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]