million in net cash used in financing activities for the six months ended June 30, 2023, compared to $25.2 million provided in the same period of 2022[147]. Strategic Initiatives and Acquisitions - The company expects to continue pursuing strategic acquisitions to strengthen its competitive positioning and drive long-term stockholder value[80]. - The company completed the acquisition of Greene's on March 8, 2023, with its results included in the financial results post-acquisition[149]. - The estimated fair value of the assets acquired in the Greene's acquisition exceeded the purchase consideration, resulting in a bargain purchase gain[150]. - The company plans to use net proceeds from the ATM Offering for general corporate purposes, including refinancing outstanding indebtedness and funding acquisitions[139]. Operational Insights - The U.S. rig count as of June 30, 2023, was 674, a decrease of 13.0% since December 31, 2022, indicating a moderation in drilling activity[91]. - The company has seen increased demand for its services, allowing for price increases across all regions to offset higher costs[93]. - The ongoing conflict in Ukraine has contributed to a resurgence in crude oil prices, impacting demand for drilling and completion activities[90]. - The company operates over 60 service facilities across major shale basins, providing a broad portfolio of services to large independent and major oil and gas companies[82]. - The company holds 35 patents and 6 pending patent applications, reflecting its commitment to innovation and technical differentiation in the oilfield services market[85]. Internal Controls and Compliance - The company has established disclosure controls and procedures to ensure timely and accurate reporting as required by the SEC[157]. - As of June 30, 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[158]. - The company implemented a new enterprise resource planning (ERP) system during the second quarter of 2023, updating internal controls over financial reporting[160]. - The transition to the new ERP system is not expected to adversely affect internal control over financial reporting[160]. - The company is involved in various legal actions, but management believes these will not materially affect financial condition or results of operations[161].