KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) Q4 2022 Earnings Call Transcript

KLX Energy Services Holdings, Inc. (NASDAQ:KLXE) Q4 2022 Earnings Call Transcript March 9, 2023

Operator: Greetings. Welcome to KLX Energy Services Fourth Quarter 2022 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ken Dennard. Please go ahead, sir.

Ken Dennard: Thank you, operator, and good morning, everyone. We appreciate you joining us for KLX Energy Services conference call and webcast to review fourth quarter 2022 results. With me today are Chris Baker, KLX Energy’s President and Chief Executive Officer; and Keefer Lehner, Executive Vice President and Chief Financial Officer. Following my remarks, management will provide a high-level commentary on the financial details of the fourth quarter and outlook before we open the call up for your questions. As you know, there will be a replay of today’s call that will be available by webcast on the company’s website at klxenergy.com. There’ll also be a telephonic recorded replay available until March 23, 2023. More information on how to access these replay features was included in yesterday’s earnings release.

Please note that information reported on this call speaks only as of today, March 9, 2023, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Also, comments on this call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of KLX management. However, various risks and uncertainties and contingencies could cause actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listener or reader is encouraged to read the annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K to understand certain of those risks, uncertainties and contingencies.

These comments today may also include certain non-GAAP financial measures. Additional details and reconciliations to the most direct comparable GAAP financial measures are included in the press release, which can be found on the KLX Energy website. And now with that behind me, I’d like to turn the call over to KLX Energy Services’ President and CEO, Mr. Chris Baker. Chris?

Chris Baker: Thank you, Ken, and good morning, everyone. We will start with the acquisition news and move into Q4 prepared remarks. Yesterday, after Q4 earnings were released, KLX announced that we acquired 100% of the equity of Greene’s Energy Group LLC in an all-stock accretive deleveraging transaction. The total consideration for the acquisition consisted of the issuance of approximately 2.4 million shares of KLX stock, subject to customary post-closing adjustments with an enterprise value of approximately $30.3 million based on a 30-day VWAP as of March 7 less acquired cash of approximately $1.7 million. Former Greene shareholders will own approximately 14.7% of the fully diluted common stock of KLX. Greene’s is a leading provider of wellhead protection, flowback and well testing services.

The acquisition of Greene’s is expected to be accretive to KLX in 2023 and augments the KLX frac rental and flowback offering, providing KLX with a broader presence in the Permian and Eagle Ford basins. I’d like to take this opportunity to personally welcome every member of the Greene’s team to KLX. We are thrilled to welcome Greene’s exceptional management team and talented team members to KLX. Greene’s has an excellent industry reputation and fits naturally within KLX’s Southwest segment, supporting both Permian and Eagle Ford operators. Greene’s has a strong unlevered balance sheet reporting unaudited 2022 revenue and adjusted EBITDA of $68 million and $14.7 million, respectively. We are excited about the synergistic fit between the organizations and look forward to growing our surface pressure control franchise with the addition of Greene.

Looking forward to 2023, we expect Greene’s revenue and adjusted EBITDA of $70 million to $75 million and $18 million to $20 million, respectively, on a full year basis. Lastly, this transaction is deleveraging for KLX and pro forma for the combination, the KLX second half 2022 annualized net leverage ratio dropped to 1.4x from 1.5x on a standalone basis. We expect $2 million to $3 million in annualized cost synergies within 12 months and believe this enhances our inorganic consolidation strategy as we continue to focus on increasing returns and enhancing shareholder value. Moving to Q4 and 2022. 2022 was a record year for KLX Energy. We exited the year with a fourth quarter and second half run rate that was back in line with our pro forma 2019 results.

This was an original objective at the time of the QES merger, and we’re extremely proud of our team’s dedication to help deliver on this multiyear objective. Over the course of 2022, we reallocated assets to maximize operating results and drive in-basin scale and increased pricing as the market rebounded to drive margin. Combined, these efforts enabled KLX to rapidly grow back into our capital structure and significantly reduce our net debt and net leverage ratio. From an operating results perspective, we ended the year with a slight sequential improvement in both revenue and adjusted EBITDA despite the fourth quarter seasonality, the holiday lull and customer third-party drilling delays impacting KLX completions activity. During the fourth quarter, KLX generated $223.3 million in revenue, which was towards the top end of the previously provided guidance range and delivered adjusted EBITDA of $37.3 million, similarly near the top end of the guidance range.

Adjusted EBITDA margin held at 16.7%, flat sequentially and also in line with our guidance. Our fourth quarter results represented the second consecutive quarter equaling 2019 pro forma profitability levels, while running fewer assets and operating in a market that is 23% smaller than 2019 on a rig count basis. We also generated near record levels of quarterly net income and earnings per share, generating $13.2 million and $1.07 in Q4 2022, respectively. To further support our capital structure, in September, we refinanced our ABL under improved terms, providing sufficient runway and improve flexibility to support continued improvement in both our financial and operating performance in our balance sheet. Additionally, during Q4, we exchanged approximately $13 million in notes, reducing our 2025 senior secured notes by over 5% from $250 million to $237 million.

Over the course of 2022, we decreased net debt by 8% and reduced our annualized net leverage ratio from 13x in Q1 2022 to 1.5x for the annualized fourth quarter and second half of 2022. Our aggressive focus on net leverage ratio reduction allowed us to exit the year at KLX’s lowest leverage level since prior to the 2018 bond offering, while also returning the business to positive free cash flow generation in the second half of 2022. Lastly, for 2022 highlights, when looking at KLX’s second half exit rate, 80% of our product lines in every geography are performing near or above pro forma 2019 performance levels. This was not an easy feat given the post-pandemic challenges that we’ve navigated. We spent significant time and focus over the last two years, streamlining our operations and ensuring that we have in-basin scale for every service line that we operate.

The company today is more efficient, which combined with the return of pricing power to service companies has enabled our rapid return to historic levels of profitability. I’m thrilled with how we exited 2022 and couldn’t be prouder of our team for all that we’ve accomplished. We have done the hard work over the last few years and believe we are extremely well positioned for 2023. With that, I’ll now turn the call over to Keefer, who will review our financial results, and I will return later in the call to discuss our outlook in greater detail. Keefer?

Keefer Lehner : Thanks, Chris. Good morning, everyone. Let me begin by discussing the acquisition, and then I’ll jump into our fourth quarter 2022 consolidated results. First, I’d like to echo Chris’ comments on the Greene’s transaction and welcome the Greene’s team to the KLX family. We are thrilled with the strategic, accretive deleveraging combination that follows a similar equity-oriented framework, which we believe best drives integration and alignment of incentives. We believe this transaction drives accretive shareholder value and galvanizes our go-forward consolidation strategy. 2022 was a big year for KLX. We experienced a 79% sequential increase in annual revenue, outpacing the 33% increase in rig count and 37% increase in oil price.

Adjusted EBITDA increased approximately $100 million year-over-year, and net income and EPS improved $102 million and $12 per share, respectively. All of that growth translated into a material reduction in net debt. Jumping into Q4 results. We are pleased to have experienced slight sequential improvement in our consolidated revenue and margins despite seasonality and customer drilling and schedule delays. For the fourth quarter, revenues were $223.3 million and similar to our Q3 results were driven by continued strong pricing and utilization across our drilling, completion, production and intervention activities. In Q4, we were able to overcome seasonal slowdowns and still generate sequential increases in revenue, adjusted operating income, adjusted EBITDA, net income and EPS.

On a product line basis, drilling, completion, production and intervention services contributed approximately 30%, 49%, 12% and 9%, respectively, to revenues for the fourth quarter of 2022. Adjusted operating income for the fourth quarter was $21.7 million. This is the third consecutive positive quarterly results on the adjusted operating income line. Adjusted EBITDA and adjusted EBITDA margin were $37.3 million and 16.7%, respectively. Net income and EPS for the fourth quarter were post-merger KLX records at $13.2 million and $1.07, respectively, representing a 19% and 11% sequential increase also respectively. Please note, we continue to be burdened by $2.1 million of quarterly lease expense related to five coiled tubing packages. As a reminder, we do not add this cost back, but it does impact our comparability to peer results.

Total SG&A expense for Q4 was approximately $19.4 million, which equates to roughly 8.7% of Q4 revenue. As we’ve discussed on prior calls, post the QES merger integration, KLX now has one of the most efficient cost structures in the OFS industry, and we believe we can continue to scale from current levels while reducing SG&A as a percentage of revenue. Turning now to review our segment results. I’ll begin with the Rockies. The Rocky segment’s fourth quarter revenue was $66.1 million, representing a flat sequential result. Adjusted operating income for the fourth quarter was $12.4 million as compared to $12 million for the third quarter. Adjusted EBITDA was $17.9 million as compared to third quarter adjusted EBITDA of $17.3 million. The increase in profitability and margin was driven by reduced white space in our drilling and completion product line and modestly improved pricing across most product service lines.

Moving now to our Southwest segment. The segment increased its revenue by 9.2% sequentially, generating revenue of $74.8 million in the fourth quarter. The increase in revenue was primarily driven by increased activity, reduced white space and modestly improved pricing across the majority of our product service lines, given the shape of Q3 pricing increases benefiting the entirety of the fourth quarter with directional drilling, coiled tubing and wireline experiencing the largest increases. Q4 adjusted operating income for the segment was $7.8 million compared to $5.6 million in the third quarter and adjusted EBITDA was $12.4 million for the fourth quarter compared to third quarter adjusted EBITDA of $10.2 million. The increase in profitability was driven by the previously mentioned increases in activity and pricing across our various product service lines, but led by strong margin expansion across drilling and completion services.

Now to wrap up the segment discussion with the Northeast and Mid-Con. Northeast/Mid-Con Q4 revenue was $82.4 million, a modest decrease relative to Q3, driven largely by seasonal holiday impacts and some micro issues with the customer experiencing delays in their drilling program, which impacted our completion activity. This is our broadest geographic segment and the geographic segment with the most gas exposure as it includes both the Haynesville and the Marcellus Utica. For the fourth quarter, the Haynesville accounted for only 26% of segment revenue and approximately 9% of consolidated revenue. Separately, the Northeast accounted for 18% of segment revenue in the fourth quarter of 2022. Adjusted operating income for the fourth quarter was $15.5 million, and adjusted EBITDA was $19.7 million in the fourth quarter.

The sequential decline in adjusted operating income and adjusted EBITDA at this segment was similarly driven by the previously mentioned scheduling issues and seasonality driving unforeseen schedule gaps where we are burdened by labor costs with no corresponding revenue. I’ll now turn to our balance sheet and cash flow. Our year-end 2022 cash balance increased by $29.4 million or 105% to $57.4 million when compared to year-end 2021 and increased 39% sequentially. The sequential increase in cash was largely driven by $12 million in operating cash inflows, $15 million in opportunistic share sales under our ATM program and continued monetization of $5 million in obsolete assets and noncore real property. Those were offset by $14.4 million of semi-annual interest paid in Q4 and $9.5 million of capital spending.

We continue to proactively manage working capital and convert cash flow as quickly as possible. Net working capital was $72.1 million in Q4, up 15% compared to Q3 and up 78% relative to year-end 2021. The sequential increase in net working capital was largely driven by the 1% increase in revenue and a 7% increase in DSO driven by customer slow paying at the end of the year, and it was offset slightly by modestly increasing our days payable outstanding over that same period. So far in Q1, we’ve seen a normalization of DSO, so we believe this was just a year-end phenomenon. Capital expenditures for the fourth quarter were approximately $9.5 million, and were primarily focused on maintenance spending across our segments. Going forward, total CapEx for 2023 is expected to be in the range of $60 million to $70 million, and that’s inclusive of Greene’s.

This spend will be primarily focused on maintenance spending with approximately 70% supporting ongoing operations and the remaining CapEx earmarked for reactivation and growth focused on quick payback projects across both drilling and completions, including the continued electrification of our wireline and coiled tubing fleets. At year-end 2022, we had $4.9 million of assets held for sale related primarily to real property and equipment in both the Rockies and Southwest segments. We’re continuing to work through our options to monetize these assets in the near term. And based on current status, we hope to close approximately 50% of that balance in the first half of 2023. Total debt outstanding as of December 31, 2022 was $283.4 million compared to $295.6 million as of September 30, 2022.

Net debt balance as of year-end ’22 was $226 million, down 11% sequentially. The decrease in total debt was driven by debt exchange transactions for $12.8 million of our senior secured 2025 notes for 778,000 shares across multiple transactions. These exchanges reduced future annual cash interest expense by approximately $1.5 million. Accrued interest as of December 31 was approximately $4.6 million related to the senior secured notes and roughly $200,000 related to the ABL. We ended the year with almost $102 million in total liquidity, an 18% sequential increase consisting of $57.4 million of cash on hand and $44.4 million of available borrowing capacity based on the December 31 ABL borrowing base certificate. Based on annualized Q4 results, we have returned the net leverage ratio to 1.5x.

This is a major achievement considering that just a year ago we had a Q4 2021 annualized net leverage ratio of 9.2x. We are in compliance with our financial covenants at year-end 2022 and expect to remain in compliance going forward. Our primary focus remains prudent capital deployment, a disciplined focus on free cash flow maximization and further reduction to net debt, all while pursuing a combination of organic and inorganic value-creating growth opportunities. I’ll now turn the call back to Chris, who will provide some additional color on our 2023 outlook.

Chris Baker : Thanks, Keefer. Before we wrap up, I’d like to share some more detail on our go-forward strategy, including potential for further consolidation in light of the Greene’s acquisition. As I mentioned earlier, we ended the year on a strong exit rate and that has carried forward into January and February. While the recent headwinds on the natural gas side have generated concerns regarding activity disruptions, thus far, we have successfully mitigated the majority of our activity losses, backfilling utilization with other customers or existing pent-up demand for KLX services. Furthermore, to Keefer’s earlier comments regarding our Haynesville exposure, we believe we are aligned with the most active operators in the basin and customers who intend on continuing forward with drilling programs or restarting them in the summer, assuming gas prices have rebounded.

Our revenue in the Haynesville is also more heavily weighted towards drilling, so should operators elect to DUC wells, then reductions in completions activity will be less impactful to KLX. For the most part, our calendars across most of our basins are booked solid through at least April if not into May, and we believe there is ample opportunity across our diversified opportunity set to continue to drive revenue growth. Looking ahead, our operational strategy will continue to be focused on efficient deployment of assets, maintaining strong utilization and driving pricing marginally higher, where possible and ahead of inflationary pressures. We will work to integrate the Greene’s acquisition as quickly as possible and believe there is a compelling fit within our existing Southwest segment and PSLs that will enable a seamless integration.

In addition, we will remain prudent with our capital spending program by focusing our budgeted CapEx predominantly on maintenance spending, along with high-quality quick payback projects that are front-end loaded in the year in order to both execute on the current industry trends and maximize our returns throughout 2023. As a reminder, our capital investments are reassessed in real time based on market conditions. Yesterday, we released standalone 2023 guidance of revenue of $925 million to $975 million and adjusted EBITDA margins of 16% to 18%. Pro forma for the subsequent announcement of the Greene’s transaction, we are updating full year guidance to a revenue range of $975 million to $1.04 billion and an adjusted EBITDA margin range of 17% to 19%.

KLX has built a strong foundation on which to grow in 2023, both organically and by pursuing additional accretive transactions. The Greene’s acquisition, again, provides a structural framework by which we believe is executable on additional transactions. We’ve said for a while now that consolidation is absolutely necessary in our industry, and we are proud to continue to lead the way in this area. Looking forward, the macro backdrop, fragmentation of the OFS landscape and lack of liquidity and cash consideration from prospective acquirers for well-run, well-capitalized private businesses has created a favorable backdrop for consolidation and growth. KLX has a strong team with a track record of successful integration and a diversified platform offering, providing the opportunity to consolidate across various high-performing market segments, conservative capitalization and diversified shareholder base with healthy public float to continue to effectuate accretive value-enhancing consolidation.

We are extremely optimistic about 2023, given our 2022 execution, our 2022 exit run rate and the favorable 2023 capital budgets that our customers have published given the constructive WTI backdrop and outlook. With that, we’ll now take your questions. Operator?

Operator: One moment while we poll for questions.

Ken Dennard: Kerry, while we’re polling for questions, I just want to let everybody know real quick. This is Ken. Management will be at Piper Sandler’s Energy Conference later this month. I think it’s the 21st of March. So I hope to see many of you there signing up in person.

Q&A Session

Operator: Our first question is from Luke Lemoine with Piper Sandler.

Luke Lemoine : Good morning, Chris, Keefer and Ken. Thanks for the nice plot there, March 21 and 22 in Las Vegas for the conference. I guess, well, first, congratulations on the deal. And Chris, looking at Greene’s and from your press release and our website, it looks like this is exclusively an Eagle Ford and Permian business. Just wanted to make sure that was correct. And then I’m guessing the revenue or EBITDA split is probably fairly proportional to the activity levels between the two basins. Is all that pretty fair? Or how should we think about that?

Chris Baker: Yes, I appreciate it and look forward to seeing you guys out there in Vegas. Look, we’re really excited about the Greene’s opportunity. You are 100% correct as of today, their opportunity set is Permian and Eagle Ford focused. We haven’t provided any detail on the split. But I think your assessment is probably pretty consistent with the overall activity set.

Luke Lemoine : Okay. Got it. And then Keefer, you talked about some of your growth CapEx being for the continued electrification for coil and wireline. Can you just kind of refresh us where you are on this initiative?

Chris Baker: So I’ll jump in and then Keefer can. This is Chris. Yes. So last year, we electrified one of our power packs on our coal tubing units. We’ve electrified one of our snubbing units. We’ve got a couple of hybrid electric wireline units in the field and have been running in the field for better part of the last year. I think we mentioned on our 3Q call that we’ve got two that are in process, two wireline units that is that are in process of being electrified today, which should come out and be ready to go to the field kind of late Q1. And then we’ve got some additional electrification initiatives underway on the coil front.

Luke Lemoine : Right good deal. And then I’ll sneak one more in here, Chris, can you remind us where you are in your active frac fleet count and where are these working right now?

Chris Baker: The numbers are spot on similar to the conversation we had in 3Q. So we still have two in the Mid-Con and the smaller spread up in Gillette and still have the — or the incremental horsepower to reactivate.

Operator: Our next question is from Ignacio Bernaldez with EF Hutton.

Ignacio Bernaldez : Thank you for your time and congratulations on the really great quarter and the great acquisition as well. When you talk about M&A and consolidation, are we talking bolt-on acquisitions? Or do you see a scenario where you could be looking at larger-scale things?

Chris Baker: Yes, it’s a great question. We’ve talked over, I think, the last four quarters that the industry continues to need consolidation as we talked about in our prepared remarks. We think the Greene’s platform provides a very synergistic fit to our existing platform. So it’s, to your point, one of the opportunity sets from a bolt-on perspective, when you think about Greene’s, it really bolsters and adds a third operating region to now realigned flowback and well testing franchise. So a big part of our initiatives last year was to realign our asset base. Flowback was one of those asset classes or PSLs that we realigned into two core asset bases to provide scale. And so this now provides a third. And then when you think about Greene’s West Texas, it provides scale to our existing frac rentals and monoline business as well as the addition of their proprietary isolation tool for wellhead protection.

So we believe that isolation tool, along with our recently acquired pressure control valve fleet is going to create kind of a market-leading and comprehensive surface pressure solution for our clients. And so that is an example of kind of a tuck-in or bolt-on that is just incredibly synergistic to our platform, given our diversified offering. We also think we’ve got the roadmap and the management team that has executed on a couple in the past and is very capable of executing on transformative, more merger of equal type opportunities, and we’ll evaluate those as they come

Operator: Our next question is from John Daniel with Daniel Energy Partners.

John Daniel: I guess first question, follow-up a little bit to Luke’s query. You spoke about electrification on some of the other product lines. Can you speak to any efforts to incorporate dual fuel into any of your services?

Chris Baker: We’ve had some conversations, especially around some of the stacked horsepower with clients, John, as to if we were to reactivate that, the incremental cost to reactivate it to dual fuel isn’t that onerous. We’ve had conversations as well with a couple of the manufacturing parties. Specifically with the electrification, we just found, especially on the smaller assets, if you will, relative to a frac spread, such as wireline, coil, et cetera, going straight electric, especially for clients that are especially ESG-sensitive in certain basins is maybe the preferred step.

John Daniel: Got it. Okay. And then the final one, just your philosophy on pricing. And the reason I ask is there’s some isolated anecdotes of outbreaks of hostility out there. And I’m just curious if we’re in a flat to slightly down market, like what’s your directive to the team and how would you envision pricing over the course of the next several quarters?

Chris Baker: Yes. It’s a fair question. And of course, I think, as you well know, and you have — you probably have as many conversations with operators as we do collectively. So you’re very much in tune with the market. The interesting thing is the OFS market just got back to a level of sustainable service pricing late last year. As we look at our platform on a weighted average basis across all of our PSLs and regions, we increased pricing approximately 49% in 2022. Yet we are only generating a 16.7% EBITDA margin. So you’re just now getting back to a level that’s truly sustainable. And of course, we’ve had cost pressures and supply chain pressures along the way. But there is a natural tension out there. And I think just like many people espoused at the Thrive Conference, we’re going to do our best to hold the line on pricing, not because we want to, but because we have to, right, if we’re going to continue to reinvest in our asset base.

As you know, all of our assets have wheels can travel. However, longer term, candidly, we’re pretty bullish on the natural gas market once we get past the summer in the choppy market. And so if we have to stack out assets, we will. And we’ll kind of see how the market plays out.

Operator: Our next question is from David Marsh with Singular Research.

David Marsh: Guys, congrats on the acquisition and the quarter. So if we could just take a look at the guidance. So the updated guidance with the acquisition for top line is $975 million to a little over $1 billion. Could you talk about how that spreads across the year? Are we — should we expect some seasonal weakness in the first quarter as a result of the nat gas slowdown and kind of a stronger second half?

Chris Baker: Yes, I’ll jump in and then — David, this is Chris. And Keefer can jump in as well. But as we look through our Q4, it was seasonally very strong relative to the typical winter time and holiday slowdown. The reality of the situation, and Keefer alluded to this in our prepared remarks, we estimate that we lost about $15 million of completions revenue across multiple product lines due to some last-minute third-party drilling delays in December. So when you think about the base load of activity set for KLX in Q4, the market and demand was there really for KLX even better than we did candidly. And so we’re happy with Q4’s results but they could have been better. And if you think about Q4’s run rate, you’re on a revenue run rate of $892 million and an adjusted EBITDA run rate of approximately $149 million, $150 million of EBITDA.

But clearly, that could have even been improved. And so there’s no doubt the natural gas market has some headwinds. That’s somewhat impacting our Q1 guidance that we provided. There’s also just natural seasonality to Q1. And so we talked about that in prepared remarks. But as we think — as we get into April and we exit the winter season, we go through what is typically very rough patterns, especially in our northern operations and seasonality in the northern district, we really think they’ll kick into fourth gear, which is what we saw last year and think that mid-second through the mid fourth quarter should be pretty robust.

David Marsh: Got it. And then could you talk about geographically in terms of the acquisitions that you may be considering if there’s a particular region that’s more appealing than others and that you are seeing more opportunity in.

Chris Baker: I think, look, we take M&A as it comes. There’s some opportunity sets that are negotiated on a one-off basis where we are the candidate that — or party that provides the outreach. But I wouldn’t say that we’re necessarily targeting M&A geographically.

Keefer Lehner : Yes. I think we’re more focused on strategic fit, customer relationships, driving accretion, the ability to further delever our platform, focused on both revenue and cost synergies, it’s probably those factors that are driving our consolidation and M&A efforts more so than necessarily geography. Obviously, that’s a consideration. But the fact that we are geographically diverse today probably provides for a more fertile hunting ground as we think about future M&A opportunities.

David Marsh: Right. That makes sense. And then just lastly for me. When we look at the CapEx guidance, $60 million to $70 million, should we expect that to kind of track with revenue across the course of the year? I mean, obviously, first quarter, you probably have a little less, but maybe in the latter part of the year, you do a little more? Or is there a different spread there?

Keefer Lehner : Yes, it’s a good question. On the maintenance side, it would largely more closely track revenue over time. With that said, we are trying to frontload our capital spending this year as much as we possibly can, just to try to bring forward the returns associated with that capital spending.

Operator: This concludes our question-and-answer portion of the call. I will now turn the call back to Mr. Chris Baker for closing comments.

Chris Baker : Thank you, operator. Thank you once again for joining us on this call and your interest in KLX Energy Services. We look forward to speaking with you again next quarter.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.