KLX Energy Services Holdings, Inc. (KLXE) Bundle
Understanding KLX Energy Services Holdings, Inc. (KLXE) Revenue Streams
Understanding KLX Energy Services Holdings, Inc.’s Revenue Streams
KLX Energy Services Holdings, Inc. generates revenue primarily from three geographic segments: Rocky Mountains, Southwest, and Northeast/Mid-Con. The breakdown of revenue sources for the nine months ended September 30, 2024, is as follows:
| Segment | Revenue (in millions USD) | Revenue (in millions USD) 2023 | % Change |
|---|---|---|---|
| Rocky Mountains | $174.9 | $211.3 | (17.2%) |
| Southwest | $207.9 | $237.5 | (12.5%) |
| Northeast/Mid-Con | $161.0 | $245.4 | (34.4%) |
| Total Revenue | $543.8 | $694.2 | (21.7%) |
In terms of product lines, the revenue breakdown for the nine months ended September 30, 2024, is as follows:
| Product Line | Revenue (in millions USD) | Revenue (in millions USD) 2023 | % Change |
|---|---|---|---|
| Drilling | $119.4 | $172.0 | (30.6%) |
| Completion | $287.5 | $368.5 | (22.0%) |
| Production | $84.3 | $89.5 | (5.8%) |
| Intervention | $52.6 | $64.2 | (18.1%) |
| Total Revenue | $543.8 | $694.2 | (21.7%) |
The year-over-year revenue growth rate indicates a significant decline in revenue across all segments and product lines. The total revenue decreased by $150.4 million, or 21.7%, for the nine months ended September 30, 2024, compared to the same period in 2023. This decline is attributed to reduced activity and pricing, with lower weighted average prices contributing approximately 20% to the decrease and lower weighted average volumes accounting for the remaining 80%.
Analyzing the contribution of different business segments to overall revenue, the Rocky Mountains segment contributed 32.2%, the Southwest segment contributed 38.3%, and the Northeast/Mid-Con segment contributed 29.5% to total revenue for the nine months ended September 30, 2024.
Significant changes in revenue streams include a stark decline in the Northeast/Mid-Con segment, which experienced a revenue reduction of 34.4% year-over-year, primarily driven by a decrease in both pricing and volume. The Completion product line also exhibited a 22.0% decrease in revenue, reflecting similar challenges in market demand and pricing pressures.
Overall, the revenue analysis indicates that KLX Energy Services Holdings, Inc. is facing substantial challenges in maintaining revenue levels across its segments and product lines in 2024.
A Deep Dive into KLX Energy Services Holdings, Inc. (KLXE) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit was calculated as follows:
| Period | Revenue (in millions) | Cost of Sales (in millions) | Gross Profit (in millions) | Gross Profit Margin (%) |
|---|---|---|---|---|
| 2024 | $543.8 | $422.3 | $121.5 | 22.34% |
| 2023 | $694.2 | $520.4 | $173.8 | 25.03% |
Operating Profit Margin: Operating income for the nine months ended September 30, 2024, was:
| Period | Operating Income (in millions) | Revenue (in millions) | Operating Profit Margin (%) |
|---|---|---|---|
| 2024 | ($10.6) | $543.8 | (1.95%) |
| 2023 | $54.9 | $694.2 | 7.91% |
Net Profit Margin: The net profit figures for the respective periods are as follows:
| Period | Net (Loss) Income (in millions) | Revenue (in millions) | Net Profit Margin (%) |
|---|---|---|---|
| 2024 | ($38.4) | $543.8 | (7.06%) |
| 2023 | $28.4 | $694.2 | 4.09% |
Trends in Profitability: Over the nine months ended September 30, 2024, there was a marked decrease in profitability metrics:
- Gross profit margin decreased from 25.03% in 2023 to 22.34% in 2024.
- Operating profit margin dropped from 7.91% in 2023 to (1.95%) in 2024.
- Net profit margin fell from 4.09% in 2023 to (7.06%) in 2024.
Comparison of Profitability Ratios: The industry average for operating profit margin is typically around 10%. Thus, the company's performance in 2024 indicates a significant underperformance compared to industry standards.
Operational Efficiency Analysis: The company's cost management metrics show:
- Cost of sales as a percentage of revenue increased from 75.0% in 2023 to 77.7% in 2024.
- SG&A expenses for the nine months ended September 30, 2024, were $62.1 million, or 11.4% of revenue, compared to $66.8 million, or 9.6% in 2023.
Summary of Key Profitability Metrics:
| Metric | 2024 | 2023 |
|---|---|---|
| Gross Profit Margin | 22.34% | 25.03% |
| Operating Profit Margin | (1.95%) | 7.91% |
| Net Profit Margin | (7.06%) | 4.09% |
| Cost of Sales (% of Revenue) | 77.7% | 75.0% |
| SG&A Expenses (% of Revenue) | 11.4% | 9.6% |
Debt vs. Equity: How KLX Energy Services Holdings, Inc. (KLXE) Finances Its Growth
Debt vs. Equity: How KLX Energy Services Finances Its Growth
As of September 30, 2024, the company's total outstanding long-term debt was $285.2 million, which includes $237.3 million in senior secured notes and $50.0 million under its asset-based revolving credit facility (ABL Facility). The total debt after adjusting for unamortized debt issuance costs is $285.2 million.
The company’s long-term debt structure is composed of the following:
| Debt Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Senior Secured Notes | $237.3 | 11.5% | November 1, 2025 |
| ABL Facility | $50.0 | ~7.9% | 2025 |
| Total Long-term Debt | $285.2 |
The company's debt-to-equity ratio stands at 114.3%, which is above the industry average of 100%, indicating a higher reliance on debt financing compared to equity.
In terms of recent activity, on June 20, 2023, the company amended its ABL Facility which has been a significant source of liquidity. The facility matures in 2025 and is tied to a borrowing base formula, allowing flexibility in financing.
As of September 30, 2024, the company's total stockholders’ equity was $2.5 million, showing a significant decrease from $38.8 million at the end of 2023, primarily due to a net loss of $38.4 million over the nine months.
To balance its debt financing and equity funding, the company has been cautious in its approach. The recent net losses indicate a need for strategic refinancing to manage its debt obligations effectively. The company plans to refinance part or all of its senior secured notes, potentially using cash reserves or seeking additional capital.
In summary, the financial structure of the company demonstrates a substantial reliance on debt, which poses both opportunities and risks as it navigates through its growth strategy amid ongoing market challenges.
Assessing KLX Energy Services Holdings, Inc. (KLXE) Liquidity
Assessing KLX Energy Services Holdings, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.25 with current assets totaling $108.4 million and current liabilities of $86.6 million.
Quick Ratio: The quick ratio stands at 0.90, indicating that quick assets amount to $65.0 million against current liabilities of $86.6 million.
Analysis of Working Capital Trends
Working capital for KLX Energy Services Holdings, Inc. as of September 30, 2024 is $21.8 million, calculated as current assets of $108.4 million minus current liabilities of $86.6 million.
Cash Flow Statements Overview
| Cash Flow Type | For the Nine Months Ended September 30, 2024 (in millions) | For the Nine Months Ended September 30, 2023 (in millions) |
|---|---|---|
| Net Cash Flows Provided by Operating Activities | $28.2 | $77.0 |
| Net Cash Flows Used in Investing Activities | ($40.6) | ($29.9) |
| Net Cash Flows Used in Financing Activities | ($17.4) | ($14.1) |
| Net Change in Cash | ($29.8) | $33.0 |
| Cash Balance at End of Period | $82.7 | $90.4 |
Potential Liquidity Concerns or Strengths
At September 30, 2024, the company reported cash and cash equivalents of $82.7 million. This reflects a decrease of $29.8 million from the previous period, driven by cash flows from operating activities of $28.2 million, cash used in investing activities of $40.6 million, and cash used in financing activities of $17.4 million.
Liquidity position is further supported by $43.6 million available under the asset-based revolving credit facility, contributing to a total liquidity position of $126.3 million as of September 30, 2024.
Is KLX Energy Services Holdings, Inc. (KLXE) Overvalued or Undervalued?
Valuation Analysis
To assess whether KLX Energy Services Holdings, Inc. is overvalued or undervalued, we will examine key financial ratios, stock performance, dividend metrics, and analyst recommendations.
Price-to-Earnings (P/E) Ratio
The current P/E ratio for KLX Energy Services is not applicable as the company reported a net loss of $8.2 million for the quarter ended September 30, 2024.
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, was calculated as follows:
- Total Stockholders' Equity: $2.5 million
- Shares Outstanding: 17.3 million
- Book Value per Share: $0.14
The current stock price is $0.89 (as of the latest trading data), resulting in a P/B ratio of approximately 6.36.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the enterprise value (EV) is calculated as follows:
- Market Capitalization: $15.4 million (based on stock price and shares outstanding)
- Total Debt: $285.2 million
- Cash and Cash Equivalents: $82.7 million
- EV = Market Cap + Total Debt - Cash = $285.2 million + $15.4 million - $82.7 million = $218.0 million
The EBITDA for the last twelve months is -10.6 million. Therefore, the EV/EBITDA ratio is -20.56.
Stock Price Trends
The stock price performance over the past 12 months shows a decline:
- 12 months ago: $2.50
- Current Price: $0.89
- Percentage Change: -64%
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, and thus the dividend yield is 0%.
Analyst Consensus
Analyst consensus on the stock is as follows:
- Buy: 0
- Hold: 2
- Sell: 1
Overall, the consensus indicates a cautious outlook on the stock.
| Metric | Value |
|---|---|
| P/E Ratio | Not Applicable |
| P/B Ratio | 6.36 |
| EV/EBITDA Ratio | -20.56 |
| Stock Price (Current) | $0.89 |
| Stock Price (12 months ago) | $2.50 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold (2), Sell (1) |
Key Risks Facing KLX Energy Services Holdings, Inc. (KLXE)
Key Risks Facing KLX Energy Services Holdings, Inc.
The financial health of KLX Energy Services Holdings, Inc. is subject to various internal and external risks that can significantly impact its operations and profitability.
Industry Competition
The company operates in a highly competitive environment characterized by numerous service providers vying for market share. The competitive landscape is marked by fluctuating demand for oil and gas services, which can lead to pricing pressures. For the nine months ended September 30, 2024, total revenue decreased to $543.8 million, a decline of 21.7% compared to $694.2 million in the same period of 2023.
Regulatory Changes
Changes in regulations related to environmental standards, safety requirements, and labor laws can pose risks. Compliance with these regulations can lead to increased operational costs. The company did not recognize a federal tax benefit on its year-to-date losses due to a valuation allowance against its deferred tax balances.
Market Conditions
Market volatility, particularly in commodity prices, has a substantial impact on the company’s revenue. For instance, lower weighted average prices contributed approximately 20% of the $150.4 million decrease in revenues. Fluctuations in oil and natural gas prices can affect demand for services, which in turn impacts financial performance.
Operational Risks
Operational challenges, including labor shortages and equipment failures, can hinder service delivery. As of September 30, 2024, the company reported a net loss of $38.4 million, compared to a net income of $28.4 million in the prior year. This operational downturn is partly due to reduced activity levels and pricing pressures across its service segments.
Financial Risks
The company carries significant debt, with total outstanding long-term indebtedness at $285.2 million as of September 30, 2024. The high interest rate on the Senior Secured Notes, at 11.5%, adds to the financial burden, especially as the company approaches the maturity date in November 2025. The current portion of long-term debt is $50.0 million.
Mitigation Strategies
To address these risks, the company has taken steps to enhance liquidity, including closing its Florida headquarters and relocating operations to Houston. As of September 30, 2024, the company had a liquidity position of $126.3 million, comprising $82.7 million in cash and cash equivalents and $43.6 million available on its ABL Facility. Additionally, the company is focused on managing capital expenditures and prioritizing maintenance spending to maintain operational integrity amidst market fluctuations.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | High competition leads to pricing pressures and reduced market share. | Revenue decreased to $543.8 million in 2024. |
| Regulatory Changes | Compliance with changing regulations increases operational costs. | No federal tax benefit recognized due to valuation allowance. |
| Market Conditions | Commodity price volatility affects demand for services. | Lower prices contributed 20% to revenue decline. |
| Operational Risks | Labor shortages and equipment failures impact service delivery. | Net loss of $38.4 million reported in 2024. |
| Financial Risks | High debt levels and interest rates increase financial burden. | Total debt of $285.2 million as of September 2024. |
| Mitigation Strategies | Improving liquidity and focusing on maintenance spending. | Liquidity position of $126.3 million as of September 2024. |
Future Growth Prospects for KLX Energy Services Holdings, Inc. (KLXE)
Future Growth Prospects for KLX Energy Services Holdings, Inc.
Analysis of Key Growth Drivers
The company is positioned for growth through several key drivers:
- Product Innovations: The company has invested in research and development, with R&D costs amounting to $1.0 million for the nine months ended September 30, 2024.
- Market Expansions: Revenue by segment for the nine months ended September 30, 2024 shows a total revenue of $543.8 million, a decrease from $694.2 million in the previous year, indicating a potential area for recovery and market expansion.
- Acquisitions: The company has made strategic acquisitions, including the Greene's Acquisition, which contributed $34.0 million to its stockholders' equity.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected to recover as market conditions stabilize. The company expects capital expenditures to range between $55.0 million and $60.0 million for the year ending December 31, 2024, with approximately 80% allocated for maintenance. Earnings estimates show a net loss of $38.4 million for the nine months ended September 30, 2024, compared to a net income of $28.4 million in the prior year.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has focused on enhancing its liquidity through various initiatives, including:
- Closing its Florida headquarters and consolidating operations in Houston to reduce costs.
- Utilizing an Equity Distribution Agreement to raise up to $50.0 million for general corporate purposes, including funding acquisitions and capital expenditures.
Competitive Advantages That Position the Company for Growth
The company benefits from several competitive advantages:
- Strong Asset Base: Total property and equipment stood at $643.1 million as of September 30, 2024.
- Liquidity Position: The company reported cash and cash equivalents of $82.7 million as of September 30, 2024.
- Debt Management: Total long-term debt was $285.2 million, with a significant portion tied to senior secured notes due in 2025.
Revenue by Segment
| Segment | Revenue (2024) | Revenue (2023) | % Change |
|---|---|---|---|
| Rocky Mountains | $174.9 million | $211.3 million | (17.2%) |
| Southwest | $207.9 million | $237.5 million | (12.5%) |
| Northeast/Mid-Con | $161.0 million | $245.4 million | (34.4%) |
| Total Revenue | $543.8 million | $694.2 million | (21.7%) |
Conclusion
Continued focus on strategic initiatives, market expansion, and leveraging competitive advantages will be essential for the company's growth trajectory moving forward.
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Article updated on 8 Nov 2024
Resources:
- KLX Energy Services Holdings, Inc. (KLXE) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of KLX Energy Services Holdings, Inc. (KLXE)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View KLX Energy Services Holdings, Inc. (KLXE)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.