KLX ENERGY SERVICES HOLDINGS, INC. REPORTS FOURTH QUARTER 2021 RESULTS

HOUSTON, March 11, 2022 /PRNewswire/ -- KLX Energy Services Holdings, Inc. (Nasdaq: KLXE)("KLXE" or the "Company") today reported financial results for the two months ended December 31, 2021 ("Transition Fourth Quarter") and eleven months ended December 31, 2021 ("Transition Period"). We also make references to the three months ended December 31, 2021 ("Pro Forma Fourth Quarter"), the three months ended September 30, 2021 ("Pro Forma Third Quarter") and the twelve months ended December 31, 2021 ("Pro Forma Fiscal Year").

Highlights

• Transition Fourth Quarter Revenue was $94.4 million
• Transition Fourth Quarter Net Loss was $13.2 million
• Transition Fourth Quarter ended December 31, 2021 Adjusted EBITDA of $3.6 million
• Revenue for the Pro Forma Fourth Quarter was $145.0, which represents a $16.7 million or 13% increase relative to Revenue for Pro Forma Third Quarter of $128.3 million
• Adjusted EBITDA for the Pro Forma Fourth Quarter was $6.7 million, which represents a $2.6 million or 63% increase relative to Adjusted EBITDA for the Pro Forma Third Quarter of $4.1 million
• Ended 2021 with $28.0 million in cash, $70.4 million in total liquidity and $60.4 million in available liquidity (net of $10.0 FCCR holdback)

See "Non-GAAP Financial Measures" at the end of this release for a discussion of Adjusted EBITDA, Adjusted EBITDA margin, net working capital and their reconciliation to the most directly comparable financial measure calculated and presented in accordance with U.S. generally accepted accounting principles ("GAAP"). We have not provided reconciliations of our future expectations as to Adjusted EBITDA or Adjusted EBITDA margin as such reconciliation is not available without unreasonable efforts. In addition, for comparative purposes, we have also presented Pro Forma Operating Income (Loss) and Adjusted EBITDA for the three months ended September 30, 2021 and December 31, 2021 as well as for the twelve months ended December 31, 2021 in the Additional Selected Operating Data section below.

Chris Baker, President and Chief Executive Officer of KLXE, stated, "I am very pleased to report strong Pro Forma Fourth Quarter revenue and Adjusted EBITDA gains despite a rising-cost environment. The sequential 13% increase in revenue was largely driven by an improved commodity price environment and associated increases in utilization, market share and pricing across most of our drilling, completion, production and intervention product and service lines.

"Looking ahead to 2022, we are optimistic about continued improvements in activity and expect net pricing improvements to accelerate as we progress through 2022. KLXE is well-positioned to benefit from the expanding drilling and completions market, as well as anticipated pent-up demand for intervention services. Market activity got off to a slow start in early 2022, partially due to the Omicron variant, however we still expect a modest sequential increase in revenue for Q1 2022. We will exit Q1 on strong revenue run-rate and expect steady improvement throughout the year with a full year 2022 revenue increase of 35% to 45% relative to the Pro Forma Fiscal Year ended December 31, 2021. Turning to costs and margins, staying ahead of inflationary cost pressures and supply chain issues will remain a critical priority in 2022 as we hope to maintain and expand upon the margin gains that we have achieved over the last few quarters," concluded Baker.

Transition Fourth Quarter 2021 Financial Results

Revenue for the Transition Fourth Quarter of 2021 totaled $94.4 million, a decrease of 32.1%, compared to fiscal third quarter revenue of $139.0 million. The decrease in revenue reflects one fewer month in the transition quarter. On a product line basis, drilling, completion, production and intervention services contributed approximately 29.6%, 49.4%, 12.2% and 8.8%, respectively, to Transition Fourth Quarter revenues.

Net loss for the Transition Fourth Quarter of 2021 was $13.2 million, compared to fiscal third quarter net loss of $18.8 million. Adjusted EBITDA for the Transition Fourth Quarter of 2021 was $3.6 million, compared to fiscal third quarter Adjusted EBITDA of $5.0 million.

Transition Fourth Quarter 2021 Segment Results

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

The following is a tabular summary of revenue and Adjusted EBITDA for the Transition Fourth Quarter ended December 31, 2021 and fiscal third quarter ended October 31, 2021 ($ in millions). Note for comparability between the Transition Fourth Quarter and fiscal third quarter that there is one less month in the Transition Fourth Quarter.

Pro Forma Fourth Quarter 2021 Financial Results

Revenue for the Pro Forma Fourth Quarter of 2021 totaled $145.0 million, an increase of 13.0%, compared to Pro Forma Third Quarter revenue of $128.3 million. The increase in revenue reflects the overall increase of activity the Company has experienced in the quarter. On a product line basis, drilling, completion, production and intervention services contributed approximately 29.1%, 49.7%, 12.3% and 8.8%, respectively, to Pro Forma Fourth Quarter revenues.

Net loss for the Pro Forma Fourth Quarter of 2021 was $18.6 million, compared to Pro Forma Third Quarter net loss of $20.3 million. Adjusted EBITDA for the Pro Forma Fourth Quarter of 2021 was $6.7 million, which represents an increase of 63% compared to Pro Forma Third Quarter Adjusted EBITDA of $4.1 million.

Pro Forma Fourth Quarter 2021 Segment Results

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

• Rocky Mountains: Revenue and Adjusted EBITDA for the Rocky Mountains segment was $35.3 million and $2.3 million, respectively, for the Pro Forma Fourth Quarter of 2021. Revenue represents a 6% decrease over Pro Forma Third Quarter of 2021 largely driven by a decrease in activity in rentals and various completion services but partially offset by improvements in coiled tubing and directional drilling.
  
  
• Southwest: Revenue and Adjusted EBITDA for the Southwest segment, which includes the Permian and South Texas, was $50.2 million and $4.2 million, respectively, for the Pro Forma Fourth Quarter of 2021. Revenue represents a 15% increase over the Pro Forma Third Quarter of 2021 largely driven by stronger utilization and pricing across the vast majority of product lines, primarily led by directional drilling and completion services.
  
  
• Northeast/Mid-Con: Revenue and Adjusted EBITDA for the Northeast/Mid-Con segment was $59.5 million and $6.2 million, respectively, for the Pro Forma Fourth Quarter of 2021. Revenue represents a 26% increase over Pro Forma Third Quarter of 2021 largely driven by stronger utilization and pricing across the vast majority of product lines, primarily led by directional drilling and completion services.

For the Pro Forma Fourth Quarter ended December 31, 2021, the Rocky Mountains segment operating loss was $(3.8) million, the Southwest segment operating loss was $(1.0) million, and the Northeast/Mid-Con segment operating income was $2.1 million.

The following is a tabular summary of revenue and Adjusted EBITDA for the Pro Forma Fourth Quarter ended December 31, 2021 and Pro Forma Third Quarter ended September 30, 2021 ($ in millions):

Balance Sheet and Liquidity

Total debt outstanding as of December 31, 2021 was $274.8 million, compared to $243.9 million as of January 31, 2021. The increase in total debt was driven by fiscal Q2 2021 borrowings under the ABL Facility. As of December 31, 2021, cash and equivalents totaled $28.0 million. Total liquidity as of December 31, 2021 was $70.4 million and available liquidity was $60.4 million, including net availability of $32.4 million available on the December 31, 2021 ABL Facility Borrowing Base Certificate, net of $10.0 million FCCR holdback. The Senior Secured Notes bear interest at an annual rate of 11.5%, payable semi-annually in arrears on May 1st and November 1st. Accrued interest as of December 31, 2021 was $4.8 million for the Senior Secured Notes and $200,000 related to the ABL facility.

Net working capital as of December 31, 2021 was $40.5 million, an increase of $5.5 million as compared with January 31, 2021. The increase in net working capital of only 16% from January 2021 to December 2021 was driven by proactive management of collections, inventory, and payables during the Transition Period.

Other Financial Information

During the eleven-month Transition Period ended December 31, 2021, the Company incurred approximately $1.6 million in costs related to testing and treatment of COVID-19, including $0.6 million incurred in the Transition Fourth Quarter and $0.8 million incurred in the Pro Forma Fourth Quarter.

Capital expenditures were $3.5 million during the Transition Fourth Quarter of 2021, an increase of $1.7 million, or 94% compared to capital expenditures of $1.8 million in the fiscal third quarter of 2021. Capital spending during the Transition Fourth Quarter of 2021 was driven primarily by maintenance capital expenditures across our segments. KLXE expects fiscal year 2022 capital spending to be between $25.0 and $30.0 million and will be primarily focused on maintenance capital spending.

Modification of Fiscal Year-End

On September 3, 2021, the Board of Directors of the Company adopted the Fourth Amended and Restated Bylaws of the Company, effective as of such date, to change the Company's fiscal year-end from January 31 to December 31, effective beginning with the year ended December 31, 2021. As a result, the Company's current fiscal year 2021 was shortened from 12 months to 11 months and ended on December 31, 2021 (the "Transition Period"). The Company has changed its reporting cycle to normalize its fiscal year-end and improve comparability with peers.

The Company will file its Transition Report on Form 10-K, which will cover the 11 month period from February 1, 2021 to December 31, 2021. The reporting periods and applicable reports for the remainder of Transition Period 2021 are expected to be as follows:

The Company intends to begin filing its quarterly reports on Form 10-Q based on the new fiscal year-end beginning with the fiscal first quarter 2022, ending March 31, 2022.

Conference Call Information

KLXE has scheduled a conference call for 9:00 a.m. Central Time (10:00 a.m. Eastern Time) on Friday, March 11, 2022, to review reported results. You may access the call by telephone at 1-201-389-0867 and ask for the KLXE 2021 Transition Fourth Quarter Conference Call. The webcast of the call may also be accessed through the Investor Relations section of the Company's website at https://investor.klxenergy.com/events-and-presentations/events. A replay of the call can be accessed on the Company's website for 90 days and will be available by telephone through March 25, 2022, at 1-201-612-7415, access code 13726220#.

About KLX Energy Services

KLXE is a growth-oriented provider of diversified oilfield services to leading onshore oil and natural gas exploration and production companies operating in both conventional and unconventional plays in all of the active major basins throughout the United States. The Company delivers mission critical oilfield services focused on drilling, completion, production, and intervention activities for the most technically demanding wells from over 50 service and support facilities located throughout the United States. KLXE's complementary suite of proprietary products and specialized services is supported by technically skilled personnel and a broad portfolio of innovative in-house manufacturing, repair and maintenance capabilities. More information is available at www.klxenergy.com.

Forward-Looking Statements and Cautionary Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information to investors. This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) includes forward-looking statements that reflect our current expectations and projections about our future results, performance and prospects. Forward-looking statements include all statements that are not historical in nature and are not current facts. When used in this news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein), the words "believe," "expect," "plan," "intend," "anticipate," "estimate," "predict," "potential," "continue," "may," "might," "should," "could," "will" or the negative of these terms or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on our current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events with respect to, among other things: our expected cost synergies related to the 2020 acquisition of Quintana Energy Services (the "Merger"); our operating cash flows; the availability of capital and our liquidity; our ability to renew or refinance our debt; our future revenue, income and operating performance; our ability to sustain and improve our utilization, revenue and margins; our ability to maintain acceptable pricing for our services; future capital expenditures; our ability to finance equipment, working capital and capital expenditures; our ability to execute our long-term growth strategy and to integrate our acquisitions; our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements; and the timing and success of strategic initiatives and special projects.

Forward-looking statements are not assurances of future performance and actual results could differ materially from our historical experience and our present expectations or projections. These forward-looking statements are based on management's current expectations and beliefs, forecasts for our existing operations, experience, expectations and perception of historical trends, current conditions, anticipated future developments and their effect on us and other factors believed to be appropriate. Although management believes the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Our forward-looking statements involve significant risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Known material factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks associated with the following: a decline in demand for our services, including due to the ongoing COVID-19 pandemic, declining commodity prices, overcapacity and other competitive factors affecting our industry; the cyclical nature and volatility of the oil and gas industry, which impacts the level of exploration, production and development activity and spending patterns by E&P companies; a decline in, or substantial volatility of, crude oil and gas commodity prices, which generally leads to decreased spending by our customers and negatively impacts drilling, completion and production activity; and other risks and uncertainties listed in our filings with the U.S. Securities and Exchange Commission, including our Current Reports on Form 8-K that we file from time to time, Quarterly Reports on Form 10-Q and Transition Report on Form 10-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except as required by law.

Non-GAAP Financial Measures

This release includes Adjusted EBITDA and net working capital measures. Each of the metrics are "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934.

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. Adjusted EBITDA is not a measure of net earnings or cash flows as determined by GAAP. We define Adjusted EBITDA as net earnings (loss) before interest, taxes, depreciation and amortization, further adjusted for (i) goodwill and/or long-lived asset impairment charges, (ii) stock-based compensation expense, (iii) restructuring charges, (iv) transaction and integration costs related to acquisitions, (v) costs incurred related to the COVID-19 pandemic and (vi) other expenses or charges to exclude certain items that we believe are not reflective of ongoing performance of our business. Adjusted EBITDA is used to calculate the Company's leverage ratio, consistent with the terms of the Company's ABL facility.

We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP, or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies.

Net working capital is calculated as current assets, excluding cash, less current liabilities, excluding accrued interest and finance lease obligations. We believe that net working capital provides useful information to investors because it is an important indicator of the Company's liquidity.

The following tables present a reconciliation of the non-GAAP financial measures of Adjusted EBITDA to the most directly comparable GAAP financial measure for the periods indicated:

The following table presents a reconciliation of the non-GAAP financial measure of net working capital to the most directly comparable GAAP financial measure for the periods indicated:

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SOURCE KLX Energy Services Holdings, Inc.