KLXE Looks At A Q2 Recovery: KLX Energy Services (KLXE) commented that despite the pushback in Q1, the first month of Q2 started on a solid note and saw “further inflection in May and June.” During Q1, the company claimed to have set a high standard for total depth and lateral length for its US onshore coiled tubing drill-outs. It also expects demand to increase for its KLX PhantM dissolvable frac plugs, SpectrA drilling motors, and OraclE-SRT equipment. Read more about KLXE in our recent article here.

Revenue And Margin Contracted In Q1: Quarter-over-quarter, KLXE’s revenues decreased by 10% in Q1, while its adjusted EBITDA margin dipped by 490 basis points, or 48%. Adverse weather conditions, safety stand-downs in the Rockies, operators’ budget exhaustion, and demand slowdown in completion and production services product service lines led to lower revenues. Also, unabsorbed costs due to lower volume lowered its operating margin from Q4 2023 to Q1 2024.

KLXE’s Cash Flows And Leverage: KLXE’s cash flow from operations and free cash flow stayed negative and deteriorated further in Q1 2024 compared to a quarter ago. Net debt increased by 16% since the start of the year. However, due to a low shareholders’ equity base and a rise in net loss, its debt-to-equity increased to 16.8x as of March 31, 2024, from 7.3x a quarter earlier.

Thanks for reading the KLXE Take Three, designed to give you three critical takeaways from KLXE’s earnings report.  Soon, we will present a second update on KLXE’s earnings, highlighting its current strategy, news, and notes we extracted from our deeper dive.