KLX Energy (KLXE) Q1 2026 Earnings Transcript

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DATE

Wednesday, May 13, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Christopher J. Baker
• Interim Chief Financial Officer — Geoffrey C. Stanford

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TAKEAWAYS

• Revenue -- $145 million, at the lower end of management’s estimated range, with a sequential decline in all product service lines except tech services and accommodations.
• Adjusted EBITDA -- $11.1 million, representing an 8% margin that aligns with historical Q1 levels.
• Net Loss -- $24 million, translating to a loss of $1.23 per share.
• SG&A Expense -- $15.4 million, down 29%, reflecting structural cost reductions achieved over several quarters.
• Northeast/Mid-Con Segment Revenue -- $52.5 million, marking a 28% year-over-year increase; segment adjusted EBITDA quadrupled with margin expanding to approximately 21%.
• Rockies Segment -- $38.6 million revenue with an operating loss of $3.8 million, reflecting a 19% year-over-year decline tied to seasonal and activity pressures.
• Southwest Segment -- $53.6 million revenue, an 18% year-over-year decrease driven by continued declines in Permian oil-directed activity.
• Revenue Contribution per Average Operating Rig -- $273 thousand, up from $269 thousand in 2025, while EBITDA per rig fell approximately 13% due to negative mix shift.
• Capital Expenditures (CapEx) -- $8.7 million gross and $5.3 million net after $3.4 million in asset sale proceeds, mainly for maintenance across rentals and pumping assets.
• Free Cash Flow -- Unlevered free cash flow was negative $1.4 million, levered free cash flow negative $5 million, and net cash from operating activities totaled $300 thousand.
• Total Debt and Liquidity -- $275.8 million in total debt against $48 million in liquidity, comprised of $6 million cash and $42 million undrawn availability on the ABL facility.
• Q2 Guidance -- Management forecasts revenue of $162 million to $172 million, with a midpoint of $167 million, 5% higher than the prior year and $22 million above Q1; adjusted EBITDA margin expected to expand sequentially.
• Interest Payment Mix -- Management stated, "we paid 25% of interest in cash and 75% pick for the first 2 months of the quarter we elected to pick 100% in March," with a plan to use 100% PIK in Q2 and a 50/50 approach in Q4.
• Customer Activity Trends -- Larger operators are accelerating DUC completions, while independent and private operators are described as "pulling forward activity" in response to elevated spot prices.
• Pricing -- CEO Baker said, "pricing in most PSLs across the industry, I think, is pretty anemic," but noted selective price increases in targeted PSLs and regions as demand rises.
• Supply Chain and Labor Constraints -- KLX is monitoring OCTG and directional module supply but sees "people could be the biggest stumbling block" if activity ramps.

SUMMARY

Management expects a recovery from Q1 lows, driven by a forecasted revenue increase and margin improvement across all segments. The company highlighted a major year-over-year improvement in the Northeast/Mid-Con segment, with strong growth in both revenue and segment EBITDA margin. KLX is positioning for higher activity with both blue-chip and independent operators, responding to constructive commodity price signals and customer program accelerations. The earnings call detailed a disciplined capital approach, ongoing SG&A efficiency, and real-time focus on pricing discipline in people-intensive service lines.

• Management indicated the Q2 sequential revenue improvement is shaped by a rebound in the Rockies and anticipated stabilization in the Permian, with 50% of incremental Q2 upside attributed to Rockies performance.
• KLX anticipates that seasonal cash flow trends will normalize in the year’s second half as receivables convert and higher activity supports working capital needs.
• SG&A is targeted to remain at or below 2025 levels for the full year, signaling ongoing focus on structural cost control.
• Larger and smaller operators have both begun to accelerate DUC completions and field activity, signaling broadening demand recovery.
• Labor constraints remain the principal concern for activity ramping, rather than equipment or material bottlenecks at this stage.

INDUSTRY GLOSSARY

• DUC: Drilled but Uncompleted well — a well that has been drilled but not yet completed for production.
• PSL: Product Service Line — distinct categories or divisions of service offerings within oilfield services companies.
• OCTG: Oil Country Tubular Goods — pipe and tubular products used in the drilling and production of oil and gas.
• PIK (Pay-In-Kind) Interest: Interest paid in additional debt securities rather than cash outflows.
• ABL Facility: Asset-Based Lending Facility — a credit facility secured by company assets, often accounts receivable and inventory.

Full Conference Call Transcript

Ken Dennard: Thank you, operator, and good morning, everyone. We appreciate you joining us for the KLX Energy Services conference call and webcast to review first quarter 26 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 website at www.klx.com. And there will also be a telephonic recorded replay available until 05/27/2026. More information on how to access these replay features was included in yesterday's earnings release.

Please note that the information reported on this call speaks only as of today, 05/13/2026 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 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 those 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 be found on the KLX website. And now with that behind me, I would like to turn the call over to Christopher J. Baker. Christopher?

Christopher J. Baker: Thank you, Ken, and good morning, everyone. I will start with a brief overview of our first quarter results and recent trends across the portfolio, Then later in the call, I will discuss the current market backdrop, and how we are thinking about the rest of 2026. Before getting into the numbers, I want to again recognize men and women of the US military who remain deployed in The Middle East. While the situation has evolved since our last call, it is far from resolved and many service members and their families are still living with significant uncertainty. Nearly 100 KLX employees are veterans, and many more across our industry share that connection.

On behalf of all of us at KLX, thank you for your service and sacrifice. And we continue to pray for your safe return home. Turning to the quarter, we expect Q1 to be the low point for the 2026 fiscal year. As it has been in prior fiscal years. The Q1 softness reflects the yearly pattern of customer budget resets and post holiday restarts of completion programs combined with specific schedule disruptions caused by customer drilling issues delaying completion jobs, and disruptions of approximately 4 to 5 days from Winter Storm Firm.

Revenue was down sequentially in every product service line, or PSL, except for our tech services and accommodations businesses which led to a negative shift in silver service offering on a relative basis with higher revenue contribution from drilling services relative to complete services. First quarter revenue was $145 million within our estimated revenue range albeit at the lower end primarily due to the previously mentioned Winter Storm Firm and customer delays in the last 2 weeks of March that pushed $5 million of revenue into Q2 across multiple districts. Adjusted EBITDA for the quarter $11.1 million with an adjusted EBITDA margin of 8%. In line with the mid to high single digit range historically delivered in Q1.

And consistent with the context provided on our Q4 call. As in past years, margin reflected typical Q1 headwinds, seasonality, weather related white space, and the payroll cost reset. Segment performance continues to reflect the shift in our portfolio towards gas directed activity. The Northeast/Mid-Con segment again led the way with revenue up 28% year over year and adjusted EBITDA of $10.9 million almost 4x the 2025 adjusted EBITDA. Our dry gas revenue was up approximately 45% year over year. Even though we did see a modest sequential decline of 4%. The first sequential decline in 5 quarters. Primarily tied to weather delays in the Haynesville. The Rockies and Southwest segments reflected a softer activity environment.

The Rockies were pressured by typical winter seasonality and lower activity levels across several PSLs. We expect a meaningful sequential improvement in Q2 as we exit the worst of the winter impact and currently forecast sequential improvements in all PSLs in the Rockies. In the Southwest, Activity levels remained soft as the Permian rig count continued its decline in Q1. And operators slowed start up of some completion programs. Permian activity has shifted heading into Q2 with a sentiment shift around completions and DUCs in particular. Additionally, we see positive indicators for South Texas which along with expected activity rebounds in the Permian should drive the Southwest.

We continue to gain traction with larger blue chip operators and are well positioned as these operators increasingly demand certified higher spec equipment and stringent safety requirements. At the same time, we expect the 2026 activity to benefit from smaller independent and private operators driving incremental activity. Revenue per average operating rig was favorable year over year. Landing $273 thousand in Q1 26 compared to $269 thousand in 2025. The previously mentioned shift in revenues however, contributed to a reduction in EBITDA per average operated rig of approximately 13%. Looking forward and based on our current Q2 revenue forecast, this metric will increase to $310 thousand in Q2 depending on Q2 average rig count.

Which is a level that has historically driven strong margins. With that, I will hand the call over to Jeff to review our financial results in greater detail and I will return later in the call to discuss our outlook. Jeff?

Geoffrey C. Stanford: Thanks, Christopher. Good morning, everybody. Consistent with Christopher' remarks, given the seasonality in our first quarter, particularly within the Rockies, The most useful analysis is a year over year comparison rather than a sequential comparison. So I will discuss that accordingly. First quarter revenue was $145 million down about 6% versus 2025, compared with an estimated 12% decline in the average US rig count. Adjusted EBITDA $11.1 million or approximately an 8% adjusted EBITDA margin, broadly consistent with the mid to high single digit margin we have delivered on prior first quarters. Net loss for the quarter was $24 million or a loss of $1.23 per share.

SG&A for the quarter $15.4 million down about 29% versus the prior year, reflecting the structural cost actions over the past several quarters. Turning to segment results. In the Rock Mountains segment, first quarter $38.6 million with an operating loss $3.8 million and an adjusted EBITDA $2.1 million. Revenue declined approximately 19% year over year, reflecting lower activity across our product lines and typical winter impacts. As Chris previously mentioned, we expect Rockies revenue and profitability to improve sequentially in Q2 as seasonal conditions normalize.

In the Southwest Region, first quarter $53.6 million operating $3.4 million and adjusted EBITDA $4.6 million Revenue declined roughly 18% versus the prior year quarter driven by reduced oil directed activity in the Permian that began in 2025. In the Northeast/Mid-Con segment, first quarter $52.5 million. Operating income $3 million. And adjusted EBITDA $10.9 million. Revenue increased 28% year over year and adjusted EBITDA quadrupled compared to 2025 with segment adjusted EBITDA margin expanding to approximately 21% from roughly 7% in the prior year period. This performance was driven by sustained gas focused activity particularly in our Haynesville and other Northeast Mid-Con operations as well as strong execution and limited white space.

At corporate and other, adjusted EBITDA loss was $6.5 million in Q1, improvement of about 11% year over year reflecting ongoing G&A rightsizing and our focus on returning corporate costs towards 2021 and 2022 levels. Turning to capital allocation and cash flow. Capital expenditures in Q1 26 were approximately $8.7 million with net CapEx of roughly $5.3 million after about $3.4 million of asset sale proceeds. Spending was predominantly maintenance oriented, focused on sustaining rentals, coiled tubing, through tubing, pressure pumping assets.

For the full year, previously guided to approximately $40 million of gross CapEx and $30 million to $35 million of net CapEx Based on the current purchase order logs and deployment schedules, our full year CapEx is tracking below that original framework However, given the market backdrop and potential incremental activity, we expect to refine this range at midyear.

Net cash provided by operating activities was $300 thousand in the quarter, Unlevered free cash flow was negative $1.4 million and levered free cash flow was a negative $5 million. that is typical for us, working capital was a use of cash in the first quarter reflecting 2 additional payroll cycles in the period an increase in days sales outstanding and lower accrued liabilities. We expect cash generation and liquidity to improve throughout the year consistent with our historical seasonal pattern. Turning to the balance sheet.

At quarter end, total debt was approximately $275.8 million total liquidity $48 million, consisting of roughly $6 million of cash and cash equivalents and about $42 million of available availability under our March 2026 ABL facility including undrawn silo capacity. Net working capital at quarter end was $54 million. Given the significant revenue increase forecast in the second quarter, we expect a slight reduction in liquidity at QTAFE to close as working capital increases to support higher activity with working capital levels expected to normalize over the second half of the year as receivables convert to cash and operations are funded from ongoing cash flow.

With respect to our notes, consistent with the commentary we provided in our Q4 call, we paid 25% of interest in cash and 75% pick for the first 2 months of the quarter we elected to pick 100% in March. Looking forward, we expect to pick interest 100% for Q2 and 2026 and then go to a 50/50 ratio for Q4. We will continue to evaluate this mix based on market conditions, leverage, and liquidity. We remain well within our leverage covenants providing us with incremental flexibility to fund CapEx potential M&A, and other capital needs. With that, hand it back over to Christopher to discuss our outlook.

Christopher J. Baker: Thanks, Jeff. From a macro standpoint, we continue to operate in a highly volatile but constructive environment. By all accounts, this is the largest energy shock in history. Commodity prices continue to be volatile and trade in a wide yet constructive band for activity due to the ongoing Middle East conflict and macroeconomic news. We are discussing customer reactions and expected incremental activity in real time. Particularly in the Permian and other oil weighted basins. I would note despite the recent declines in prompt month WTI pricing, the forward curve for the balance of 2026 is still constructive. And operator sentiment seems to be shifting quickly.

We have already seen larger operators accelerating DUCs and independent operators pulling forward activity in the face of elevated spot prices. On the gas side, the forward strip remains supportive though as natural gas prices flirt with the mid-$2 range, we have seen some operators feather the clutch a bit on activity. Specifically in the Haynesville. With some considering pushing incremental programs to the second half of the year. We continue to believe that KLX's gas weighted basins have longer term strength and KLX has meaningful exposure particularly in the Northeast Mid Con and Haynesville. To drive incremental revenue as activity increases.

Looking forward, we are forecasting Q2 revenue of $162 million to $172 million with a midpoint of $167 million 5% higher than 2025 and 22 million higher than 2026. We expect solid contributions from the Northeast Mid Con and a seasonal rebound in the Rockies with the Southwest gradually improving off of current levels as Permian activity stabilizes. In short, we forecast revenue to increase in all 3 segments in Q2. Along with nearly every single PSL. The mix of drilling versus completion versus production and intervention services will still lean unfavorable on a historical basis but it is definitely trending back to normal. We expect adjusted EBITDA margin to expand sequentially driven by higher activity and better overhead absorption.

Looking beyond Q2, our historic pattern has been for Q3 to be our strongest quarter of the year, and current operator commentary suggests a robust second half. Particularly as smaller independents and private operators increase activity. Those customers have historically been a core customer base for KLX, and we look forward to seeing them increase their activity in the 2026. That said, I want to see how margins translate at higher revenue levels including any impact from pricing and mix before providing additional color on the 2026 and updating our full year 2026 framework. In closing, I would like to thank our team of hardworking employees for their continued commitment and resilience.

Particularly given the challenges that always come with the first quarter in our business. I would also like to thank our customers and shareholders for their ongoing support of KLX. We remain confident in our ability to execute our strategy and navigate what continues to be a dynamic and fast moving market. With that, we will now take your questions. Operator?

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. A confirmation tone will indicate your line is in the question queue. 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 key. Our first question comes from the line of Steve Ferazani with Sidoti. Please proceed with your question.

Steve Ferazani: Morning, Christopher. Morning, Jeff. Appreciate the detail on the call. Christopher, when I think about the pretty significant sequential improvement guide you have in Q2, Certainly, it is much higher than we have seen the previous 2 years. I am just trying to get a better sense of how severe the weather impact was to you on Q1 and how much is that leading towards the much stronger guide to Q2?

Christopher J. Baker: Yeah. it is a great question. I think it very much depends on the region. You know, look. The Rockies saw typical seasonal winter weather as we always do, and we had a lot of nonoperational days due to high wind, especially in North Dakota. We candidly do not and did not quantify those days just due to the fact that this is a very typical seasonal pattern. Up there. I would say our gut feel is North Dakota and Wyoming this year were probably more impacted than last year. When you shift to the Mid Continent, Haynesville, we definitely, as we said in prepared remarks, saw anywhere from 2 to 5 days of revenue loss across various PSLs.

And so when you think about the combination collectively between Firm, plus the drilling delays that we mentioned that pushed some completion programs out we estimate approximately $5 million of total revenue loss. And as you well know, we still incur all the fixed cost. And, candidly, on short term notice, a lot of the variable cost in those instances. Right?

Steve Ferazani: Okay. that is helpful. I was actually surprised at the sequential revenue improvement in the Southwest given what activity has looked like there in Q1? But it was at a much lower margin. Can you sort of explain that?

Christopher J. Baker: Yes. Sure. And it is a great question. I think it was largely due to what we talked about in the prepared remarks where we had a PSL mix shift. That we referenced in the call with some completion activity slowing down. Drilling activity holding in pretty well. And so that puts and takes kind of across the board. We were also staffed up for some completions work that slipped. Later into the quarter, so that compressed margins as well. What I would say is we expect margins to expand in Q2.

And we I think we will continue, and we have already seen this in April, We will continue to see the mix shift improve as we will see a reversal of what we saw in Q1. And so, you know, on that point, just solely based off of internal April numbers, we have already seen them you know, material. 1 it is a 1 month proxy, but we have seen a material improvement in set segment level margin in the Southwest relative to Q1.

Steve Ferazani: Got it. Excellent. You mentioned both of you mentioned in your remarks typically, it is the extra 1 or 2 payroll cycles in Q1. Usually, that is been your highest SG&A quarter. I was surprised how low SG&A was this quarter, Does it are you thinking about trends this year on SG and A? After a very strong performance in Q1 in terms of how low it was?

Geoffrey C. Stanford: Yeah. Good morning, Steve. This is Jeff. I will take that 1. It was a good quarter for SG&A, and we are we are looking obviously, at every single dollar. We have a great team. We are looking at every single dollar. So we are trying to keep those, costs as low as possible. Without loss of quality. But we are looking, you know, for if you look at the full year, if you look at, you know, 2025, we $68.5 million. 2024, $79.6 million. So you know, our goal is to kind of get it in the kind of a if we can get lower than 2025 for the full year, we are heading.

So we are looking at it hard. It is a process going through it all, but we are definitely you know, reviewing everything and going through that process. But if you wanna think about SG&A for the full year, kind of think about it in the kind of 2025, maybe less than 2025 rate.

Steve Ferazani: Excellent. that is helpful. Thanks, Jeff. Touched on this a little bit in your closing remarks, Christopher. Obviously, when we look at rig count, the 1 place we have continued to see growth was in the Haynesville, but obviously, we know the lower natural gas prices could pressure there. And obviously, just even with the weather impact, still incredibly strong margin in that geographical region. Sounds like you are a little bit more cautious about growth moving forward where you think the pickup may be in the oil basins for obvious reasons in the second half? Can you just walk through the different pieces there?

Christopher J. Baker: Yes. it is definitely a multifaceted question. I think if you think about the pure MidCon, it is holding steady. The Haynesville has been the story of the year. it is up, what, 8 rigs year to date in 25 rigs year over year. As we stated in our prepared remarks, we have seen a number of operators kind of feather the clutch talk about holding back or delaying programs. Natural gas prices are still pretty robust if you look at the forward strip this morning. So it is not been a couple months out where you start to see a $3 handle and then $4 later this year.

And so I would say the second half of the year in the Haynesville kind of gets back on track. From what I think is going to be a little bit of a slow spell, if you will, In kind of the shoulder month of Q2. Q3, Q4 step up. Same thing for the Marcellus, Utica. They are up 2 rigs year to date. Kind of the same year over year. Q1 was seasonally very strong for us.

So when you think about all the components of the Northeast Mid Con, the Northeast in that segment was very strong year over year, and I think the business there and the team continue to perform at a elevated and kind of steady pace is the way I frame it. And so from a macro standpoint, there is no doubt D&C activity in that segment seems steady.

Steve Ferazani: with, you know, some people talking about picking up rigs. The second portion of your question is, you know, what happens to oil demand and oil rig count in the second half of the year? Look. it is a great question. This is the longest we have seen prices this elevated. Without a material inflection in rig count. Typically, 60 to 90 days after major moves in WTI, you will see the market respond. That really has not been the case. And depending on if you are looking at Baker or Inverness rig count, 1 kind of shows rig count year to date, the Permian almost flat. The other showing it slightly up.

I think there is very nuanced reasons for you know, and part of that is the constant overhang of the Middle East deal and thoughts that prices would crash back to the $60 range on WTI. I think everybody's finally coming to terms that even with some conclusion, the Middle East situation, WTI is not heading back below $70 anytime soon. And in fact, the forward strip still has prices in the $80s in Q1 of next year. As of this morning.

So in short, you know, it looks like based off of all indicators, operator discussions, public commentary by operators, the second half should tend to be stronger than the first half based off a number of macro tailwinds. it is how you did in your prepared remarks, you were talking about the smaller independents and private operators potentially being the driver. Are you seeing any of that right now?

Christopher J. Baker: Well, unfortunately, there are not as many of them around as they are used to be, right, from a from a sponsor backed in entity standpoint. it is due to the wave of consolidation. But we have seen some of those former teams pick up some acreage around the margin, and we have seen some operators on the independent side do some pretty interesting acreage deals. So we have definitely seen in the Permian and other basins some of the smaller operators kind of pull forward activity, especially completion activity and accelerate the pace of drill outs putting 2 coil units per pad, multiple and a lot of the smaller operators do not do that in same way.

The larger operators typically do. So we have seen more and more of that as we enter Q2. That basically just pulling forward our existing base load of revenue anyway. So the question becomes, how much incremental capital do they allocate on the year to increase drilling and completion expenditures? And you have to think they are salivating at molecules at, you know, $90 a barrel. Right?

Steve Ferazani: Thanks, Christopher. Thanks, Jeff.

Christopher J. Baker: Yeah. Appreciate it, Steve.

Operator: Next question comes from the line of John Daniel with Daniel Energy Partners.

Analyst (Josh): Thanks. Good morning. First 1, you talked through the different geographies, but in light of the commodity price moves year to date, maybe you could just talk about different sense of urgencies around different product lines and how you see demand in the back half of the year across your different business lines first.

Christopher J. Baker: Yes. it is a great question. Of course, we are geographically and product line diverse when you think about the business of KLX. I think your question, kind of, John, first of all, good morning, that ties into Steve was just asking. If you think about our guide for Q2, we typically provide granular detail around the market movement. But, you know, from a segment perspective, I think we are going to see the highest rebounding in Q2. In the Rockies, but that is really due to the performance in Q1. Right? And I would estimate of the incremental upside revenue, probably 50% of that is coming from the Rockies ballpark.

Followed by the Southwest, which is probably 30%, and then the Mid Con, the balance. And so I think those numbers are skewed. Due to KLX's diversity. Second half of the year, I think those the rate of change of those probably shifts back to the oilier basins. Specifically in the Permian, we have seen South Texas ramp a lot of activity of late. We are also having a lot of conversations with operators and seeing incremental opportunity sets in the Bakken, the Uinta, etcetera. And so I think all of those basins the second half of the year probably drive on a relative basis, drive any outside kind of market performance.

Relative to the gas basins because the gas basins are already seeing a lot of the leg up. And while I think there is tailwinds there, I do not think you see the order of magnitude and the growth in those basins.

Analyst (Josh): Okay. Thanks. And then thoughts on pricing, how you see it evolving over the balance of this year? Do you think it will be more region driven or will it be more product line driven? And maybe just any anecdotes you could give would be helpful.

Christopher J. Baker: Yeah. Great question. I will start with saying what we said most of the 2025, and pricing in most PSLs across the industry, I think, is pretty anemic. And you saw a lot of the frack guys, rig guys, etcetera, all said that pricing did not justify reactivations. Right? So I think that sentiment's pretty consistent. So I think as we entered 2026, the floor was basically established. There was kind of only 1 direction to go. We candidly had selectively started to push price on certain PSLs specifically in the basins that we have talked about that ramped earlier. Late Q4, and into 2026. And I think that was a very specific and targeted set of PSLs.

When we drove we drove, and we were able to drive some incremental pricing there. From a go forward perspective, you know, look. We have pushed through, I think, just like most people have. The standard fuel surcharges. Of late, but we have definitely started having conversations that in order to add capacity on PSLs, especially the people intensive PSLs, I not rentals and things of that nature, but the more people intensive PSLs, like coiled tubing, wireline, etcetera, we need to see price move. And so we will see how the market develops, but I think that is kind of the macro theme as we think about our portfolio.

Analyst (Josh): Thanks for that. And then last 1 for me. Just still a lot going on with tariffs, global logistics, being disrupted. Maybe you could just talk through anything you are seeing today and how that may impact, an activity ramp coming in the lower 48 and steps you are taking to help mitigate supply chain risk moving forward?

Christopher J. Baker: Yeah. that is a great question. I think if you go back to the 2016 or 2020 COVID cycle, what we saw coming out of both of those cycles was the biggest issue were people. And I think, you know, seeing what John has forecasted for the second half of the year on rig count, There are not a lot of hot stacked rigs available in the market. And if you think about pulling ducts forward, and adding completion activity or adding refrac activity at the same time as trying to ramp rig count, I think people could be the biggest stumbling block.

We have not, you know, from a tariff perspective, it feels like most of those issues have been alleviated over the last couple of years. There are some sensors and boards on the directional and downhole module side, etcetera. That still have issues at times. And I think everybody's watching the OCTG good market just to see if things start to get tighter there again. Pricing on 2 dealers had come down. Over the last, call it, 18 months. And I think they have kind of found the floor. But we are we are definitely watching that market real time.

Analyst (Josh): Understood. Thanks for taking my questions. Appreciate it.

Christopher J. Baker: Yeah. Appreciate it, John.

Operator: Thank you. Mister Baker, I would like to turn the floor back over to you for closing comments.

Christopher J. Baker: Thank you once again for joining us on this call and for your continued interest in KLX. We look forward to speaking with you again next quarter.

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

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