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KLX Energy Services Holdings, Inc. (KLXE)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered modest sequential improvement: revenue rose 3.2% to $159.0M with Adjusted EBITDA up 34% to $18.5M (11.6% margin), aided by stronger completions/production activity and cost controls; GAAP diluted EPS was $(1.04) and Adjusted diluted EPS was $(0.88) .
  • Versus S&P Global consensus, KLX missed on revenue ($159.0M vs $163.5M*) and Adjusted EPS ($(0.88) vs $(0.62)); S&P’s standardized EBITDA also came in below consensus ($15.0M actual vs $21.8M* est.), reflecting definitional differences vs company “Adjusted EBITDA” .
  • Management guided Q3 to be the strongest quarter of 2025 with low-to-mid single-digit sequential revenue growth and continued margin expansion; Rocky Mountains and Northeast/Mid-Con momentum offset softer Permian “white space” in Q2 and should continue improving into Q3 .
  • Liquidity improved to $65.4M (cash $16.7M + $48.7M ABL availability) and levered FCF was $8.0M, supporting balance sheet flexibility as management balances cash vs PIK interest and curtails 2H25 capex within a $40–$50M gross/$30–$40M net FY guide .

What Went Well and What Went Wrong

  • What Went Well

    • Sequential execution ahead of a weaker macro: revenue +3.2% and Adjusted EBITDA margin +260 bps to 11.6% despite US land rig count down ~7% q/q; CEO: “Adjusted EBITDA margin increased by 260 basis points… despite the US land rig count being down (7.3)% sequentially” .
    • Segment rebound outside the Permian: Rockies revenue +13% q/q with Adjusted EBITDA +55% on higher utilization; Northeast/Mid-Con revenue +12% q/q with Adjusted EBITDA +167% as white space eased .
    • Cost discipline and SG&A efficiency: Q2 SG&A $18.0M; CFO noted adjusted SG&A would be ~$15.1M, 12% below prior-year Q2 and 8% below Q1, with adjusted SG&A expected at 9–10% of revenue for 2025 .

  • What Went Wrong

    • Permian-driven softness: Southwest revenue fell (9.8)% q/q; segment turned to an operating loss with Adjusted EBITDA down (38.5)% on completion holidays and mix/white space .
    • Interest burden and losses: Interest expense of $11.0M drove a GAAP net loss of $(19.9)M (net loss margin (12.5)%), though improved vs Q1; management actively toggled PIK vs cash interest to manage liquidity .
    • Consensus shortfall: Single-analyst S&P consensus implied revenue and EPS above actuals; standardized EBITDA also trailed consensus, highlighting either conservatism or definition mismatch vs company Adjusted EBITDA [GetEstimates – S&P Global, see table note].

Financial Results

Q2 2025 vs prior year and prior quarter (oldest → newest):

MetricQ2 2024Q1 2025Q2 2025
Revenue ($M)180.2 154.0 159.0
Net Loss ($M)(8.0) (27.9) (19.9)
Diluted EPS ($)(0.49) (1.62) (1.04)
Adjusted EBITDA ($M)27.0 13.8 18.5
Net Loss Margin (%)(4.4)% (18.1)% (12.5)%
Adjusted EBITDA Margin (%)15.0% 9.0% 11.6%

Q2 2025 actual vs S&P Global consensus:

MetricQ2 2025 ConsensusQ2 2025 Actual
Revenue ($M)163.5*159.0
Adjusted EPS ($)(0.62)*(0.88)
EBITDA ($M)21.8*15.0*

*Values retrieved from S&P Global.

Notes: Company reported “Adjusted EBITDA” of $18.5M; S&P’s standardized EBITDA actual differs at $15.0M (definition variance). The press release headline rounds Adjusted EBITDA to “$19 million” while details show $18.5M .

Segment revenue and Adjusted EBITDA (oldest → newest):

Segment Revenue ($M)Q2 2024Q1 2025Q2 2025
Rocky Mountains61.4 47.8 54.1
Southwest69.9 65.2 58.8
Northeast/Mid-Con48.9 41.0 46.1
Total180.2 154.0 159.0
Segment Adj. EBITDA ($M)Q2 2024Q1 2025Q2 2025
Rocky Mountains17.2 6.7 10.4
Southwest10.4 11.7 7.2
Northeast/Mid-Con6.4 2.7 7.2
Corporate & other(7.0) (7.3) (6.3)
Total Adj. EBITDA27.0 13.8 18.5

KPIs and cash flow (oldest → newest):

KPIQ1 2025Q2 2025
Liquidity ($M)58.1 65.4
Cash & Equivalents ($M)14.6 16.7
Net Working Capital ($M)59.4 45.9
CapEx – Gross ($M)15.0 12.7
CapEx – Net of Sales ($M)10.2 11.1
Levered Free Cash Flow ($M)(47.8) 8.0
Net Debt ($M)238.3 241.4

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (sequential)Q3 2025—Low-to-mid single-digit sequential increaseNew guide
Adjusted EBITDA marginQ3 2025—Continued margin expansionNew guide
CapEx (gross)FY 2025$40–$50M (reaffirmed) $40–$50M (curtailed 2H)Maintained
CapEx (net)FY 2025$30–$40M (reaffirmed) $30–$40MMaintained
Liquidity/Cash2H 2025Expected to improve Expected to improveMaintained
Interest approachQ3 2025Flex to PIK as needed Elected to pay a portion of Q3 interest in cashShift toward partial cash

Note: No quantitative revenue/EPS ranges were provided; guidance remains directional.

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
Macro & rig/frac activityHighlighted weaker activity and seasonality; margin resiliency focus Volatile macro (OPEC+, tariffs) impacting visibility Rig/frac counts down; KLX outperformed sequentially Cautious but executing
Pricing/UtilizationSustained profitability focus in rentals/tech/coiled tubing Cost controls; mixed utilization; white space in Mid-Con Higher utilization in Rockies/Northeast; Permian white space Mixed by basin
Gas basinsWatching LNG-driven opportunity long term Neutral share; ~12.5% dry gas exposure; monitoring Haynesville+NE revenue +25% q/q; more rigs/crews; opportunity remains Improving
Tariffs/supply chainMonitoring tariff risks Tariff policy driving volatility; pass-through where possible Strategy unchanged: pass-through and adjust sourcing Ongoing mitigation
Technology/R&D—Gen 2 Oracle SRT gaining acceptance (tech services) Tech services central to outperformance Execution continues
M&A/consolidation—Evaluating accretive deals; consolidation needed Counterparties re-engaging; industry fragmentation; valuation realism improving Pipeline building
HSE/SOP standards——Step-change in enforcement among majors; barrier for smaller OFS Higher bar benefits scaled players

Management Commentary

  • “We continued to focus on the execution of our operational initiatives, including cost management, asset rotation, holding the line on pricing, and leaning into higher-margin work … we expect the third quarter to be the strongest quarter of the year … targeting a sequential quarterly revenue increase of low to mid-single digits … with continued margin expansion.” — CEO Chris Baker .
  • “Consolidated adjusted EBITDA was $18.5 million with a 12% margin… adjusted SG&A would have been $15.1 million… We ended Q2 with approximately $65 million in liquidity.” — CFO Keefer Lehner .
  • “Our Haynesville plus Northeast revenue increased about 25% quarter over quarter … we’re still 40% off the gas-driven quarterly revenue highs we saw in 2023, illustrating ample room to run.” — CEO .
  • “We elected to pay a portion of Q3 interest in cash … we will evaluate future PIK versus cash pay decisions based on market conditions and company leverage and liquidity.” — CFO .

Q&A Highlights

  • Hitting Q3 growth amid falling rig count: Management cited strong exit rates in May/June, restarted completion programs, and base-loaded schedules across Q3; risks remain from unplanned “white space” .
  • Gas basin outlook: Rigs/crews adding in Haynesville; NE stable; Q2 gas revenue +25% q/q; still well below 2023 highs, implying runway if gas macro tightens .
  • Cash flow and capex cadence: Expect Q3 working capital to be more intensive (three July payrolls, revenue uplift) with some unwind in Q4; 2H capex curtailed, with higher spend in Q3 vs Q4 .
  • M&A environment: More deal “capitulation” among smaller OFS; majors’ HSE/SOP standards create barriers; KLX ready to act on deleveraging, creative transactions within debt docs .
  • HSE/SOP enforcement: Step-change among majors; consistency and procedures increasingly critical in pressure-related service lines (coil tubing, frac) .

Estimates Context

  • Coverage is limited (one estimate for revenue and EPS in Q2), and KLX missed S&P consensus on revenue ($159.0M vs $163.5M*) and Adjusted EPS ($(0.88) vs $(0.62)); S&P standardized EBITDA actual ($15.0M) also below consensus ($21.8M*) while company-reported Adjusted EBITDA was $18.5M .
  • Street models may need to reduce Southwest assumptions given extended Permian completion holidays and mix/white space, partially offset by higher Rockies and Northeast/Mid-Con utilization and Q3 seasonality uplift .

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Operations outperformed a weak macro sequentially; however, Q2 was a small miss vs limited consensus and losses persist—focus shifts to Q3 execution, which management says will be the strongest quarter with further margin expansion .
  • Permian remains the swing factor: continued “white space” risks could cap upside; watch for evidence of sustained activity resumption and mix normalization in Southwest .
  • Gas leverage is building: Haynesville and Northeast improved meaningfully; further gas price/LNG tailwinds could drive additional utilization and pricing in 2H25/2026 .
  • Balance sheet flexibility improved: $65.4M liquidity, positive Q2 FCF, and optionality to toggle PIK vs cash interest; 2H25 capex curtailed, which should support liquidity into year-end .
  • Monitor SG&A discipline and segment margin trajectory—adjusted SG&A run-rate of ~9–10% of revenue and rising Rockies/Northeast margins should underpin incremental operating leverage in Q3 .
  • Corporate development is a potential catalyst: management sees rising M&A dialogue and possible consolidation that could be deleveraging—timing/valuation remain constraints .
  • Stock reaction likely hinges on Q3 delivery vs this directional guide and visibility into Permian recovery vs gas-driven upside; any quantitative guide would reduce uncertainty and help re-rate expectations .

Appendix: Additional Detail and Cross-Checks

  • Product line mix in Q2: drilling 16%, completion 56%, production 18%, intervention 10% .
  • Liquidity detail: cash $16.7M and ABL availability $48.7M (incl. undrawn FILO) at 6/30/25 .
  • Non-GAAP reconciliation: one-time costs of $2.9M; Adjusted Net Loss $(17.0)M; Adjusted diluted loss/share $(0.88) .
  • Conference logistics and release timing (Q2): PR on Aug 6; call on Aug 7 .