KLXE looks to a year-end Recovery: In Q2 2023, KLX Energy’s (KLXE) topline declined but managed to outperform the US rig count. Its management was “constructive” on the energy activity recovery as it saw commodity prices strengthen. It expects the drilling and completion activity to ramp up in late 2023 and 2024. Read more about KLXE in our recent article here.
Revenue fell, but margin strengthened in Q2: Quarter-over-quarter, KLXE’s revenues decreased by 2.3% in Q2, while its adjusted EBITDA margin expanded by 102 basis points. The activity slowdown in the Rocky Mountains and Northeast/Mid-Con primarily accounted for the revenue loss. But, a better product service mix, additional revenue from Greene’s (acquired in March 2023), and payroll and unemployment taxes roll-off led to the margin expansion.
KLXE’s cash flows and leverage: KLXE’s cash flow from operations turned positive in Q2 2023 compared to negative CFO a year ago. Its free cash flow also turned positive. It reduced net debt by 17% in Q2 over Q1. However, due to low shareholders’ equity (accumulated deficit), its debt-to-equity was high at 7.1x as of June 30, 2023.
Thanks for reading the KLXE take three, designed to give you three critical takeaways from KLXE’s earnings report. Â Soon we will present a second update on KLXE’s earnings highlighting its current strategy, news, and notes we extracted from our deeper dive.
