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KLX Energy Services Fourth Quarter, Full Year 2020 Results

Share Print Bookmark    |    Thursday,April 15,2021

KLX Energy Services Holdings, Inc. reported financial results for its fiscal fourth quarter and full fiscal year ended January 31, 2021.

Fiscal Q4 2020 Highlights:

• Revenue of $86.8 million increased $15.9 million, or 22.4% sequentially from the fiscal third quarter 2020
• Net loss of $30.5 million decreased $7.8 million, or 20.4% sequentially from the fiscal third quarter 2020
• Adjusted EBITDA loss of $2.6 million improved $2.8 million, compared to the fiscal third quarter 2020
• Ended the fiscal fourth quarter with $47.1 million in cash and $82.0 million in total liquidity
• As of April 2021, successfully integrated the QES merger and fully implemented at least $46.0 million of cost synergies

Chris Baker, President and Chief Executive Officer of KLXE, stated, "We are pleased to report that despite the overhanging issues brought about by COVID-19, we saw broad-based macroeconomic improvement that benefited all our business lines in our fiscal fourth quarter, and this is directly reflected in our financial results. 2020 fiscal fourth quarter revenues were up approximately 22% sequentially to $87 million and Adjusted EBITDA improved approximately $3 million.

"I'm also pleased to report that following the QES merger, the integration of our operations was successfully completed ahead of schedule," continued Baker. "With the closure of our Florida legacy corporate headquarters and the relocation of all key functions to Houston having been completed in the third quarter, we then undertook eliminating redundancies and duplicative functions throughout our operations in the fourth quarter. In May 2020, we stated that we expected to generate annualized cost synergies of $40.0 million within twelve months. As part of the integration process, during the third quarter, we identified additional cost savings and have now fully realized a total of $46.0 million in projected savings, approximately six months ahead of schedule. I'm very proud of the team and would like to thank the tireless efforts of our employees in bringing the integration to a successful conclusion.

"With our merger integration now largely complete, we return our focus on continuing to pursue organic margin enhancing initiatives and continuing to lead the effort to consolidate the oilfield service industry in 2021 and beyond," added Baker. "Given our history of successfully executing on mergers and acquisitions, we have shown that we can increase economies of scale, enhance operating efficiencies, and drive meaningful shareholder value through consolidation. It remains a fundamental part of our strategy to become a low-cost-structure provider of high-quality drilling, completion and production services.

"Turning to fiscal 2021, KLXE, like most of our peers, experienced a material slow down due to the unprecedented Winter Storm Uri and its aftermath in February. Despite the extremely challenging start to our fiscal first quarter, we believe we are well positioned to strongly rebound for the remainder of fiscal year 2021," concluded Baker.  

Fiscal Fourth Quarter 2020 Financial Results

Revenue for the fiscal fourth quarter of 2020 totaled $86.8 million, an increase of 22.4%, compared to fiscal third quarter revenue of $70.9 million. The increase in revenue reflects the impact of an improvement in drilling and completions and to a lesser extent, production and intervention activity during the fiscal fourth quarter compared to the fiscal third quarter. On a product line basis, drilling, completion, production and intervention services contributed approximately 24.3%, 49.4%, 13.0% and 13.3%, respectively, to fiscal fourth quarter revenues.

Net loss for the fiscal fourth quarter of 2020 was $30.5 million, compared to third quarter net loss of $38.3 million. Adjusted EBITDA loss for the fiscal fourth quarter of 2020 was $2.6 million, an improvement of $2.8 million compared to fiscal third quarter Adjusted EBITDA loss of $5.4 million.

Fiscal Q4 2020 Segment Results

The Company reports revenue and Adjusted EBITDA through our three geographic business segments: Southwest, Rocky Mountains and Northeast/Mid-Con.

• Southwest: Revenue and Adjusted EBITDA for the Southwest segment, which includes the Permian and South Texas, was $30.1 million and $1.1 million, respectively, for the fiscal fourth quarter of 2020. Revenue represents a 21.4% increase over the fiscal third quarter of 2020 driven primarily by a meaningful increase in directional drilling and completion rental activity.
   
• Rocky Mountains: Revenue and Adjusted EBITDA for the Rocky Mountains segment was $29.4 million and $6.5 million, respectively, for the fiscal fourth quarter of 2020. Revenue represents a 61.5% increase over fiscal third quarter of 2020 largely driven by increased completion activity in the DJ Basin.
   
• Northeast/Mid-Con: Revenue and Adjusted EBITDA loss for the Northeast/Mid-Con segment was $27.3 million and $5.4 million, respectively, for the fiscal fourth quarter of 2020. Revenues were largely consistent with the fiscal third quarter of 2020 and Adjusted EBITDA decreased by $6.9 million sequentially. The decline in Adjusted EBITDA was largely driven by a $4.6 million accounts receivable reserve recognized in response to a recent customer bankruptcy. The customer has an Operator's Extra Expense insurance policy which we believe should ultimately cover a material portion of the amount owed.

For the fiscal fourth quarter ended January 31, 2021, the Southwest segment operating loss was $6.5 million, the Rocky Mountains segment operating income was $1.7 million and the Northeast/Mid-Con segment operating loss was $11.6 million.

The following is a tabular summary of revenue and Adjusted EBITDA for the three-month periods ended January 31, 2021 and October 31, 2020 ($ in millions):

Merger and Integration Costs

Merger and integration costs were recorded separately from the acquisition of assets and assumptions of liabilities in the Merger. Merger costs consist of legal and professional fees and accelerated stock compensation expense ("Merger costs"). Integration costs consist of expenses to relocate corporate headquarters, integrate the QES business, reduce headcount, and consolidate service and support facilities ("Integration costs").

The following table presents Merger and Integration costs that were recorded for the three months ended January 31, 2021 and October 31, 2020 in the consolidated statements of operations (in millions of U.S. dollars):

As the Company continues its integration of the QES business, there will be further charges in future periods relating to, among other things, fixed assets, facilities, workforce reductions and other assets.

Balance Sheet and Liquidity

Total debt outstanding as of January 31, 2021 was $243.9 million, compared to $243.0 million as of January 31, 2020. As of January 31, 2021, cash and equivalents totaled $47.1 million. Total available liquidity as of January 31, 2021 was approximately $82.0 million, including net availability under our undrawn ABL Facility.