KLX Energy Services Reports Positive Cash Flow in Q2

KLX Energy Services (ticker: KLXE) has announced its financial results for the second quarter of 2024, reporting revenues of $180 million, which marks a 3% increase from the previous quarter. The company also achieved a positive levered free cash flow of $10 million and an adjusted EBITDA of $27 million.

The company attributed its improved performance to heightened sales, particularly in the Rocky Mountain segment, combined with the growth of its higher-margin products and services. Looking ahead, KLX Energy Services expects continued strength in the Rockies and Southwest regions, as well as an increase in activity in the Northeast Mid-Con area during the third quarter.

The outlook for 2025 appears optimistic, with expectations for increased activity driven by customer integration initiatives and a rise in gas-directed operations.

### Key Highlights
– Revenue for Q2 2024 reached $180 million with an adjusted EBITDA of $27 million.
– Sequential revenue growth of 3% was primarily due to increased sales in the Rocky Mountain segment.
– Reported a levered free cash flow of $10 million, with projections for greater activity in 2025.
– Plans to assess market conditions for possible refinancing of outstanding notes and ABL during 2024.
– Capital expenditures for 2024 are expected to range between $50 million and $55 million, primarily focused on maintenance.
– Reduced the number of operational facilities from over 60 to around 35 to enhance competitiveness.

### Company Outlook
– Anticipated continued strength in the Rockies and Southwest regions, with an uptick in the Northeast Mid-Con.
– Expected increase in activity in 2025 due to customer integration initiatives and heightened gas-directed efforts.
– Continued focus on optimizing margins and generating free cash flow.

### Bearish Insights
– The company holds a net debt of $198 million.
– While the adjusted EBITDA loss has decreased, it is projected to remain at similar levels in the third quarter.

### Bullish Insights
– Diversification across geographic regions and service lines has helped maintain margins amid market softness.
– Achieved record low health, safety, and environmental metrics while servicing major U.S. onshore market operators.
– KLX is strategically positioned for future market cycles, with a robust cost structure and advanced technology portfolio.

### Challenges
– The adjusted EBITDA loss has decreased, but KLX aims to sustain similar levels into the next quarter.

### Q&A Highlights
– The company is focusing on refinancing existing debts while remaining open to strategic opportunities.
– Completed rationalization of facilities, reducing from over 60 to approximately 35.
– Assets are being redeployed in frac and coil markets, with a focus on dedicated customer programs to enhance margins.
– Nonrecurring costs and SG&A expenses are being actively managed, with potential refinancing ongoing through 2024.

Overall, KLX Energy Services has demonstrated a positive financial trajectory through strategic cost management and a focus on high-margin activities. The company’s prudent approach to capital management and examination of market conditions reflect its commitment to maintaining financial stability. With its emphasis on safety and environmental records, KLX is well-positioned to seize future market opportunities, particularly in gas-directed activities.

The management team expressed confidence in the sustainability of their profit margins while continuing to optimize costs for further savings.