A Q4 Slowdown Follows: In Q3, KLX Energy Services (KLXE) benefited from product and service line diversification, extended reach laterals, better completion technologies offerings, and improved production and intervention services. However, the negative impact of Q4 seasonality and customer budget exhaustion will likely keep Q4 revenues lower by 10%-14% in Q4 compared to Q3. For 2025, KLXE’s management has a “cautious optimism” based on customers’ drilling, completion, and production programs. Read more about KLXE in our recent article here.
Revenue Increased; EBITDA Margin Steady In Q3: Quarter-over-quarter, KLXE’s revenues in the Rocky Mountains increased by 11% in Q3, while its operating income decreased by 8%. An increased activity in Coiled Tubing and Directional Drilling contributed to the sales growth. Northeast/Mid-Con saw a moderate 7% revenue rise, while its operating income turned to a modest profit in Q3. Higher completion activity benefited the segment result in Q3. Its revenues from the Southwest segment, however, declined marginally in Q3. KLXE’s adjusted EBITDA margin (company-wide) was resilient (down by 30 basis points) from Q2 to Q3 due to a short-term shift in PSL (product and service line) mix and reduced whitespace in its completion PSLs.
Cash Flows Negative; Net Debt Increased: KLXE’s cash flow from operations declined, and free cash flow turned negative in Q3 2024 compared to a year ago. Net debt increased by 18% since the start of the year. Due to a low shareholders’ equity base and a rise in net loss, its shareholders’ equity nearly evaporated as of September 30, 2024.
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.
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