What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-13 compared with 2024-03-08 · 189 added, 139 removed, 557 unchanged (37% of the section changed)

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Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023

Consolidated Statements of Operations for the Year s Ended December 31, 2023 and December 31, 2022

Consolidated Statements of Stockholders' Equity for the Yea r s Ended December 31, 2023 and December 31, 2022

Consolidated Statements of Cash Flows for the Year s Ended December 31, 2023 and December 31, 2022

Consolidated Statements of Operations for the Years Ended December 31, 2024 and December 31, 2023

Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2024 and December 31, 2023

Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and December 31, 2023

Notes to Consolidated Financial Statements

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Business combinations – Acquisition of Greene's Energy Group, LLC – Refer to Note 3 to the consolidated financial statements

Revenue Recognition – Accrued Revenue – Refer to Note 1 to the consolidated financial statements

Critical Audit Matter Description

On March 8, 2023, KLXE acquired all of the equity interests of Greene’s Energy Group, LLC (“Greene’s”), in an all-stock transaction.

This transaction was accounted for as a purchase under FASB ASC Topic 805, Business Combinations (“ASC 805”).

Under the acquisition method of accounting, the fair value of purchase consideration transferred is allocated to the tangible assets acquired, and liabilities assumed based on their estimated fair values on the date of the acquisition.

The fair values assigned are based on assumptions and methodologies determined by management.

Personal property was valued using a combination of market approach and replacement cost approach.

We identified the estimated fair value of personal property acquired in the Greene’s acquisition as a critical audit matter due to the assumptions and methodologies made by management in estimating the respective fair value.

Auditing management’s assumptions and methodologies required a high degree of auditor judgment and increased extent of effort, including the use of our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s selected valuation methodologies for the acquired personal property and the assumptions related to the value of the personal property acquired.

As discussed in Note 1 to the consolidated financial statements, revenue is recognized upon the customer obtaining control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services.

As most projects are not billed until completion, the Company accrues revenue at the end of each month for jobs that are on-going and have not been invoiced.

As of December 31, 2024, the Company recognized $14.2 million of accrued revenue which is included within the "Revenue" financial statement line item within the financial statements.

The amount to be recorded is dependent upon estimates prepared by management.

We identified the estimated accrued revenue as a critical audit matter due to the subjectivity inherent and degree of judgment made by management in estimating the amount to be accrued.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the valuation of acquired personal property included the following, among others:

• We tested the effectiveness of controls over the valuation of the acquired personal property.

• With the assistance of internal fair value specialists, we:

o Evaluated the appropriateness of the market approach and replacement cost approach valuation methodologies used to value the acquired personal property.

o Evaluated the appropriateness of the valuation assumptions, including assumptions made about replacement cost and normal useful life, used to value the acquired personal property.

o Tested the mathematical accuracy of management’s calculations.

Our audit procedures related to accrued revenue included the following, among others:

• We evaluated the reasonableness of the Company's policies for recording the accrual, including whether there were changes in those policies in the current year.

• We tested the effectiveness of internal controls over accrued revenue, including (1) the process to estimate the revenue accrual, including the assumptions related to status of jobs on-going at the date of the accrual, and (2) management's analysis of the actual revenue invoiced in the subsequent period compared to the amount accrued for at year-end.

• We evaluated the reasonableness of the assumptions and degree of judgment utilized in the determination of the accrual, tested the source of information used to estimate the accrual, and validated the mathematical accuracy of management's calculation.

• We selected a sample of accrued revenue transactions and performed the following:

o Evaluated the Company's methodology and assumptions in developing their revenue accrual, including assessing the completeness and accuracy of the underlying data used by management in their estimates.

o Compared the related revenue billed subsequently in January 2025 to the estimate recorded.

/s/ Deloitte & Touche LLP

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Accumulated deficit ( 562.4 ) ( 509.4 )

Total stockholders’ equity (deficit) 38.8 ( 15.8 )

Total stockholders’ (deficit) equity ( 10.5 ) 38.8

Total liabilities and stockholders' equity $ 456.3 $ 539.8

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Research and development costs 1.4 1.4

Impairment and other charges 0.1 —

Bargain purchase gain — ( 1.9 )

Operating income 56.9 32.5

Operating (loss) income ( 15.5 ) 56.9

Non-operating expense:

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Interest expense 39.4 36.5

Net income (loss) before income tax 22.2 ( 2.5 )

Net (loss) income before income tax ( 52.4 ) 22.2

Income tax expense 0.6 3.0

Net income (loss) $ 19.2 $ ( 3.1 )

Net income (loss) per share-basic $ 1.23 $ ( 0.27 )

Net income (loss) per share-diluted $ 1.22 $ ( 0.27 )

Net (loss) income $ ( 53.0 ) $ 19.2

Net (loss) income per share-basic $ ( 3.27 ) $ 1.23

Net (loss) income per share-diluted $ ( 3.27 ) $ 1.22

See accompanying notes to consolidated financial statements.

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Balance at January 31, 2023 14.3 $ 0.1 $ 517.3 $ ( 4.6 ) $ ( 528.6 ) $ ( 15.8 )

10.5 $ 0.1 $ 478.1 $ ( 4.3 ) $ ( 525.3 ) $ ( 51.4 )

Adjustment to beginning period retained earnings as a result of ASC 326 adoption — — — — ( 0.2 ) ( 0.2 )

Restricted stock, net of forfeitures 0.2 — 2.6 — — 2.6

Purchase of treasury stock — — — ( 0.7 ) — ( 0.7 )

Greene's acquisition 2.4 — 34.0 — — 34.0

Issuance of common stock, net of cost — — ( 0.5 ) — — ( 0.5 )

Net loss — — — — ( 3.1 ) ( 3.1 )

Net income — — — — 19.2 19.2

Balance at December 31, 2023

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Purchase of treasury stock — — — ( 0.5 ) — ( 0.5 )

Greene's Acquisition 2.4 — 34.0 — — 34.0

Issuance of Common Stock, net of cost 0.6 0.1 0.5 — — 0.6

Net income — — — — 19.2 19.2

Net loss — — — — ( 53.0 ) ( 53.0 )

Balance at December 31, 2024

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Cash flows from operating activities:

Net income (loss) $ 19.2 $ ( 3.1 )

Net (loss) income $ ( 53.0 ) $ 19.2

Adjustments to reconcile net income (loss) to net cash flows from operating activities

Depreciation and amortization 94.0 72.8

Impairment and other charges 0.1 —

Non-cash compensation 3.9 3.0

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Cash flows from financing activities:

Borrowings on ABL Facility — 20.0

Proceeds from stock issuance, net of costs ( 0.4 ) ( 0.4 )

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Payments of debt issuance costs ( 0.9 ) ( 0.5 )

Proceeds from note payable 5.4 —

Change in financed payables ( 6.1 ) ( 4.6 )

Other ( 0.4 ) ( 0.7 )

Net cash flows (used in) provided by financing activities ( 20.8 ) 32.4

Net cash flows used in financing activities ( 24.0 ) ( 20.8 )

Net change in cash and cash equivalents ( 20.9 ) 55.1

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Supplemental schedule of non-cash activities:

Change in deposits on capital expenditures $ 1.4 $ ( 0.2 )

Change in accrued capital expenditures 4.8 0.4

Accrued capital expenditures 12.7 4.8

Acquisition of Greene's Energy Group, LLC — ( 32.9 )

Issuance of KLX stock for Acquisition of Greene's Energy Group, LLC — 34.0

Debt-for-equity exchanges 1.0 —

See accompanying notes to consolidated financial statements.

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Activity in our allowance for doubtful accounts during the years ended December 31, 2024 and December 31, 2023 is set forth in the table below:

Allowance for doubtful accounts Balance at beginning of period ASC 326* Adjustment at adoption Charged (credited) to costs and expenses Deductions (1)

Allowance for doubtful accounts Balance at beginning of period Charged (credited) to costs and expenses Deductions (1)

Balance at end of period

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Inventories, made up primarily of dissolvable plugs, supplies, finished goods and other consumables used to perform services for customers.

The Company values inventories at the lower of cost or net realizable value.

The Company values inventories at the lower of cost or net realizable value and uses the weighted average costing and first-in, first-out methods.

Reserves for excess and obsolete inventory were approximately $ 3.2 and $ 4.5 as of years ended December 31, 2024 and December 31, 2023, respectively.

Property and Equipment, Net

Property and equipment are stated at cost and depreciated generally under the straight-line method over their estimated useful lives of one to forty years (or the lesser of the term of the lease for leasehold improvements, as appropriate).

Property and Equipment

Property and equipment is stated at cost and depreciated under the straight-line method over the estimated useful life of the asset.

Equipment held under finance leases is stated at the present value of its future

minimum lease payments and is depreciated under the straight-line method over the shorter of the lease term or the estimated useful life of the asset.

Estimated useful lives requires significant judgment which is influenced by our historical experience in operating property and equipment, technological developments, and expectations of future demand.

Intangible Assets, Net

Under Financial Accounting Standards Board (“FASB”) ASC Topic 350, Intangibles—Goodwill and Other, indefinite-lived intangible assets are reviewed at least annually for impairment.

Acquired intangible assets with definite lives are amortized over their individual useful lives.

As of December 31, 2023 and December 31, 2022, there were net intangible assets with definite lives of $ 1.8 and $ 2.1 , respectively.

Acquired intangible assets with definite lives are amortized under the straight-line method over their individual useful lives.

As of December 31, 2024 and December 31, 2023, there were net intangible assets, consisting of customer relationships and patents, with definite lives of $ 1.5 and $ 1.8 , respectively.

As of December 31, 2024 and December 31, 2023, intangible assets had gross carrying amount of $ 5.9 and $ 5.9 and accumulated amortization of $ 4.4 and $ 4.1 , respectively, with amortization expense for the years then ended of $ 0.3 and $ 0.3 , respectively.

The Company has elected the practical expedients for all asset classes to carry forward the historical lease classifications and assessment of initial direct costs, account for lease and non-lease components as a single component, and exclude leases with an initial term of less than twelve months in the lease assets and liabilities.

Long‑Lived Assets

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The Company capitalizes certain third-party fees directly related to the issuance of debt and amortizes these costs over the life of the debt using the effective interest method.

Debt issuance costs related to the Company’s $ 100.0 senior secured asset-based lending facility (the “ABL Facility”) are presented net of amortization as a non-current asset.

Debt issuance costs related to the Prior ABL Facility (as defined below) are presented net of amortization as a non-current asset.

Debt issuance costs related to the Company’s $ 236.3 principal amount of 11.5 % senior secured notes due 2025 (the “2025 Senior Notes”) are presented net of amortization as an offset to the liability.

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Stock-Based Compensation

The Company accounts for share-based compensation arrangements in accordance with the provisions of FASB ASC 718, whereby share-based compensation cost is measured on the date of grant, based on the calculated fair value of the award and recognized as selling, general and administrative expenses in the consolidated statement of operations over the requisite service period.

The Company accounts for share-based compensation arrangements in accordance with the provisions of FASB ASC Topic 718, Stock Compensation whereby share-based compensation cost is measured on the date of grant, based on the calculated fair value of the award and recognized as selling, general and administrative expenses in the consolidated statement of operations over the requisite service period.

Compensation cost recognized during the years ended December 31, 2024 and December 31, 2023 primarily related to grants of restricted stock and restricted stock units granted or approved by the Board’s compensation committee (the “Compensation Committee”).

See Note 12 - Stock-Based Compensation for additional information related to stock-based compensation.

See Note 12 - Equity and Stock-Based Compensation for additional information related to stock-based compensation.

Concentration of Risk

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NOTE 2 - Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280).

This ASU is intended to enhance reportable segment disclosures by adopting a number of provisions currently in Regulation S-X and Regulation S-K upon the provisions' removal from these regulations.

The guidance is effective for the Company for the fiscal year beginning January 1, 2024 and is not expected to have a material impact on the Company’s consolidated financial statements.

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740).

In December 2023, FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740).

This ASU includes specific requirements for the rate reconciliation, income taxes paid and other tax-related disclosures.

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Recently Adopted Accounting Standard Updates

In July 2023, FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718):

Amendments to Securities and Exchange Commission (the “SEC”) Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.

This ASU provides guidance for the valuation of spring-loaded stock-based compensation awards.

We have adopted ASU 2023-03 effective immediately.

The changes in the guidance are currently not applicable to our calculation of stock-based compensation awards, but we continue to evaluate and will comply with the updated guidance for any stock-based compensation awards, where applicable.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280).

This ASU is intended to enhance reportable segment disclosures by adopting a number of provisions currently in Regulation S-X and Regulation S-K upon the provisions' removal from these regulations.

This guidance has been adopted as of this Form 10-K for the year ended December 31, 2024.

Note that while Note 14 - Segment Reporting has been updated to comply with the guidance provisions, there is no material impact on the Company’s consolidated financial statements.

NOTE 3 - Business Combinations

On March 8, 2023, KLXE acquired all of the equity interests of Greene's Energy Group, LLC (“Greene’s”), in an all-stock transaction (“Greene's Acquisition”), including $ 1.7 in cash, which was subsequently adjusted to $ 1.1 due to a $ 0.6 working capital adjustment.

On March 8, 2023, KLXE acquired all of the equity interests of Greene's Energy Group, LLC (“Greene’s”), in an all-stock transaction (“Greene's Acquisition”).

The total consideration for the acquisition consisted of the issuance of approximately 2.4 million shares of KLXE Common Stock, subject to customary post-closing adjustments, with an implied enterprise value of approximately $ 30.3 based on a 30-day volume weighted average price as of March 7, 2023 less acquired cash.

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December 31, 2024 December 31, 2023

Accrued salaries, vacation and related benefits $ 17.6 $ 16.3

Accrued compensation and employee benefits $ 27.9 $ 25.9

Accrued property taxes 1.8 2.4

Accrued taxes other than property 3.5 7.3

Accrued incentive compensation 8.3 12.2

Other accrued liabilities 8.1 7.1

4 unchanged sentences

2025 Senior Notes (1)

ABL Facility 50.0 50.0

$ 236.3 $ 237.3

Prior ABL Facility (1)

Total principal outstanding 286.3

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Total debt $ 285.1 $ 284.3

(1) Subsequent to December 31, 2024, the Company completed the Refinancing (as defined below) and entered into the New ABL Facility (as defined below).

In connection therewith, the Company deposited funds in trust to be used to effect the redemption of all the remaining outstanding 2025 Senior Notes and repaid the Prior ABL Facility in full.

As such, these obligations are classified as long-term on the Company's Consolidated Balance Sheets at December 31, 2024.

See below for further information on these transactions.

2025 Senior Notes

As of December 31, 2024, long-term debt included $ 236.3 principal amount of the 2025 Senior Notes offered pursuant to Rule 144A under the Securities Act of 1933 (as amended, the “Securities Act”) and to certain non-U.S.

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Accrued interest related to the 2025 Senior Notes as of December 31, 2024 and December 31, 2023 was $ 4.5 and $ 4.5 , respectively.

During the year ended December 31, 2022, we entered into debt for equity exchange agreements (the “Exchange Agreements”) with certain holders (the “Noteholders”) of our Senior Notes.

Pursuant to the Exchange Agreements, the Noteholders exchanged $ 12.8 in aggregate principal amount of the Company’s outstanding Senior Notes for an aggregate of 777,811 shares of our Common Stock (the “Exchanges”).

The Company’s shares of Common Stock issued in connection with the Exchanges were not registered under the Securities Act, and were issued to existing holders of the Company’s securities without commission in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.

The Senior Notes exchanged represent approximately 5.1 % of the outstanding principal amount of outstanding Senior Notes prior to the Exchanges.

Following the Exchanges, approximately $ 237.3 in aggregate principal amount of Senior Notes remained outstanding.

As of December 31, 2023, the Company also had a $ 120.0 ABL Facility pursuant to a senior secured credit agreement dated August 10, 2018.

The ABL Facility became effective on September 14, 2018 and matures on the ABL Maturity Date (as defined below) in 2025.

On October 22, 2018, the ABL Facility was amended primarily to permit the Company to issue the Senior Notes and acquire Motley and the definition of the required ratio (as defined in the ABL Facility) was also amended as a result of the Senior Notes issuance.

On June 20, 2023, the Company entered into a Fourth Amendment to the ABL Facility, with certain of its subsidiaries party thereto, as guarantors, with JPMorgan Chase Bank, N.A., as administrative agent, collateral

agent and an issuing lender, and the other lenders and issuing lenders party thereto from time to time (the “ABL Amendment”).

The ABL Amendment, among other things, (i) extended the maturity date of the ABL Facility from September 15, 2024 to the earlier of (A) September 15, 2025 or (B) August 1, 2025, if the Company's Senior Notes are still outstanding as of such date (the earlier of the foregoing item (A) or item (B), the “ABL Maturity Date”) and (ii) increased the revolving credit commitment from $ 100.0 to $ 120.0 .

Unamortized deferred costs for the ABL Facility of $ 1.3 and $ 1.7 were recorded in other non-current assets as of December 31, 2023 and December 31, 2022, respectively.

Borrowings outstanding under the ABL Facility were $ 50.0 and $ 50.0 as of December 31, 2023 and December 31, 2022, respectively, and bear interest at a rate equal to Term SOFR (as defined in the ABL Facility) plus the Applicable Margin (as defined in the ABL Facility).

The effective interest rate under the ABL Facility was approximately 7.96 % on December 31, 2023.

Interest expense amounted to $ 3.9 for the year ended December 31, 2023.

Accrued interest under the ABL Facility was $ 0.0 as of December 31, 2023.

The ABL Facility is tied to a borrowing base formula and has no maintenance financial covenants as long as the minimum level of borrowing availability is maintained.

The ABL Facility is secured by, among other things, a first priority lien on the Company’s accounts receivable and inventory and contains customary conditions precedent to borrowing and affirmative and negative covenants.

The ABL Facility includes a springing financial covenant which requires the Company’s fixed-charge coverage ratio (“FCCR”) to be at least 1.0 to 1.0 if availability falls below the greater of $ 15.0 or 20 % of the borrowing base.

At all times during the year ended December 31, 2023, availability exceeded this threshold, and the Company was not subject to this financial covenant.

As of December 31, 2023, the FCCR was above 1.0 to 1.0.

The Company was in full compliance with its ABL Facility as of December 31, 2023.

We have funds available of $ 41.9 based on the December 2023 borrowing base certificate.

During the year ended December 31, 2024, we entered into a debt-for-equity exchange agreement (the “Exchange Agreement”) with a noteholder of our 2025 Senior Notes.

Pursuant to the Exchange Agreement, the noteholder exchanged $ 1.0 in aggregate principal amount of the Company’s outstanding 2025 Senior Notes for an aggregate of 190,476 shares of our Common Stock (the “Exchange”).

The Company’s shares of Common Stock issued in connection with the debt-for-equity exchanges were not registered under the Securities Act, and were issued to existing holders of the Company’s securities without commission in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.

The 2025 Senior Notes exchanged in 2024 represent approximately 0.4 % of the outstanding principal amount of outstanding 2025 Senior Notes prior to the Exchange.

Following the Exchange, approximately $ 236.3 in aggregate principal amount of the 2025 Senior Notes remained outstanding.

No 2025 Senior Notes were exchanged in 2023 and there were approximately $ 237.3 in aggregate principal amount of the 2025 Senior Notes outstanding as of December 31, 2023.

On March 12, 2025, approximately $ 143.6 aggregate principal amount of the 2025 Senior Notes were exchanged in connection with the Refinancing, and the Company deposited $ 97.1 in trust with the trustee for the 2025 Senior Notes and irrevocably instructed the trustee to apply such funds to effect the redemption of all of the remaining outstanding 2025 Senior Notes on March 30, 2025 at a redemption price of 100.000 % of the principal amount thereof, plus accrued and unpaid interest.

Upon deposit of such redemption amount, the indenture that governs the 2025 Senior Notes was satisfied and discharged in accordance with its terms and, as a result thereof, the Company has been released from its obligations under the 2025 Senior Notes except with respect to those provisions of the indenture that, by their terms, survive the satisfaction and discharge of thereof.

2030 Senior Notes

On March 12, 2025, as part of the Refinancing, the Company and certain of its subsidiaries entered into an indenture, dated as of March 12, 2025 (the “2030 Senior Notes Indenture”), with U.S.

Bank Trust Company, National Association, as the trustee and notes collateral agent, pursuant to which $ 232.2 of the 2030 Senior Notes were issued.

The 2030 Senior Notes will mature on March 12, 2030 and bear a floating rate of interest

of Term SOFR plus the Applicable Margin (as defined in the 2030 Senior Notes Indenture) based on the Secured Net Leverage Ratio (as defined in the 2030 Senior Notes Indenture) payable on the last day of the applicable interest period in cash or, at the Company’s election, additional 2030 Senior Notes paid-in-kind on one-, three- or six-month interest periods, which shall include a 100 basis point premium for any period where interest is paid-in-kind.

The 2030 Senior Notes are senior secured obligations of the Company and are guaranteed on a senior secured basis by each of the Company’s current domestic subsidiaries and by certain future subsidiaries, subject to agreed guaranty and security principles and certain exclusions.

The 2030 Senior Notes were initially fully and unconditionally guaranteed by each of the Company’s current subsidiaries.

The 2030 Senior Notes will also be guaranteed by each of the Company’s future subsidiaries that guarantee the Company’s indebtedness or indebtedness of guarantors, including under the New ABL Facility and such subsidiaries that become guarantors in the future will also pledge their collateral in support of such guarantees.

These guarantees are senior secured obligations of the guarantors secured by a first priority security interest on substantially all of the guarantors’ assets (other than collateral securing the New ABL Facility on a first priority basis) and a second priority security interest on the guarantors’ assets which secure the New ABL Facility on a first priority basis, subject in each case to certain excluded assets.

The Company will be required to redeem the 2030 Senior Notes in an amount equal to 2.00 % per annum of all 2030 Senior Notes outstanding as of the prior applicable Interest Payment Date (as defined in the 2030 Senior Notes Indenture) on the last business day of each of March, June, September and December, commencing on March 31, 2025.

Additionally, upon certain changes of control, consummation of certain asset sales and other events, the Company will be required to repurchase the 2030 Senior Notes at the applicable redemption prices.

The 2030 Senior Notes Indenture contains certain financial covenants that include (i) a maximum total net leverage ratio of not greater than 4.50 to 1.0 for the test periods ending March 31, 2025 through December 31, 2025, stepping down to 4.00 to 1.0 for the test periods ending March 31, 2026 through December 31, 2026, 3.50 to 1.0 for the test periods ending March 31, 2027 through December 31, 2027, 3.00 to 1.0 for the test periods ending March 31, 2028 through December 31, 2028, and 2.50 to 1.0 for each test period thereafter and (ii) restrictions on making net capital expenditures in any test period in excess of the greater of (x) $ 65.0 in the aggregate or (y) 7 % of revenues during such test period.

The 2030 Senior Notes Indenture also restricts, among other things, the Company’s ability to incur indebtedness and liens, pay dividends or make other distributions, make certain other restricted payments or investments, sell assets, enter into restrictive agreements, enter into transactions with the Company’s affiliates, and merge or consolidate with other entities or convey, transfer or lease all or substantially all of the Company’s properties and assets to another person, which, in each case, is subject to certain limitations and exceptions.

The 2030 Senior Notes Indenture also contains customary events of default including, among other things, the failure to pay interest for three business days, failure to pay principal when due, failure to observe or perform any other covenants or agreement in the 2030 Senior Notes Indenture subject to grace periods, cross-acceleration to indebtedness with an aggregate principal amount in excess of $ 7.5 , material impairment of liens, failure to pay certain material judgments and certain events of bankruptcy.

The 2030 Senior Notes Indenture permits the Company to incur additional pari passu indebtedness of up to $ 150.0 within twelve months of the Refinancing (including for the purpose of consummating permitted acquisitions and investments) subject to the terms and conditions contained in the 2030 Senior Notes Indenture and contains certain other covenants, events of default and other customary provisions.

Prior ABL Facility

On August 10, 2018, the Company entered into a Credit Agreement, by and among the Company, as borrower, certain subsidiaries of the Company, as guarantors, JPMorgan Chase Bank, N.A., as administrative agent (“Prior Administrative Agent”), as collateral agent and as issuing lender, and the lenders party thereto, which has been repaid in full and the commitments thereunder terminated (as amended, supplemented, or otherwise modified prior to the date hereof, the “Prior ABL Facility”).

The Prior ABL Facility became effective on September 14, 2018 and was scheduled to mature in 2025.

Borrowings under the Prior ABL Facility bore interest at a rate equal to Term SOFR (as defined in the Prior ABL Facility) plus the Applicable Margin (as defined in the Prior ABL Facility).

As of December 31, 2024, $ 50.0 was outstanding under the Prior ABL Facility and the effective interest rate under the Prior ABL Facility was approximately 7.44 %.

On March 12, 2025, in connection with the completion of the Refinancing, the Prior Credit Facility was repaid in full using borrowings under the New ABL Facility and the commitments thereunder terminated.

In connection with the prepayment and termination of the Prior ABL Facility, the Company provided Prior Administrative Agent cash collateral in support of certain existing letters of credit and existing purchasing card program in an aggregate amount of approximately $ 8.1 .

New ABL Facility

On March 7, 2025, the Company also entered into a Credit Agreement, dated as of March 7, 2025 (the “New ABL Facility”), with the Company, as borrower, Eclipse Business Capital LLC, as administrative agent, as collateral agent and as FILO administrative agent and the lenders party thereto.

The New ABL Facility is comprised of an asset-based revolving credit facility with a $ 125.0 commitment (the “Revolving Facility”), a first-in-last-out asset-based credit facility with a $ 10.0 commitment (the “FILO Facility”), and a committed incremental loan option under the Revolving Facility with a $ 25.0 commitment (the “Incremental Revolving Loans”).

The availability of the Incremental Revolving Loans are subject to usual and customary conditions to effectiveness, including, for example, the Company electing to utilize such Incremental Revolving Loans by a date certain and the payment of required fees.

Borrowings under the Revolving Facility (including, to the extent incurred, the Incremental Revolving Loans) bear interest at a rate equal to adjusted term SOFR plus an applicable margin of 4.625 %.

Borrowings under the FILO Facility bear interest at a rate equal to adjusted term SOFR plus an applicable margin of 6.00 %.

The applicable margin under the Revolving Facility is subject to a 0.125 % reduction and the applicable margin under the FILO Facility is subject to a 0.50 % reduction, in each case upon the repayment in full of a $ 5.0 over-advance provided on the initial funding date under the Revolving Facility.

The New ABL Facility is secured by, among other things, a first priority lien on accounts receivable and inventory and contains customary conditions precedent to borrowing and affirmative and negative covenants.

The initial funding under the New ABL Facility occurred on March 12, 2025, and the proceeds therefrom were used to repay the Prior ABL Facility in full.

After giving effect to the foregoing, we had approximately $ 39.9 of available borrowing capacity under the New ABL Facility.

The New ABL Facility includes a springing financial covenant which requires the Company’s consolidated fixed charge coverage ratio to be at least 1.0 to 1.0 if availability under the Revolving Facility falls below $ 7.0 .

The New ABL Facility includes financial, operating and negative covenants that limit our ability to incur indebtedness, to create liens or other encumbrances, to make certain payments and investments, including dividend payments, to engage in transactions with affiliates, to engage in sale/leaseback transactions, to guarantee indebtedness and to sell or otherwise dispose of assets and merge or consolidate with other entities.

It also includes a covenant to deliver annual audited financial statements that are not qualified by a “going concern” or like qualification or exception.

A failure to comply with the obligations contained in the New ABL Facility could result in an event of default, which could permit acceleration of the debt, termination of undrawn commitments and enforcement against any liens securing the debt.

The New ABL Facility contains certain other covenants (including the ability to incur indebtedness for the purpose of consummating permitted acquisitions, subject to the terms of the New ABL Facility), events of default and other customary provisions.

Our New ABL Facility matures in 2028.

Other debt-related items

The Company uses standby letters of credit to facilitate commercial transactions with third parties and to secure our performance to certain vendors.

Total letters of credit outstanding under the ABL Facility were $ 6.4 at December 31, 2023.

Total letters of credit outstanding under the Prior ABL Facility were $ 6.5 at December 31, 2024.

To the extent liabilities are incurred as a result of the activities covered by the letters of credit, such liabilities are included on the accompanying consolidated balance sheets.

Maturities of long-term debt are as follows:

Years ending December 31, Amount

Total maturities of long-term debt $ 287.3

As of December 31, 2024, the Company had $ 1.9 of outstanding short-term indebtedness related to the financing of various insurance premiums.

NOTE 8 - Leases

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Finance lease cost is comprised of a separate interest component and amortization component and is presented as a component of the Interest expense, net and Depreciation and amortization line items, respectively, in the Consolidated Statement of Operations.

ASU 2016-02, Leases Topic 842 (“ASC 842”), requires that a lessee use the rate implicit in the lease when measuring the lease liability and ROU asset, when available.

ASU 2016-02, Leases (Topic 842), requires that a lessee use the rate implicit in the lease when measuring the lease liability and ROU asset, when available.

Alternatively, the Company is permitted to use its incremental borrowing rate which is defined as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

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2026 7.0 16.5

2026 5.5 15.1

Thereafter 0.1 —

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The carrying amounts of cash and cash equivalents, accounts receivable-trade and accounts payable represent their respective fair values due to their short-term nature.

There was $ 50.0 debt outstanding under the ABL Facility as of December 31, 2023.

The fair value of the ABL Facility approximates its carrying value as of December 31, 2023.

There was $ 50.0 debt outstanding under the Prior ABL Facility as of December 31, 2024.

The fair value of the Prior ABL Facility approximates its carrying value as of December 31, 2024.

The following tables present the placement in the fair value hierarchy of the 2025 Senior Notes, based on market prices for publicly traded debt, as of December 31, 2024 and December 31, 2023:

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Total Assets Held for Sale $ 2.3 $ — $ 2.3 $ —

During the years ended December 31, 2023 and December 31, 2022, the before-tax loss (gain) related to Assets Held for Sale was nil and $( 0.3 ), respectively.

During the years ended December 31, 2024 and December 31, 2023, there was no before-tax loss (gain) related to Assets Held for Sale.

NOTE 10 - Commitments, Contingencies and Off-Balance Sheet Arrangements

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The KLX Energy Services Holdings, Inc.

Retirement Plan (“401(k) Plan”) was established pursuant to Section 401(k) of the Internal Revenue Code.

Retirement Plan (“401(k) Plan”) was established

pursuant to Section 401(k) of the Internal Revenue Code.

Under the terms of this plan, covered employees may contribute up to 100 % of their annual compensation, limited to certain statutory maximum contributions.

Participants would vest in discretionary matching contributions in an amount equal to 50 % of the first 6 % of an employee’s eligible compensation that is contributed to the 401(k) Plan based on a 3-year vesting schedule.

Note that in the fourth quarter of 2022, the Company fully reinstated the previously suspended 401(k) Plan match at the rate of 50 % of the first 6 %.

Total expense for the Plan was $ 3.4 and $ 3.5 for the years ended December 31, 2024 and December 31, 2023, respectively.

NOTE 12 - Stock-Based Compensation

NOTE 12 - Equity and Stock-Based Compensation

Equity Distribution Agreement

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Pursuant to the terms of the Equity Distribution Agreement, the Company may sell from time to time through the Agent (the “ATM Offering”) the Company’s Common Stock, par value $ 0.01 per share, having an aggregate offering price of up to $ 50.0 .

November 16, 2022, the Company entered into Amendment No.

On November 16, 2022, the Company entered into Amendment No.

1 to the Equity Distribution Agreement (the “EDA Amendment”).

Among other things, the EDA Amendment allows for debt for equity exchanges in accordance with Section 3(a)(9) of the Securities Act.

Any Common Stock offered and sold in the ATM Offering will be issued pursuant to the Company’s shelf registration statement on Form S-3 (Registration No.

Shares of Common Stock offered and sold in the ATM Offering were issued pursuant to the Company's shelf registration statement on Form S-3 (Registration No.

333-256149) filed with the SEC on May 14, 2021 and declared effective on June 11, 2021 (the “Registration Statement”), the prospectus supplement relating to the ATM Offering filed with the SEC on June 14, 2021 and any applicable additional prospectus supplements related to the ATM Offering that form a part of the Registration Statement.

Sales of Common Stock under the Equity Distribution Agreement may be made in any transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act.

The Registration Statement expired on June 11, 2024 pursuant to Rule 415(a)(5) under the Securities Act.

Sales under the ATM Offering program may restart when and if the Company files a prospectus supplement under a successor registration statement.

The Equity Distribution Agreement contains customary representations, warranties and agreements by the Company, indemnification obligations of the Company and the Agent, including for liabilities under the Securities Act, other obligations of the parties and termination provisions.

Under the terms of the Equity Distribution Agreement, the Company will pay the Agent a commission equal to 3.0 % of the gross sales price of the Common Stock sold.

The Company plans to use the net proceeds from the ATM Offering, after deducting the Agent’s commissions and the Company’s offering expenses, for general corporate purposes, which may include, among other things, paying or refinancing all or a portion of the Company’s then-outstanding indebtedness, and funding acquisitions, capital expenditures and working capital.

During the three and twelve months ended December 31, 2023, the Company did no t sell any shares of Common Stock and incurred legal and administrative fees of $ 0.1 and $ 0.5 , respectively.

During the three and twelve months ended December 31, 2022, the Company sold 976,808 and 2,803,007 shares of Common Stock, respectively, in exchange for gross proceeds of approximately $ 15.0 and $ 25.1 , respectively, and paid fees to the sales agent and other legal and accounting fees of $ 0.1 and $ 0.3 , respectively, to establish the ATM Offering.

The Company used the net proceeds from the ATM Offering, after deducting the Agent’s commissions and the Company’s offering expenses, for general corporate purposes, which included funding acquisitions, capital expenditures and working capital.

During the three and twelve months ended December 31, 2024, the Company did not sell any shares of Common Stock and incurred legal and administrative fees of $ 0.3 and $ 0.5 , respectively.

During the three and twelve months ended December 31, 2023, the Company did not sell any shares of Common Stock and incurred legal and administrative fees of $ 0.1 and $ 0.5 , respectively.

The Company has a Long-Term Incentive Plan (“LTIP”) under which the Compensation Committee has the authority to grant stock options, stock appreciation rights, restricted stock, restricted stock units or other forms of equity-based or equity-related awards.

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Total income tax expense $ 0.6 $ 3.0

A reconciliation of income tax expense using the federal statutory income tax rate to the actual income tax consists of the following:

A reconciliation of income tax expense using the federal statutory income tax rate of 21% to the actual income tax consists of the following:

December 31, 2024 December 31, 2023

Income tax provision computed at the statutory federal rate $ 4.6 $ ( 0.5 )

Income tax (benefit) expense at statutory rate $ ( 11.0 ) $ 4.6

State income taxes, net of federal tax benefit 0.7 1.1

Change in valuation allowance ( 6.4 ) ( 5.1 )

Valuation allowance 9.5 ( 6.4 )

Adjustments to prior year tax accruals ( 0.3 ) 2.2

Change in state tax rate — 3.9

Non-taxable/non-deductible items 0.1 0.1

Stock based compensation 0.1 ( 0.1 )

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Income tax expense was $ 0.6 for the year ended December 31, 2024, which reflects an effective tax rate of approximately ( 1.1 )%.

For the fiscal year ended December 31, 2024, the Company recognized current state tax expense on its year-to-date income of $ 0.9 , primarily related to Texas franchise tax, less a federal tax adjustment of $( 0.3 ) to the prior year accrual.

For the fiscal year ended December 31, 2023, the Company recognized current federal tax expense on its year-to-date income of $ 0.3 and $ 1.1 of state income tax, primarily related to Texas franchise tax, less a deferred tax benefit of $( 0.6 ), primarily due to the bargain purchase gain related to the Greene's Acquisition.

In addition, the Company recognized $ 2.0 of federal tax expense and $ 0.2 of state income tax expense for the fiscal year ended December 31, 2022.

The prior year income tax expense of $ 0.6 , as reported, relates to the Texas franchise tax.

The tax effects of temporary differences and carryforwards that give rise to deferred income tax assets and liabilities consisted of the following:

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Operating lease liabilities 4.8 5.4

Other 7.0 7.3

Interest expense limitation 23.3 10.3

Other 6.8 7.0

Deferred tax liabilities:

Bargain purchase gain — ( 9.4 )

Operating lease assets ( 4.6 ) ( 5.2 )

Other ( 1.1 ) ( 0.7 )

Depreciation ( 16.4 ) ( 16.4 )

Other ( 1.2 ) ( 1.1 )

( 22.2 ) ( 22.7 )

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The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.

A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2023.

A significant piece of objective negative evidence evaluated was the cumulative loss that existed for the three-year period ended December 31, 2024.

Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

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The amount of the deferred tax assets considered realizable, however, could be adjusted if additional objectively verifiable positive evidence materializes in future reporting periods, such as a demonstrated operating profitability.

The change in the valuation allowance from December 31, 2022 was a net increase of $ 4.3 , which is comprised of a decrease due to current year operating profitability, offset by an increase to the net operating losses due to Section 382 limitations.

The change in the valuation allowance from December 31, 2023 was a net increase of $ 11.1 , which is primarily due to the current year operating loss plus prior year adjustments.

The valuation allowance recorded is exclusive of the $ 0.1 relating to the Texas franchise tax, which the Company expects to fully realize.

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federal net operating loss carryforwards of $ 840.2 and $ 780.0 , for the fiscal years ended December 31, 2024 and December 31, 2023, respectively.

Of these net operating losses, $ 656.3 is

subject to an IRC Section 382 limitation, excluding $ 12.1 that will expire between 2029 and 2037 that the Company believes will not be utilized.

Of these net operating losses, $ 724.1 is subject to an IRC Section 382 limitation, excluding $ 12.1 that will expire between 2029 and 2037 that the Company believes will not be utilized.

The Company also has state net operating loss carryforwards of $ 269.3 for the fiscal year ended December 31, 2024, and $ 291.7 for the fiscal year ended December 31, 2023, which begin to expire for tax years ending in 2028.

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The Company’s reportable segments, which are also its operating segments, are comprised of the Southwest Region (the Permian Basin and the Eagle Ford Shale), the Rocky Mountains Region (the Bakken, Williston, DJ, Uinta, Powder River, Piceance and Niobrara basins) and the Northeast/Mid-Con Region (the Marcellus and Utica Shale as well as the Mid-Continent STACK and SCOOP and Haynesville Shale).

The segments regularly report their results of operations and make requests for capital expenditures and acquisition funding to the CODM.

The segments regularly report their results of operations and make requests for capital expenditures and acquisition funding to the Chief Operating Decision Maker ("CODM").

The Company's CODM is our Chief Executive Officer.

As a result, Company has three reportable segments.

The following table presents revenues and operating (loss) earnings by reportable segment:

December 31, 2023 December 31, 2022

Rocky Mountains $ 271.3 $ 229.0

Southwest 304.9 255.2

Northeast/Mid-Con 312.2 297.4

Total revenues 888.4 781.6

Operating income (loss)

Rocky Mountains 46.1 27.3

Southwest 19.3 14.5

Northeast/Mid-Con 40.6 39.1

Corporate and other ( 49.1 ) ( 48.4 )

Total operating income (loss) 56.9 32.5

The Company has adopted ASU 2023-07, Segment Reporting (Topic 280) as of December 31, 2024.

Accordingly, the following tables have been updated to present revenues, significant expenses and operating income by reportable segment:

December 31, 2024

Mountains Southwest Northeast

/Mid-Con Eliminations Total

Revenues $ 229.1 $ 270.7 $ 211.6 $ ( 2.1 ) $ 709.3

Cost of sales 164.6 218.4 164.9 ( 2.1 )

Depreciation and amortization 27.3 30.8 34.1

Selling, general and administrative (1)

Other segment items 5.9 4.8 3.8

Segment operating income $ 23.6 $ 4.0 $ 2.2 $ — $ 29.8

Reconciliation of profit or loss (segment profit/(loss))

Unallocated corporate expenses ( 45.3 )

Interest income 2.5

Interest expense ( 39.4 )

Income (loss) before income tax $ 22.2 $ ( 2.5 )

The following table presents revenues by service offering by reportable segment:

December 31, 2023 December 31, 2022

Loss before income tax $ ( 52.4 )

(1) Note that the Selling, general and administrative line item in the Consolidated Statement of Operations contains the Other segment items line item here, less the Research and development costs line item.

December 31, 2023

Mountains Southwest Northeast

/Mid-Con Total Rocky

/Mid-Con Eliminations Total

Revenues $ 271.5 $ 306.8 $ 312.3 $ ( 2.2 ) $ 888.4

Cost of sales 187.5 243.6 236.5 ( 2.2 )

Depreciation and amortization 22.4 25.7 22.9

Selling, general and administrative (1)

Other segment items 8.0 5.1 6.0

Segment operating income $ 46.1 $ 19.8 $ 40.1 $ — $ 106.0

Reconciliation of profit or loss (segment profit/(loss))

Unallocated corporate expenses ( 49.1 )

Interest income 1.8

Interest expense ( 36.5 )

Income before income tax $ 22.2

Other segment items include research and development costs, allocations and other expenses.

The following tables present revenues by service offering by reportable segment:

December 31, 2024

Mountains Southwest Northeast

/Mid-Con Total

/Mid-Con Eliminations Total

Drilling $ 24.6 $ 76.3 $ 57.3 $ ( 2.1 ) $ 156.1

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Total revenues $ 229.1 $ 270.7 $ 211.6 $ ( 2.1 ) $ 709.3

December 31, 2023

Mountains Southwest Northeast

/Mid-Con Eliminations Total

Drilling $ 31.1 $ 102.0 $ 89.3 $ ( 2.2 ) $ 220.2

Completion 149.9 138.9 179.7 468.5

Production 65.2 34.0 18.6 117.8

Intervention 25.3 31.9 24.7 81.9

Total revenues $ 271.5 $ 306.8 $ 312.3 $ ( 2.2 ) $ 888.4

The following table presents total assets by segment:

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Total 364.7 427.3

Corporate and other 112.5 57.4

Unallocated corporate assets 91.6 112.5

Total assets $ 456.3 $ 539.8

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Northeast/Mid-Con 26.1 25.7

Corporate and other 0.9 —

Unallocated corporate expenditures 0.4 0.9

Total capital expenditures $ 65.1 $ 57.1

NOTE 15 - Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed using the weighted average common shares outstanding during the period.

Diluted net income (loss) per common share is computed by using the weighted average common shares outstanding, excluding unvested restricted shares when their inclusion would be anti-dilutive.

NOTE 15 - Net (Loss) Income Per Common Share

Basic net (loss) income per common share is computed using the weighted average common shares outstanding during the period.

Diluted net (loss) income per common share is computed by using the weighted average common shares outstanding, excluding unvested restricted shares when their inclusion would be anti-dilutive.

For the years ended December 31, 2024 and December 31, 2023, we excluded 0.4 and 0.0 million shares of the Company’s Common Stock, respectively.

1 unchanged sentence

December 31, 2024 December 31, 2023

Net income (loss) $ 19.2 $ ( 3.1 )

Net (loss) income $ ( 53.0 ) $ 19.2

(Shares in millions)

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Diluted weighted average common shares 16.2 15.7

Basic net income (loss) per common share $ 1.23 $ ( 0.27 )

Diluted net income (loss) per common share $ 1.22 $ ( 0.27 )

Basic net (loss) income per common share $ ( 3.27 ) $ 1.23

Diluted net (loss) income per common share $ ( 3.27 ) $ 1.22

NOTE 16 - Subsequent Events

On March 7, 2025, the Company and certain of its subsidiaries party thereto entered into a Securities Purchase Agreement with certain holders (the “Investors”) of its 2025 Senior Notes, pursuant to which the Company agreed to issue and sell to the Investors (a) approximately $ 232.2 in aggregate principal amount of 2030 Senior Notes and (b) warrants entitling the holders thereof to purchase, in the aggregate, up to 2,373,187 shares of Common Stock, at an exercise price of $ 0.01 per share, subject to adjustment (collectively, the “Warrants”) in exchange for (i) approximately $ 78.4 in aggregate cash consideration and (ii) approximately $ 143.6 aggregate principal amount of the 2025 Senior Notes, which will be cancelled by the Company upon receipt thereof (collectively, the “Refinancing”).

The Company completed the Refinancing on March 12, 2025, and in connection therewith, deposited with the trustee under the indenture governing the 2025 Senior Notes, $ 97.1 in trust and irrevocably instructed the trustee to apply such funds to effect the redemption of the remaining 2025 Senior Notes.

Upon deposit of such redemption amount, the indenture governing the 2025 Senior Notes was satisfied and discharged in accordance with its terms and, as a result, the Company has been released from its obligations under the indenture governing the 2025 Senior Notes except with respect to those provisions of such indenture that, by their terms, survive the satisfaction and discharge thereof.

In connection with the Refinancing, the Company also entered into a Credit Agreement, dated as of March 7, 2025 (the “New ABL Facility”), with the Company, as borrower, Eclipse Business Capital LLC, as administrative agent, as collateral agent and as FILO administrative agent and the lenders party thereto.

The initial funding under the New ABL Facility occurred on March 12, 2025, and the proceeds therefrom were used to repay the Prior ABL Facility in full.

Please see Note 7 - Long Term Debt for additional information regarding the redemption of the 2025 Senior Notes, the 2030 Senior Notes, the repayment of the Prior ABL Facility and the New ABL Facility.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data