Greetings, and welcome to the KLX Energy Services Holdings, Inc. Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard. Thank you, Ken. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the KLX Energy Services Holdings, Inc. conference call and webcast to review fourth quarter and full year 2025 results. With me today are Christopher J. Baker, President and Chief Executive Officer, and Jeff Stanford, Interim Chief Financial Officer. Following my remarks, management will provide commentary on its quarterly financial results and outlook before opening the call for your questions. There will be a replay of today's call that will be available by webcast on the company's website at klx.com. There will also be a telephonic recorded replay available until 03/26/2026, and, of course, there is more information on how to access these replay features that was in yesterday's earnings release. Please note that information reported on this call speaks only as of today, 03/12/2026, 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 will contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of KLX Energy Services Holdings, Inc. management; however, various risks, 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-Ks, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K to understand certain risks, uncertainties, and contingencies. The comments today will also include certain non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in the quarterly press release, which can also be found on the KLX Energy Services Holdings, Inc. website. I will now turn the call over to Christopher J. Baker.

Thank you, Ken. And good morning, everyone. Before we discuss our results, I would like to take a moment to say our thoughts and prayers are with all of the military personnel serving in the Middle East in the midst of this significant conflict. KLX Energy Services Holdings, Inc. has very close ties to our military. There are almost 100 veterans that work for KLX Energy Services Holdings, Inc., and so many other veterans and their family members in the broader oilfield services space that we are all connected in some way. So, again, our thoughts and prayers to all of our men and women in the military for a safe return. We sincerely thank you for your service. Now for our 2025 performance. 2025 was another solid year for KLX Energy Services Holdings, Inc. despite a choppy market, and we finished the year on a high note. The fourth quarter delivered our strongest profitability of the year with adjusted EBITDA and adjusted EBITDA margin both at 2025 highs. Throughout 2025, we continued to optimize our corporate cost structure and thoughtfully invested in our product lines while leaning into gas-weighted asset allocation as we realigned certain product service lines and benefited from capacity rationalization in the industry. KLX Energy Services Holdings, Inc. continues to execute against the playbook that we have outlined on prior calls. We focus on higher-margin, technically differentiated work, lean into cost discipline, and are very intentional and diligent about where we strategically deploy capital and people. Operationally, the Northeast/Mid-Con segment was the standout in the quarter. Despite typical winter weather and year-end budget dynamics, that segment held revenue essentially flat sequentially and, again, expanded margins, driven by robust demand in our gas-directed work. Our dry gas exposure continued to grow as a share of the portfolio,…

Thanks, Chris. Good morning, everybody. Starting with the fourth quarter, we generated revenues of approximately $157 million, which was in line with our Q4 guidance. As expected, revenues decreased due to seasonality and budget exhaustion. We generated approximately $23 million of adjusted EBITDA, our highest quarterly adjusted EBITDA of the year, and an adjusted EBITDA margin of about 14%, also the high for 2025. The margin performance reflected favorable product line mix, ongoing cost reductions and normal fourth-quarter accrual unwind as well as impacts from our fleet refresh, asset rationalization, and other year-end items. By segment, Northeast/Mid-Con revenue was essentially flat sequentially at $69.6 million, up about 0.5%, while delivering another quarter of adjusted EBITDA margin expansion to 25.3% and $15.1 million of total adjusted EBITDA, driven by gas-directed activity. Within that segment, dry gas revenue increased 5.3% quarter over quarter, continuing the trend of our gas-levered revenue base growing as a share of the portfolio. In the Rockies, revenues 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%. In the 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%. On corporate costs, we made measurable progress. Corporate adjusted EBITDA loss improved to approximately $6.3 million in Q4, down from $6.6 million in Q3. For the full year, corporate adjusted EBITDA loss was around $26 million, bringing us back toward the 2021–2022 levels. This reflects structural G&A rightsizing, including approximately a 12% decline in total headcount when comparing average Q4 2025 headcount versus Q4 2024. Turning to capital allocation, net CapEx for 2025 was approximately $33 million. For 2026, we expect gross…

Thanks, Jeff. Let me start with the market backdrop and how we are thinking about 2026. We are approaching the year with a constructive but measured outlook. We expect the first quarter to be the low point for the year, reflecting the familiar seasonal combination of customer budget resets, slower restarts of completion programs, and weather-related disruptions. Beyond Q1, we see a path to a gradually improving market led by gas-directed basins, where we believe incremental rigs are more likely to show up before we see a more meaningful recovery in certain oil-directed markets. This, of course, is tenuous given the Middle East situation, and we will continue to monitor for oil-directed activity inflections. Our portfolio is increasingly aligned with that opportunity set. The Northeast/Mid-Con and other gas-focused basins have been areas of momentum for us, and we expect them to remain important contributors as potential areas of growth on a relative basis. In oil-directed basins, particularly the Permian, we are managing through what has been a slow, extended downturn by rightsizing our footprint and cost structure to current demand while maintaining the flexibility to respond when conditions improve. Finally, in terms of how we are framing 2026 revenue, our internal budget contemplates a year that is broadly flat to slightly up versus 2025, with the majority of improvement weighted toward the second half of the year, yielding results that trend toward the stronger run rate we delivered in 2025. That framework will be updated as the year progresses and we gain more visibility into customer plans and basin-level activity. From a Q1 perspective, we are forecasting revenue of $145 million to $150 million, down approximately 3% from 2025 despite rig count being down 8% over the same period. This forecast does include the impact of Winter Storm Firm, where we lost approximately four to five revenue days in many product service lines in certain districts. Looking forward to Q2 2026, we expect revenue to rebound to the $160 million to $170 million range, which is higher than Q1 2025. Industry consolidation and capacity rationalization remain important themes across the oilfield services landscape, and we believe KLX Energy Services Holdings, Inc. is well positioned to be a net beneficiary. We have seen a number of smaller competitors exit the market in the last several months, which helped remove inefficient capacity and support a more rational competitive environment. On capital and fleet readiness, our philosophy has not changed. We continue to invest at a level that maintains our asset base and keeps us ready for a market inflection. At the same time, our capital program is disciplined and predominantly maintenance-oriented, which we believe strikes the right balance between prudence and preparedness in the current environment. With that, we will now take your questions. Operator, thank you.

We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from Steve Ferazani with Sidoti & Company.

Please proceed with your question.

Good morning, Chris. Morning, Jeff. Appreciate all the two positive surprises, very similar to what you reported in 3Q, in that, at least compared to our estimates, Northeast/Mid-Con was stronger and your margins were much stronger than we were modeling. Can you provide— and you covered this in the call, but I was hoping for a little bit more color, particularly on the strength in Northeast/Mid-Con, which normally would expect to see some hit late in the year because of weather.

Good— first of all, good morning, Steve. Appreciate the question. I think if you look at the segment as a whole, when you think about Mid-Con through our ArcoTex to the Northeast, it is a pretty geographically diverse segment. But if you look at segment-level rig count aggregated, rig count increased about 6% across that entire segment quarter over quarter. Our dry gas exposure, as we referenced in the call, increased 5.3%, and furthermore, to your question, I think all of the service lines held up exceptionally well. It is a continuation of the theme, and I think you asked a similar question last quarter. We saw an early start in the Northeast last year that sustained through Q4, and we were not sure how well it would sustain through November and December post-Thanksgiving because that is a very seasonally impacted business. But we saw the Mid-Con continue with completion programs through the year end. We continue to see wins in our accommodations business, our flowback business in East Texas. And so, yes, it held up exceptionally well. Margin, of course, held up well, and, yes, look, we would forecast a slight decrease in revenue in that segment in Q1, predominantly tied to the previously discussed Winter Storm Firm, which really hit the Mid-Con pretty hard. But overall, we expect continued improvements throughout 2026.

And then the overall margin improvement, how much of that do you owe to product line mix versus efficiencies versus what clearly has been some cost reductions? Is it very much a mix, or would you weigh it more towards one or the other?

I think— it is a great question. In the Northeast/Mid-Con specifically, I think it is both, I guess. But, yes, it is really lack of white space, really absorption of fixed costs, staying sustainably busy, and product line mix.

Helpful. Switching to the Southwest, when I look at that revenue line, was that primarily the impact on your completion product lines, and I am assuming that continues at least through the first part of Q1.

Yes. It is a combination. We actually saw some on the drilling side of the business. Rig count stayed pretty flat. I think it was up from a segment level when you combine all of the Southwest basins by about 2%. But, yes, we did see some budget exhaustion and completion programs tailing off going into the fourth quarter. Some of our PSL and asset realignment rotations that we referenced on the call were really pulling certain assets out of the Southwest segment, pushing them into the Haynesville, so that attributes to some of the revenue decline.

That makes sense. Okay. That is helpful. In terms of how you are thinking about CapEx and cash as we go into 2026, and knowing that we have markets that can move in different directions given the uncertainty that is out there, how are you thinking about CapEx and cash flow as we enter the year, knowing it can clearly change?

Look, the world is in turmoil, and we are not budgeting for increases, clearly. Our budget was set before the events of eleven days ago, twelve days ago really kicked off. And so we are targeting gross capital spending of $40 million. That is down from $49 million on a year-over-year basis in a year when we think revenue is flat to up. And so I think that speaks to, A, we do not have a lot of end-up need for incremental CapEx in our business. We have continued to spend to support the business, and we think that we will continue to see some asset rationalization— DBR tools, lost-in-hole, etc.— that will drive net CapEx down into the $30 million to $35 million range. That is all subject to change based on market inflections, but I think we are doing the appropriate level of spending and being prudent, so we are staged and ready to go for any market inflection.

Got it. And if I could talk just about the PIK option, how you are thinking about that, and then the covenant relief. It looks— typically you have very significant working capital seasonality, and typically 1Q is your significant cash outflow. The covenant relief, is that primarily related to what we see as typically the working capital build in Q1, which would potentially put you at a closer point to where it was going to step down to? And how do you think about the relief now in your comfort level over the next few quarters?

Hey, guys. Good morning, Steve. This is Jeff Stanford. Great question on that. The waiver— we know, closing our books out, doing our year-end budget, going through the year-end audit— we are going through all these things at year end. We do look at stress testing of that, so you look at certain ramifications if this happens or that happens. Going through that stress testing, we entered into it more as a proactive measure, give us some cushion for the future periods, goes out five quarters or fifteen months, so we feel really good about that. It gives us a lot of cushion there. But a lot of things happen as you move forward. Working capital is one piece of that, but also, as you stress test the model, what does it look like? So that provided us a good proactive measure to make sure we had cushion for future periods. That is the main reason that we entered into the waiver. As far as the PIK option, I think your first question— we PIKed 75% in January and February of this year. We did PIK 33% of it in Q4. The PIK option on the note is designed for flexibility. We utilize that flexibility as we see fit. So, in this case, we PIK some, we pay some in cash, and we look at it, kind of throttle up and down as we need to. Market dynamics, liquidity, leverage considerations are taken into account in our algorithm. That is how we want to do it. That is what we did in the past and what we are doing the first two months of this year. That is how we look at the PIK option. We do like that flexibility and use it as needed.

Got it. That is helpful. And, Chris, I know it is way too early to really have an outlook on this, but what is your take on the potential impact from the Middle East conflict if it is extended? If it is not, what do you think— and I know there are a lot of different outcomes— but just how you are looking at it on your business and what the potential outcomes could be.

It is a great question. Just one thing I want to clarify on the PIK, to Jeff's point. Recall our leverage ratio includes capital lease balances as debt. That capital lease balance at year end is going to amortize off pretty significantly this year. And so there is an amount that you can PIK where you can stay, all else equal, basically net-debt neutral. And so that is another consideration that we factor in when we think about overall leverage profile. Returning to your question, it is a great question regarding the Middle East conflict, and as we said at the outset, thoughts and prayers to the servicemen and women that are over there. If you think on a historical basis, Steve, we have typically seen a 60- to 90-day lag in activity increases or decreases post commodity prices moving. What we saw in April was almost an immediate reaction, but we definitely saw kind of 45–60 days, a material reduction in rig count post “Liberation Day” with the tariffs and when commodity prices change. We have not seen— so I think what that speaks to is the cycles have gotten shorter, and that is for a couple of reasons. Operators do not have a lot of duration and tenor in their rig contracts today. They are going pad to pad, well to well, etc., and so they react in much shorter time frames than they have historically. We have not really seen any reaction to $100 crude yet, and we think most operators are taking a wait-and-see approach. They just set their 2026 budgets. It is hard to say. What I will say is, as of this morning, the forward strip— you can do forward swaps at $72-plus in December ’26— but the strip, and the tail of the strip, is clearly much more conducive to Lower 48 activity. The other point would be, from a KLX Energy Services Holdings, Inc. perspective, we do not actually have to see incremental rig count to see increases in our own activity. If you think about our completion, production, intervention business line, we benefit from increases in refrac activity, workovers, well intervention, stimulation of existing wells. We have talked a lot over the last year about how the refrac market, specifically in the Bakken, to a lesser extent in the Eagle Ford, slowed down through 2025. We are keeping our ear to the ground, trying to stay close to customers. We will see how protracted the situation becomes, how much energy infrastructure in the Middle East is damaged, and what happens to commodity prices, and I think specifically the tail over the next month. But, as you know, KLX Energy Services Holdings, Inc. has the right asset base. We have the right technology and people. If customers elect to ramp activity, we will absolutely be there and be prepared to participate.

That is great. Thanks, Chris. Thanks, Jeff.

Appreciate it, Steve. Thanks, Steve.

Thanks, Steve. This is Ken. John Daniel— he had to drop, but he emailed me some questions, and so I am going to read them to you so that way, he will hear them on the replay. Fair enough.

There continues to be a push by some operators to move to simulfrac operations. Can you speak to your frac business and customer base and let us know what trends you are seeing?

At a high level, specifically in the Mid-Con, we have not seen the huge adoption of simulfrac relative— on the same pace— that we have seen in other basins. We clearly are participating in simulfrac in the Permian and other basins in a very material way with our frac rentals business, wellhead isolation business, etc. That is not to say that the Mid-Con has not adopted simulfrac, but I think there are numerous reasons for the slower adoption rate, one being the acreage profile, operator size, in some instances pad sizes, lack of electrical infrastructure when you think about comparing to the large electric spreads in the Permian. We have seen some adoption. I would say, on a stage count basis, if you think about our forecast for this year, we are probably somewhere between 25%–30% simulfrac, and that is up year over year, but it clearly does not have the propensity that you would see in the Permian.

So if not mistaken, that is not a basin that has seen a lot of new capacity in some years. So would it seem that attrition would be a little more pronounced, or is that too optimistic on my part?

John is always optimistic, but tying back to the first part of the question, simulfrac definitely adds a layer of complexity— incremental horsepower needs— that some providers just are not adept at managing either from a rate or pressure perspective. A lot of providers are limited to 100 barrels a minute under 10k. As you think about attrition within the basin— and I am sure John is on the call; I am sure he is aware— the general industry said there were about 10 spreads sold last year to international locations. Most of those spreads were Tier 2 equipment. There was some horsepower that left the basin. But as you think about the basin today, it is amply supplied. I do not think we are short horsepower by any stretch, and barring any material pickup in activity— back to Steve’s prior question around the Middle East situation, commodity prices— barring any material pickup in activity, I think John is probably optimistic that attrition is going to drive overall results. I think it is a pretty balanced basin today.

Second topic is coiled tubing. We have heard at least one coiled tubing company suspending operations in recent months, and we believe some of those assets may be reconstituted by some other folks. At the same time, there are a very small number of units being built. Thus, on one hand are those who have struggled and those who are doing well. Can you give us your thoughts on the U.S. coiled tubing market? Do you see the sector beginning to rationalize itself, or is that something you expect will occur in the next year or two, if at all?

That is a broad question. I will jump in on the first point. We have definitely seen some attrition of units. We have seen over the last couple years— one player exited the market about two years ago and that equipment candidly vanished. I am aware of the player that John is talking about. The majority of the optimal assets were reconstituted into and absorbed by a pretty sizable player in the business today. There were some assets that landed in a startup. We are aware of another situation that is currently active with another smaller player exiting the market altogether. So, yes, I think the business is shaking out, but for different market dynamics. If you think about the Bakken, that has shrunk as a coil market. We have seen players move equipment out of the Bakken, either back to Canada or down to the Permian and other basins, Waco, and so there has been a lot of coil decline in certain regions due to the length of the wellbores surpassing capacity of the units in those regions and the growth of snubbing and stick pipe. Pivoting to the second part of his question, from a new build perspective, John is correct. There are very few new build units that are under construction, and the ones that are are solely focused on ultra-deep, extended-reach laterals. That is where the market is heading. The routine frac screen-outs, wellbore cleanouts have become fewer and fewer, and so a provider has to have the expertise, the scale, to manage all of the technologies required to complete four-mile laterals with coiled tubing. That is multiple ERTs, coil connectors, string and fluid design— they all have to be optimized. Risk and pipe costs are increased, and operators are monitoring ROP KPIs in real time, and switching costs are candidly minimal as they are trying to think about the risk-reward and efficiency gains of coil versus alternatives. Candidly, I think that is where KLX Energy Services Holdings, Inc. has an advantage with our in-house proprietary mud motors, our extended reach tools, as well as additional technologies that we are bringing to bear to extend the commercially viable life of coiled tubing and expand the addressable wellbores.

Good. Okay. This concludes our Q&A session. I would now like to turn the call back over to Christopher J. Baker for final comments.

Thank you once again for joining us on this call today and for your continued interest in KLX Energy Services Holdings, Inc. We look forward to speaking with you next quarter.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.