KLXE

• 2025 was a solid year despite a choppy market, with Q4 delivering the strongest profitability of the year. - Throughout 2025, the company optimized corporate cost structure, invested in product lines, and leaned into gas-weighted asset allocation. - Operationally, the Northeast/Mid-Con segment was a standout in Q4, holding revenue essentially flat sequentially and expanding margins due to robust gas-directed work; dry gas revenue in this segment had significant quarter-over-quarter and year-over-year growth. - The Rockies were impacted by severe weather and customer budget exhaustion late in the year, while the Southwest experienced lower activity but expanded margins via product and service mix optimization. - The company continued to align its footprint and cost structure with activity levels, reducing headcount while protecting service quality, maintaining healthy revenue per rig and revenue per headcount, and driving corporate cost reduction year over year

• Expect the first quarter of 2026 to be the low point of the year, reflecting seasonal factors like customer budget resets, slower restarts of completion programs, and weather-related disruptions. - Forecast Q2 2026 revenue to rebound to the $160 million to $170 million range, higher than Q1 2025. - For 2026, expect gross capital expenditures of approximately $40 million, down from $49 million in 2025, and net CapEx in the range of $30 million to $35 million, predominantly for maintenance CapEx. - Internal budget contemplates 2026 revenue to be broadly flat to slightly up versus 2025, with improvement weighted toward the second half of the year

Fourth quarter revenues were approximately $157 million, in line with Q4 guidance. Adjusted EBITDA was around $23 million, the highest quarterly adjusted EBITDA of 2025, with an adjusted EBITDA margin of about 14%. By segment: Northeast/Mid-Con revenue was essentially flat sequentially at $69.6 million, up about 0.5%, with adjusted EBITDA margin expanding to 25.3% and $15.1 million of total adjusted EBITDA, driven by gas-directed activity; dry gas revenue in this segment increased 5.3% quarter over quarter. Rockies revenue declined to $46.3 million, roughly 9% sequentially, primarily due to weather, seasonality, and customer budget exhaustion; adjusted EBITDA declined to $6.9 million, or 15%. Southwest revenue declined about 10% to $50.9 million from the third quarter, mostly tied to budget exhaustion and softer oil-directed activity in the Permian; adjusted EBITDA increased to $6.8 million, or 33%. Corporate adjusted EBITDA loss improved in Q4, with full-year corporate adjusted EBITDA loss around $26 million

• Uncertainty in the macro environment, including the impact of the Middle East conflict on commodity prices and oil-directed activity, which could affect revenue projections. - Risks related to covenants and leverage, as stress testing indicated potential needs for covenant relief, and market conditions could impact the company's financial metrics. - Seasonality and budget exhaustion can impact cash flow and financial results, as seen in Q4 and potential effects on Q1

Q: Steve Ferazani asked about the strength in the Northeast/Mid-Con despite late-year weather, the components of margin improvement, the impact on Southwest revenue, thoughts on CapEx and cash as entering 2026, the PIK option, and the potential impact of the Middle East conflict if extended.

A: Christopher J. Baker and Jeff Stanford responded. Christopher J. Baker discussed the diverse geography of the Northeast/Mid-Con segment, margin drivers including product line mix and efficiencies, factors affecting Southwest revenue, CapEx plans and prudence, and the potential impact of the Middle East conflict on activity and the company's preparedness. Jeff Stanford talked about the proactive covenant relief as a cushion for future periods and the flexibility of the PIK option in managing note interest expense.

Q: John Daniel asked about simulfrac trends in the frac business and the U.S. coiled tubing market.

A: Christopher J. Baker responded, discussing simulfrac adoption in the Mid-Con vs other basins, attrition in the basin, coiled tubing market attrition, new build focus on ultra-deep and extended-reach laterals, and KLX's advantages in coiled tubing with proprietary technologies and extended reach tools