KLXE - NASDAQ

Greetings and welcome to KLX Energy Services 2023 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ken Dennard. Thank you. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for KLX Energy Services conference call and webcast to review first quarter 2023 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. There will be a replay of today's call that will be available by webcast on the Company's website at klxenergy.com. There will also be a telephonic recorded replay available until May 25, 2023. And 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, May 11, 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 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?

Thank you, Ken, and good morning, everyone. KLX continued its positive momentum from 2022 by closing the highly accretive Greene's acquisition and reporting a strong first quarter that surpassed our expectations and has propelled KLX to one of the strongest starts to a year in its history. We exceeded our guidance across all financial metrics in Q1 overcoming numerous headwinds during the quarter. As we previously reported, we closed on our acquisition of Greene's on March 08, 2023. Greene's wellhead protection, flowback and well testing services, augment KLX's frac rentals and flowback product lines and provides us with a broader presence in the Permian and Eagle Ford basins. Although we are in the early stages of integration, we are excited about the opportunity to blend the teams together and the technology brought by Greene's and believe there is a tremendous strategic fit and ultimately a more differentiated compelling offering to our customers. In the early days of integration, the teams have already identified numerous revenue synergies, which were not factored into the deal and while minimal on a total revenue basis speak to the fit and entrepreneurial nature of the managers involved. From a macro standpoint, the commodity price backdrop was volatile yet remained constructive, and the supply and demand fundamentals are still materially in favor of the services sector and the longer-term outlook is favorable as well. OFS equipment and labor capacity remains tight and OPEC Plus seems to have taken a more proactive approach to supporting commodity prices based on recent actions, which is bullish not only for the North American onshore service industry, but for KLX in its role as a premium provider. From an operating results perspective, despite seasonality, weather disruptions and commodity price and rig count volatility, we realized a 7% sequential improvement in revenue, at approximately $240 million, which was above our guidance range of $225 million to $230 million and represents our 12th consecutive quarter of revenue growth. On a geographic basis, the Northeast/Mid-Con contributed 41% of Q1 revenue led by our pressure pumping, coil tubing and rental PSLs. The Southwest contributed 31% led by directional drilling, coil tubing and tech services. And finally, the Rockies contributed 28% led by coil tubing, rentals and tech services. The Haynesville falls within our Northeast/Mid-Con segment and accounted for 10% of Q1 revenue, which was increased slightly from Q4. Despite market volatility and a 3% sequential reduction in average Haynesville rig count, KLX was able to maintain its strong utilization rate in the basin due to pent-up demand for KLX services and through Q1 has more than offset activity disruptions via incremental market share and weighted average pricing gains in the basin. We believe this microcosm is a testament to our premier positioning within the market and service lines and customer mix during Q1. On a product line basis, drilling, completion, production and intervention services contributed approximately 25%, 54%, 12% and 9% respectively to revenues for the first quarter of 2023, which represents a 5% increase in leverage to the completions end market. We saw relative strength across our completion and production PSLs, where we experienced sequential increases in revenue activity and weighted average pricing. KLX generated first quarter adjusted EBITDA of $38 million above our guidance range of $30 million to $35 million and adjusted EBITDA margin of approximately 16%, which was above the top end of our prior guidance range of 13% to 15%. We overcame seasonal pressures in the first quarter including elevated personnel costs from the January reset of unemployment taxes as well as commodity price volatility to report record first quarter results that exceeded our expectations and guidance across all metrics. Note that because the Greene's deal was closed on March 8, they only contributed a partial month a consolidated KLX Q1 results. Pro forma for a full quarter impact from Greene's, Q1 revenue and adjusted EBITDA would have been $252 million and $41 million respectively. Drilling down into the first quarter cadence, March proved to be a record month for the Company, and we ended the quarter north of $1 billion of revenue on an annualized monthly run rate basis. We exited the quarter with strong momentum and are encouraged about KLX's outlook and free cash flow generation in Q2 and the remainder of 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?

Thanks, Chris. Good morning, everyone. I'll begin by discussing our first quarter 2023 results in more detail. As Chris mentioned, we reported record quarterly revenue of almost $240 million which represents a 7% sequential increase, outpacing the 2% decrease in the rig count and a 10% decrease in average quarterly WTI price. Q1 revenue continued to be driven by strong utilization and weighted average pricing across our drilling, completion, production and intervention activities. Additionally, we were very pleased to have experienced our fourth consecutive sequential improvement and adjusted EBITDA to $38 million for the first quarter, overcoming seasonal pressures from weather, elevated personnel costs from the January reset of unemployment taxes along with the well discussed commodity price volatility. Adjusted operating income for the first quarter was $21 million. Adjusted EBITDA and adjusted EBITDA margin were $38.2 million and 15.9% respectively. Adjusted EBITDA increased approximately $33 million over first quarter of 2022 and $1 million sequentially. Total SG&A expense for Q1 was approximately $26.2 million. When you back out the non-recurring cost, adjusted SG&A expense for Q1 would have been $20.2 million or just 8.4% of quarterly revenue. Net income and adjusted net income were $9.4 million and $11.5 million respectively. Pro forma for a full quarter's impact of Greene's pro forma revenue, adjusted EBITDA and adjusted net income for Q1 would have been $252 million, $41 million and $12.4 million respectively. Turning now to a review of our segment income statement results. I'll begin with the Rockies. The Rockies segment's first quarter revenue was $67.9 million, representing a 3% increase over the fourth quarter of 2022 and an all-time quarterly record for the segment. Adjusted operating income for the first quarter was $9.8 million. Adjusted EBITDA was $15.5 million as compared to fourth quarter adjusted EBITDA of $17.9 million. The slight decrease in profitability was driven by seasonality, white space, and seasonally elevated payroll taxes previously discussed. Moving now to our Southwest segment. The segment experienced a slight 2% sequential decrease in revenue generating revenue of $73.4 million in the quarter. The minor decrease in revenue was primarily driven by slightly lower activity to begin the year as operators reset their budgets and a shift in job mix that drove a modest decline in weighted average pricing. Q1 adjusted operating income for the segment was $4.8 million. Adjusted EBITDA was $10.2 million for the first quarter compared to fourth quarter adjusted EBITDA $12.4 million. The decrease in profitability was driven by higher costs for this region related to seasonally elevated payroll taxes along with white space impacting margins early in the quarter as we prepared for a return to normalcy in March. Now to wrap up the segment discussion with the Northeast and Mid-Con, Northeast/Mid-Con Q1 revenue was $98.3 million, a significant 19% increase relative to Q4 driven largely by sequential improvement in activity and pricing across pressure pumping, cold tubing and directional drilling. This is our broadest geographic segment in the geographic segment with the most gas exposure, as it includes both the Haynesville and the Marcellus Utica. For the first quarter, the Haynesville accounted for 10% of consolidated revenue and we actually captured market share while seeing an increase in weighted average pricing. Adjusted operating income for the first quarter was $18.7 million, and adjusted EBITDA was $23.7 million. The 20% sequential increase in adjusted EBITDA was driven by a favorable shift in job mix and continued strength and weighted average pricing across our core completions offerings. Q1 results for revenue adjusted operating income and adjusted EBITDA represent all-time segment records. Corporate adjusted operating income and adjusted EBITDA losses for Q1 were $12.2 million and $11.2 million respectively. The corporate adjusted EBITDA loss improved by 9%, sequentially. I'll now turn to our networking capital, cash flow and capitalization. Our first quarter 2023 cash balance was $39.6 million, down from $57.4 million a year end. The sequential decrease in cash was largely due to a material investment and networking capital driven by a handful of transitory timing factors. We continue to proactively manage working capital and convert cash flow as quickly as possible. Networking capital was approximately $115 million in Q1. Sequential increase in networking capital and corresponding decrease in cash was largely driven by. One, A 7% increase in revenue; Two, a $12 million working capital contribution from greens; Three, a 7% increase in DSO as customer slowed payments and response to commodity price volatility; Four, accelerated accounts payable in March as we paid some invoices early in preparation for a system implementation project in April, thereby reducing DPO by approximately 2% from year end levels; and lastly five, two incremental payrolls in the first quarter of 2023 relative to the fourth quarter of 2022. This all normalized, and as of April 30, 2023, our cash balance returned to approximately $61 million and our available liquidity was approximately $106 million. Currently, we are at similar cash and liquidity levels to month end, April, even after making our semiannual interest payment on May 1st. Total debt outstanding as of March 31, 2023 was $283.6 million which was in line with our Q4 balance as we did not draw on or pay down the ABL, nor did we execute additional 3(a)(9) exchange transactions. Net debt balance as of Q1 was $244 million and accrued interest as of March 31 was $11.5 million for the senior secured notes and $200,000 related to the ABL. We exit Q1 with our strongest credit metrics since the notes were put in place in late 2018. Based on annualized Q1 results, we have a net leverage ratio of 1.6x and 1.5x when you pro forma for Greene's. We ended the first quarter with $84 million in total liquidity consisting of $39.6 million of cash and availability of $44.4 million on the March 2023 ABL borrowing base certificate. As I stated earlier, cash normalized in April and as of April 30th, our cash balance was approximately $61 million and our available liquidity was approximately $106 million. Our borrowing base as of our March certificate is significantly larger than the facility size and we had $42 million of suppressed availability. We remain in compliance with all financial covenants and we expect to remain in compliance going forward. We are currently in conversations with lenders to address our September 2024 ABL maturity and believe there are highly constructive options available and we plan to address well before we go current later this year. We did not issue shares under our ATM in Q1 and have not issued any shares so far this year. The only share issuances in 2023 were associated with share-based, long-term compensation and the 100% stock acquisition of Greene's. Now turning to our CapEx. CapEx for the first quarter was approximately $10 million and we were primarily focused on maintenance spending across our segments. Going forward, we continue to expect total CapEx for 2023 to be in the range of $60 million to $70 million inclusive of Greene's, though we likely come in towards the lower end of that range. This spend will be primarily focused on maintenance spending with 75% to 80% supporting ongoing operations and the remaining CapEx earmarked for reactivation and growth, focused on quick payback projects. As always, we will reassess capital spending in real time based on market conditions. At the end of the first quarter, we had $4.9 million of assets held-for-sale. And based on our current estimates, we hope to close on the sale of approximately 50% of this balance in the second half of 2023. As we look to the remainder of the year, our focus remains on maximizing free cash flow and further reducing our net debt, all while being prudent stewards of capital and pursuing accretive consolidation opportunities. I will now turn the call back to Chris, who will provide some additional color on the current market and our outlook for Q2 and 2023.

Thanks, Keeper. Before we wrap up, I'd like to share some more detail on our outlook. Despite recent volatility in commodity prices and rig count declines and rotations driving short-term dislocations, the market backdrop remains fundamentally constructive. Our customers are largely hedged and the supply and demand fundamentals continue to favor the services sector. As we enter the second quarter, we have seen consolidated recount decline, approximately 10 rigs from Q1 average levels and some softening across a few of our product lines, largely driven by a reduction in Haynesville activity and an associated impact on adjacent basins. However, the overall market remains tight for many of our market leading differentiated service lines. KLX's diversification will enable us to navigate any near term market disruption and dislocation. KLX is well positioned to manage these disruptions given our competitive positioning and ability to take a portfolio allocation approach to managing our assets across a diverse product line and geographic footprint. Looking forward to the second quarter, we expect continued strong utilization and margin, plus a full quarter's impact from greens to drive sequential expansion of quarterly revenue and adjusted EBITDA. As we look out to full year 2023, we will continue to proactively manage our portfolio of assets to maximize our results in the face of market volatility and basin rotation with a focus on generating meaningful free cash flow. As I mentioned earlier, we exited March on a strong monthly run rate and are optimistic about Q2 results guiding to sequential improvement in both revenue and adjusted EBITDA. We expect Q2 revenue to be in the range of $240 million to $250 million an adjusted EBITDA margin to be in the range of 16% to 17%. Further, as Keefer mentioned, we expect strong sequential free cash flow generation this quarter despite making our semi-annual interest payment in early May. Yesterday, we also reaffirmed our full year 2023 guidance. Full year revenue is expected to be in the range of $975 million to $1.04 billion in adjusted EBITDA margin in the range of 17% to 19%. Given these margin levels and our CapEx guidance, we expect meaningful free cash flow generation for the remainder of 2023. Lastly, on consolidation, KLX has a long history of accretive inorganic growth. Most recently, we completed the highly accretive acquisition of greens and we are working to quickly integrate our businesses. Given the operational synergy and systems overlap, we expect a quick integration process and are well positioned to pursue the next deal. Well site interest remains strong, but the bid-ask spread remains challenging. We believe KLX is a counterparty of choice for potential M&A targets amongst the publicly traded diversified services providers, and the Greene’s transaction should serve as a blueprint for how KLX will structure and execute additional accretive tuck-in consolidation opportunities. With that, we will now take your questions. Operator?

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is from the line of Ignacio Bernaldez with EF Hutton. Please proceed with your question.

I was wondering if you could provide some more color on what you're seeing in pricing trends kind of looking ahead, and if, or even where customers are pushing back on those prices?

Yes, sure. Great question. Good morning, Ignacio. Appreciate your questions on the call. So look, the market seems somewhat like a tale of two tastes, the gas market as everybody's alluded to recently as challenging. The more fragmented your service lines are, the closer you are to an area with rig count reductions, the more impacted you are going to be, by transitory issues and pricing pressures. I would say this is especially true for the more fragmented service lines like DD, wire line, other commodity products in general. And so, we have definitely seen some pricing pressures in those service lines. And candidly strangely enough, we have seen competitors occasionally taking work at COVID-type pricing levels in certain instances, which makes no sense whatsoever. However, in those instances, it really seems like it just desperation to fill holes in schedules or redeploy assets, not really resetting price and setting the new pricing paradigm. At the same time, we have seen strengthening in other markets, especially as we get ready to start mid-summer programs et cetera on the completion production and intervention side of the business. And so the market is focused on bifurcation of the electric frac, Tier 4 frac spread market, super spec rig market. It gets overlooked, but KLX likewise has its own bifurcation and market leading positions and numerous business lines as I said are overlooked and we're candidly fine that. So, we have recently been able to raise price as much as 10% or 15% in certain business lines, in certain areas, and we believe the strength of those areas will offset the declines in the other areas.

Thank you. Our next question is from the line of John Daniel with Daniel Energy Partners. Please proceed with your question.

Good morning and congrats on, what appears to be a pretty good outlook relative to some of your peers, I guess, Chris, my question is on the frac business initially. Those fleets carry high revenue. And I'm curious if you can speak to the visibility you have for work for the balance of the year if they are under dedicated arrangements. Just any color around on that would be helpful.

Yes. What I'd say is, we don't have with the exception of a small contract on the industrial wire line side of our business. We are primarily a spot player in all of our business lines. And so as I look at our calendar this week, we are kind of booked out for the foreseeable future. And we are still bidding other opportunities into the third and fourth quarter. I think people probably overestimate the contribution of those business is relative to our rentals business and coiled tubing and others. But here again, that's fine.

Okay. Fair enough. I was assuming there is at least $30 million to $40 million of revenue per fleet, but maybe misguided, on an annualized basis. M&A, you noted that this.

No, go ahead. As you well know, those revenue numbers are highly dependent on whether it's pump only and you are providing commodities et cetera, right?

Okay, right. Fair enough. On the M&A commentary, Chris, you noted the disconnect between sellers that are presumably just valuation expectations. I guess if you're starting to look at some of the people that are being pitched to you. And you look at the near-term sort of headwinds the industry is facing. Do you see any chance of some of the smaller competitors having balance sheet issues, which would lead to maybe a more rational approach to evaluation?

You -- sure would think so. And it's a great question. We talked about this I think last quarter on the earnings call. Some of the competitors, especially the smaller single basin competitors that have high degrees of gas exposure, you would think would capitulate on the bid as spread. Here's what I'll say. Right now, we're focused on the greens deal. First, we're integrating that first and foremost, and managing the blocking and tackling of our business, right? We absolutely remained steadfast in our opinion that consolidation needs to occur in multiple service lines. And so, to your point and Ignacio's question earlier, if the markets and certain markets weren't so fragmented, I don't think you would see some of the episodic irrational pricings. I will say post announcing the greens deal. We have seen a handful of inbounds for privately negotiated deals that probably fit within the molds of what you're saying around some of the smaller tuck-in type opportunities. And so we'll evaluate those as they come. The reality of the situation is, it's your point on relative value in multiples. Our pitch to especially private sellers is KLX provides a pathway to liquidity where the sellers can better time their exit and avoid cashing out at these low multiples, right? And so if you really believe it's a multi-year up cycle take doing a stock oriented deal with some semblance of a lockup makes a lot of sense.

Final question just relates to labor, and it's a hypothetical question, but if we have hard landing here and then you balance that with, I think everyone would share a constructive outlook on natural gas for next year and beyond, right? As l and g comes online, and then assuming oil markets tighten next year, so call it short term headwinds, long term positive, but if it's a little bit worse than maybe expectations, how do you handle the labor situation if you believe that three quarters from now, we're going to be gearing back up again. Again, hypothetical, but how would you approach that?

Yes, look, I think to your point, I don't want to assume what you mean by hard landing with regards to recount -- spread rollover, but there's no doubt that. If rigs get stacked out or spreads get stacked out, it pushes people back into the systems that are looking for jobs, right? At a minimum, it should put a hard tap on any increases in some of the night fights they go on, especially in the Permian around field level compensation. So, it should put a hard cap on that, and whether or not it drives down incremental field labor costs, I think is premature to speculate on.

Thank you. Our next question is from David Marsh with Singular Research. Please proceed with your question.

I mean, aside from the working cap issue, I mean, think this is a really good quarter here. And it sounds like this working cap stuff has resolved itself, as of April, Keefer, is that accurate?

Yes, so, as we've exited Q1, we've talked about this in the prepared remarks, but obviously, we saw a decline in cash position that was largely driven by an investment in networking capital. There were a handful of factors that that led to that increase. So, it was a combination of just a general increase in our underlying business. Greene's brought over a meaningful amount of working capital a little over $12 million. Additionally, we saw some of our customers begin to slow pay at the end of the first quarter. I think largely in response to some of the commodity price volatility that we are seeing at that point in time. And then we are working through and have now successfully gone live on an implementation project. That was completed in April. But in order to get ahead of that project, we accelerated some of our AP disbursement at the end of the first quarter. And then lastly, we had those two incremental payrolls in Q1, so kind of all those things combined to drive a pretty material investment in net working capital. But like we stated on the prepared remarks side of the call, cash kind of quickly began to normalize in April, and we ended April with $61 million of cash on hand. Liquidity was back up to roughly $106 million plus and then further as we sit here currently post making our interest payment in early May, we are back to kind of the similar month in April type cash and liquidity levels.

That's really helpful. And then I guess my next question, the SG&A obviously is elevated because you got the acquisition and everything else. Once you start to realize some synergy, where do you see your SG&A shaking out kind of over the balance of the year in terms of a percentage of revenue?

Yes. Good question. And so, we haven't explicitly given a full year guide on SG&A. Clearly, we gave a full year guide on EBITDA margin of 17% to 19%. As you look at the first quarter, total SG&A expense was a little north of $26 million. There was a substantial amount of non-recurring cost included in that number. So if you were to back that out on a pro forma adjusted basis, you would kind of get to a more normalized Q1 level of just north of $20 million for the quarter and that would be roughly 8.4-ish percent of revenue as you think about our Q1 results.

That's really helpful. Appreciate that. And then great to hear that you guys are working credit facility. I wish that the financial markets were a little more friendly and that the banking space is a little bit more friendly at the moment. But within your lending group, you currently do have no exposure to any of these regionals that are getting kind of hammered or do you?

Yes, really good question. We do not. So our lending group is comprised of some of the leading largest banks in the United States and our agent is JPMorgan.

Yes. That's good. And then lastly from me, the senior secured notes through 2025. I got to imagine that, they are callable now at par. Are you -- I know market conditions aren't the best right now to go try to refinance them, but have you started to consider refinancing and can you talk about what that may or may not look like?

Yes. Good question. So just first and foremost, the notes, they are callable today, but it is north of par. If you look at just take a step back, and think about where we were from an annualized Q1 perspective, we exited the first quarter at a net leverage ratio of 1.6x. If you pro form a for a full quarterly impact of Greene's, our net leverage ratio would be about 1.5x times net leverage ratio. So I think, at this point we've kind of more than grown back into our capital structure and based on our results over the last four few quarters, we're currently sitting at kind of our strongest credit metric position since we've put the senior secure notes in place in late 2018. So, I think, as we think about today, we're on extremely sound financial footing. We're focused day in, day out on execution and free cash flow generation. We've got two and a half years of 10 or left on those notes. So I think right now we're really focused on the 2024 ABL maturity. But given, we've got a really strong borrowing base, we've got an extremely high quality customer base and we've got a bank group that's very supportive of KLX. So we plan to address that maturity first and foremost kind of before that goes current later this year.

And as usual, we get some email questions and one of our questions from Luke at Piper who's on the road somewhere. He asked, Chris, if you could walk through -- pull it up here real quick. Walk through some of the improvements from Q2 to the second half on how you get to the midpoint of your guidance?

Yes, great question and Luke, we'll try to address that. Appreciate the question. Look, we receive a 90 day rolling forecast every Monday morning that forecast revenue out for the next 90 days. And as I look at what's in front of me today in this week's forecast, it clearly supports Q2 guidance. If you think about our March annualized run rate on a one month basis, it was above the midpoint of our full year guidance range. And so we alluded to that in our prepared remarks. If you look at the pro forma numbers contained in the earnings release, the run rate numbers would imply slightly above a billion in revenue and slightly above 160 million of adjusted EBITDA on a pro forma basis. So that's right at the bottom of the range. And so, relative to and I think ties into what John Daniel was saying, there's no doubt the market is volatile to Ignacio's point. There's pricing pressure in certain basins. However, with what we know today, we're comfortable with the 2Q guide and we can only go from there. What we have seen is a strengthening in certain of our smaller markets, specifically with many of our completion and production and intervention services and additional customer programs that are expected to start in early summer. We've noted on numerous of our prior calls that we have substantial geographic diversity, and with that comes significant seasonality in certain areas. And as of today, we expect those businesses to ramp as we enter the summer. Our cement business, our refract business, our P&A business, all in the Rockies, are especially seasonal, typically kickoff mid-summer. And the third quarter is notoriously our strongest quarter in those markets due to the thaw runoff, wildlife migration steps, et cetera. So the second half of the year the question remains, does that incremental off activity offset any gas weakness? Right now, our calendars point to positives and we believe as long as WTI holds, maybe strengthens a little bit in the second half of the year that we should be on track to hit that guidance. There's plenty of noise in the market right now. Yesterday, the house was discussing a NOPEC bill. I think once we get past June, the debt ceiling overhang SPR releases have to come to an end at some point. You get into summer driving season. I think you have much better visibility on the second half of the year. I guess the last point I would make, so that's all talking about the revenue side of the business, we also have cost reductions, right? We've got employment tax roll offs, which people tend to drastically underestimate the impact to your cost structure of those. We have the incremental Greene's integration savings. And then finally, we do have some contributions that we expect to kick in from numerous R&D projects, on the downhole tool side, which will both help the costs structure side of the business and the revenue side of the business.

Thanks, Chris. So no more questions in the queue and I'll hand it back to Chris to give some final comments and we will move on to the next quarter.

Thank you, Ken. Thank you once again for joining us on this call, and thank you for your interest KLX Services. I would especially like to thank the KLX team for their stellar execution in Q1. We look forward to speaking with you again next quarter.