KLX Energy Services: Q2 TAKE THREE

KLXE expects Q3 to be the strongest quarter of 2025, driven by recovery in gas basins and improved margins. Revenues are projected to rise modestly, though market volatility and soft spot activity remain concerns. Q2 performance improved in most regions, except the Permian, and margins expanded due to higher utilization and mix shift. Despite positive cash flow, rising net debt, and negative equity reflect ongoing financial strain.

[ihc-hide-content ihc_mb_type="show" ihc_mb_who="10,13,14,16,18,19,20,21,22,23,24,25" ihc_mb_template="1"]

Q3 Outlook: KLX Energy Services’ (KLXE) management expressed optimism over the recovery in natural gas basin-heavy activities and expects “the third quarter to be the strongest quarter of the year.” It also expects revenues to increase by “low to mid-single digits” and operating margin to expand in Q3 compared to Q2. However, the management also anticipated the market to remain volatile and spot activity to remain soft.

Revenue and EBITDA Margin Increased in Q2 : Quarter-over-quarter, KLXE's revenues in the Rocky Mountains increased by 13% in Q2, while the segment operating income turned positive. Northeast/Mid-Con saw a 12% revenue rise, while its operating loss lessened in Q2. Higher demand for coiled tubing, pressure pumping, and tech services, and improved utilization benefited the results in Q2. Its revenues from the Southwest segment, on the other hand, decreased by 10% in Q2 from a quarter earlier due primarily to the decline in activity in the Permian.

Overall, KLXE's adjusted EBITDA margin expanded (up by 270 basis points) from Q1 to Q2 due to sequential improvement in completions and production portfolios and the company’s shift to higher-margin work, despite the lower rig count in Q2.

Cash Flows Positive; Net Debt Increased : KLXE's cash flow from operations remained positive but decreased by 14% in the past year until Q2 2025. Its free cash flow also stayed positive in Q2. Its cash balance, however, has significantly reduced since the start of the year. Due to a large accumulated deficit, its shareholders' equity was negative as of June 30, 2025.

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.

Premium/Monthly ------------------------------------------------------------------------------------------------------------- [ihc-hide-content ihc_mb_type="show" ihc_mb_who="10,13,14,16,18,19,20,21,22,23,24,25" ihc_mb_template="1"] [/ihc-hide-content] [ump-visitor ] To unlock the content you need a Premium or Enterprise Account! [/ump-visitor]