KLX ENERGY SERVICES HOLDINGS, INC. PROVIDES PRELIMINARY 2023 FULL YEAR AND FOURTH QUARTER RESULTS
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Insights
KLX Energy Services Holdings' preliminary financial results for the full year and fourth quarter of 2023 display a complex financial situation that warrants a nuanced interpretation. The reported increase in annual Adjusted EBITDA by 42% is a significant indicator of operational efficiency, particularly when juxtaposed with a 20% reduction in rig count. This suggests that KLX has effectively managed costs or improved margins on its services, which is commendable in a period of potentially reduced demand.
The 96% increase in cash balance and the 24% decrease in net debt are strong signals of improved financial health and prudent capital management. However, the net loss in the fourth quarter raises questions about the sustainability of profits and potential volatility in earnings. Investors should consider these factors in the context of the company's long-term strategy and the cyclical nature of the energy services industry.
While the financial metrics are crucial, the strategic developments mentioned, such as the commercialization of proprietary offerings and the acquisition of Greene's, are equally important to consider. These advancements indicate an aggressive approach to capturing market share and diversifying services, which can lead to revenue growth and increased competitive advantage. However, the integration of acquisitions and new offerings can also pose risks and lead to integration costs that may not be immediately apparent in the preliminary results.
Furthermore, the reference to post-COVID record HSE statistics suggests that KLX is prioritizing operational safety and efficiency, which can lead to reduced liabilities and improved reputation in the long run. These operational highlights should be monitored as they can have significant implications for customer retention and cost management.
The mention of reduced seasonal activity and budget exhaustion hints at broader economic factors that can influence KLX's performance. The energy sector is highly sensitive to macroeconomic trends, commodity prices and regulatory changes. The ability of KLX to generate strong cash flow despite these headwinds is noteworthy and may reflect underlying resilience in their business model. Nonetheless, stakeholders should be aware of potential external shocks that could impact future performance, including fluctuations in energy prices and changes in environmental regulations.
Overall, the preliminary results provide a snapshot of KLX's financial and operational health, but they should be viewed in the context of industry trends and economic conditions that may affect future performance.
Preliminary Full Year 2023 Financial and Operational Highlights
- Estimated Revenue range of
$887 million $889 million - Estimated Net Income range of
$18 million $20 million - Estimated Adjusted EBITDA range of
$136 million $139 million - Estimated Cash balance of
$113 million 96% increase relative to prior year - Estimated Total Debt of
$284 million $283 million - Estimated Net Debt of
$172 million $54 million 24% decrease relative to prior year - Estimated Liquidity of
$154 million $53 million 52% relative to prior year
Preliminary Fourth Quarter 2023 Financial and Operational Highlights
- Estimated Revenue range of
$193 million $195 million - Estimated Net Loss range of
$(10) million $(8) million - Estimated Adjusted EBITDA range of
$22 million $25 million
See "Non-GAAP Financial Measures" at the end of this release for a discussion of Adjusted EBITDA, Net Debt, Net Leverage Ratio and their reconciliations to the most directly comparable financial measures calculated and presented in accordance with
Chris Baker, KLX President and Chief Executive Officer, stated, "2023 was a record year on numerous fronts marked by outstanding operational performance, post-COVID record HSE statistics across our three key measures, financial success, and significant strategic advancements, including the commercialization of numerous proprietary offerings and the consummation of the Greene's acquisition. KLX managed to grow annual Adjusted EBITDA by
About KLX Energy Services Holdings, Inc.
KLX is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas exploration and production companies operating in both conventional and unconventional plays in all of the active major basins throughout
Forward-Looking Statements and Cautionary Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information to investors. This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) includes forward-looking statements that reflect our current expectations, projections and goals relating to our future results, performance and prospects. Forward-looking statements include all statements that are not historical in nature and are not current facts, including our preliminary estimated financial information disclosed above. When used in this news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein), the words "believe," "expect," "plan," "intend," "anticipate," "estimate," "predict," "potential," "continue," "may," "might," "should," "could," "will" or the negative of these terms or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events with respect to, among other things: our operating cash flows; the availability of capital and our liquidity; our ability to renew and refinance our debt; our future revenue, income and operating performance; our ability to sustain and improve our utilization, revenue and margins; our ability to maintain acceptable pricing for our services; future capital expenditures; our ability to finance equipment, working capital and capital expenditures; our ability to execute our long-term growth strategy and to integrate our acquisitions; our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements; and the timing and success of strategic initiatives and special projects.
Forward-looking statements are not assurances of future performance and actual results could differ materially from our historical experience and our present expectations or projections. These forward-looking statements are based on management's current expectations and beliefs, forecasts for our existing operations, experience, expectations and perception of historical trends, current conditions, anticipated future developments and their effect on us and other factors believed to be appropriate. Although management believes the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Our forward-looking statements involve significant risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks associated with the following: a decline in demand for our services, declining commodity prices, overcapacity and other competitive factors affecting our industry; the cyclical nature and volatility of the oil and gas industry, which impacts the level of exploration, production and development activity and spending patterns by oil and natural gas exploration and production companies; a decline in, or substantial volatility of, crude oil and gas commodity prices, which generally leads to decreased spending by our customers and negatively impacts drilling, completion and production activity; inflation; increases in interest rates; the ongoing conflict in
Information Regarding Preliminary Results
The preliminary estimated financial information contained in this news release reflects management's estimates based solely upon information available to it as of the date of this news release and is not a comprehensive statement of the Company's financial results for the three and twelve months ended December 31, 2023. The information presented herein should not be considered a substitute for full unaudited financial statements for the three and twelve months ended December 31, 2023, or audited financial statements for the fiscal year ended December 31, 2023, once they become available and should not be regarded as a representation by the Company or its management as to its actual financial results for the three and twelve months ended December 31, 2023. The ranges for the preliminary estimated financial results described above constitute forward-looking statements. The preliminary estimated financial information presented herein is subject to change, and the Company's actual financial results may differ from such preliminary estimates and such differences could be material. Accordingly, you should not place undue reliance upon these preliminary estimates.
Non-GAAP Financial Measures
This release includes Net Debt, Adjusted EBITDA, Unlevered and Levered Free Cash Flow and Net Leverage Ratio measures. Each of the metrics are "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934.
We define Net Debt as Total Debt less cash and cash equivalents. We believe that Net Debt provides useful information to investors because it is an important indicator of the Company's indebtedness.
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. Adjusted EBITDA is not a measure of net earnings or cash flows as determined by GAAP. We define Adjusted EBITDA as net earnings (loss) before interest, taxes, depreciation and amortization, further adjusted for (i) goodwill and/or long-lived asset impairment charges, (ii) stock-based compensation expense, (iii) restructuring charges, (iv) transaction and integration costs related to acquisitions and (v) other expenses or charges to exclude certain items that we believe are not reflective of ongoing performance of our business. Adjusted EBITDA is used to calculate the Company's leverage ratio, consistent with the terms of the Company's asset-based lending facility.
We believe Adjusted EBITDA is useful because it allows us to supplement the GAAP measures in order to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP, or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.
We define Levered Free Cash Flow as net cash provided by operating activities less capital expenditures and proceeds from sale of property and equipment and we define Unlevered Free Cash Flow as net cash provided by operating activities less capital expenditures and proceeds from sale of property and equipment plus interest expense. Our management uses Levered and Unlevered Free Cash Flow to assess the Company's liquidity and ability to repay maturing debt, fund operations and make additional investments. We believe that each of Levered and Unlevered Free Cash Flow provides useful information to investors because it is an important indicator of the Company's liquidity, including its ability to reduce net debt and make strategic investments.
We define Net Leverage Ratio as Total Debt less cash and cash equivalents, divided by Adjusted EBITDA. We believe that Net Leverage Ratio provides useful information to investors because it is an important indicator of the Company's indebtedness in relation to its operating performance.
The following tables present a reconciliation of the non-GAAP financial measures of Net Debt, Adjusted EBITDA, Levered and Unlevered Free Cash Flow and Net Leverage Ratio to the most directly comparable GAAP financial measures for the periods indicated:
KLX Energy Services Holdings, Inc | |||
Selected Financial Information | |||
(In millions of | |||
(Unaudited) | |||
Twelve Months Ended December 31, 2023 | |||
Low | High | ||
Revenue | $ 887.4 | $ 889.4 | |
KLX Energy Services Holdings, Inc | |||
Selected Financial Information | |||
(In millions of | |||
(Unaudited) | |||
Three Months Ended December 31, 2023 | |||
Low | High | ||
Revenue | $ 193.2 | $ 195.2 | |
KLX Energy Services Holdings, Inc | |
Reconciliation of Net Debt(1) | |
(In millions of | |
(Unaudited) | |
As of December 31, 2023 | |
Total Debt | $ 284.3 |
Cash | 112.5 |
Net Debt | $ 171.8 |
(1) Net Debt is defined as Total Debt less cash and cash equivalents. |
KLX Energy Services Holdings, Inc | |||
Reconciliation of Consolidated Net Income to Adjusted EBITDA | |||
(In millions of | |||
(Unaudited) | |||
Twelve Months Ended December 31, 2023 | |||
Low | High | ||
Consolidated Net Income (1) | $ 18.2 | $ 20.2 | |
Income tax expense | 3.0 | 3.0 | |
Interest expense, net | 34.7 | 34.7 | |
Operating income | 55.9 | 57.9 | |
Bargain purchase gain | (1.9) | (1.9) | |
One-time costs (2) | 6.3 | 7.3 | |
Adjusted operating income | 60.3 | 63.3 | |
Depreciation and amortization | 72.8 | 72.8 | |
Non-cash compensation | 3.0 | 3.0 | |
Adjusted EBITDA (1) | $ 136.1 | $ 139.1 | |
(1) Cost of sales includes |
(2) The one-time costs during the fourth quarter of 2023 relate to non-recurring facility costs and professional services. |
KLX Energy Services Holdings, Inc | |||
Reconciliation of Consolidated Net Loss to Adjusted EBITDA | |||
(In millions of | |||
(Unaudited) | |||
Three Months Ended December 31, 2023 | |||
Low | High | ||
Consolidated Net Loss (1) | $ (10.2) | $ (8.2) | |
Income tax expense | 2.8 | 2.8 | |
Interest expense, net | 8.4 | 8.4 | |
Operating income | 1.0 | 3.0 | |
One-time costs (2) | — | 1.0 | |
Adjusted operating income | 1.0 | 4.0 | |
Depreciation and amortization | 19.8 | 19.8 | |
Non-cash compensation | 0.7 | 0.7 | |
Adjusted EBITDA (1) | $ 21.5 | $ 24.5 | |
(1) Quarterly cost of sales includes |
(2) The one-time costs during the fourth quarter of 2023 relate to non-recurring facility costs and professional services. |
KLX Energy Services Holdings, Inc | |||
Reconciliation of Net Cash Flow Provided by Operating Activities to Free Cash Flow | |||
(In millions of | |||
(Unaudited) | |||
Three Months Ended December 31, 2023 | |||
Low | High | ||
Net cash flow provided by operating activities | $ 38.1 | $ 39.1 | |
Capital expenditures | (13.3) | (12.3) | |
Proceeds from sale of property and equipment | 3.0 | 3.0 | |
Levered free cash flow | 27.8 | 29.8 | |
Add: Interest expense, net | 8.4 | 8.4 | |
Unlevered free cash flow | $ 36.2 | $ 38.2 | |
KLX Energy Services Holdings, Inc | |||
Reconciliation of Net Leverage Ratio | |||
(In millions of | |||
(Unaudited) | |||
Twelve Months Ended December 31, 2023 | |||
Low | High | ||
Adjusted EBITDA | $ 136.1 | $ 139.1 | |
Net Debt | 171.8 | 171.8 | |
Net Leverage Ratio (1) | 1.3 | 1.2 | |
(1) Net Leverage Ratio is defined as Net Debt divided by Adjusted EBITDA. |
Other Information
KLX Energy Services Holdings, Inc | |||
Revenue by Segment | |||
(In millions of | |||
(Unaudited) | |||
Twelve Months Ended December 31, 2023 | |||
Low | High | ||
Rocky Mountains | $ 271.0 | $ 271.6 | |
Southwest | 304.6 | 305.2 | |
Northeast/Mid-Con | 311.8 | 312.6 | |
KLX Energy Services Holdings, Inc | |||
Consolidated SG&A Margin(1) | |||
(In millions of | |||
(Unaudited) | |||
Twelve Months Ended December 31, 2023 | |||
Low | High | ||
Selling, general and administrative expenses | $ 86.2 | $ 87.2 | |
Revenue | 887.4 | 889.4 | |
SG&A Margin Percentage | 9.7 % | 9.8 % | |
(1) SG&A Margin is defined as the quotient of selling, general and administrative expenses and total revenue. |
Contacts: | KLX Energy Services Holdings, Inc. |
Keefer M. Lehner, EVP & CFO | |
832-930-8066 | |
Dennard Lascar Investor Relations | |
Ken Dennard / Natalie Hairston | |
713-529-6600 | |
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SOURCE KLX Energy Services Holdings, Inc.
FAQ
What were KLX Energy Services Holdings, Inc.'s estimated revenue and net income ranges for the full year 2023?
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