Greetings. Welcome to KLX Energy Services Full Year 2023 and Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard. Thank you. You may begin..

Thank you, operator, and good morning, everyone. We appreciate you joining us for the KLX Energy Services conference call and webcast to review fourth quarter and full year 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 full year and fourth quarter and discuss the outlook for 2024 before opening the call for your questions. There will be a replay of today's call and will be available by webcast by going to the company's website at klx.com.

There'll also be a telephonic recorded replay available until March 21, 2024. 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 7, 2024.

And therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listing 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 certain of those 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 Energy website. And with that behind me now, 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. I'll go through the highlights of our full year 2023 and fourth quarter before turning the call over to Keefer to discuss our financials in more detail, and will then rejoin the call for concluding remarks.

2023 was a tremendous year for KLX on numerous fronts, marked by outstanding operational performance, financial successes, post-COVID record HSE performance and statistics, continued market share gains with investment-grade and blue-chip customers and significant strategic advancements, including the commercialization of multiple proprietary offerings and the accretive acquisitions of Greene's Energy Group.

We generated record revenue and adjusted EBITDA of $888 million and $138 million, respectively, representing year-over-year increases of 14% and 42%, respectively, despite facing a 20% decrease in rig count over the same time period. We generated $111 million of unlevered free cash flow, which was an annual record for KLX.

We ended the year with $113 million in cash and $154 million of liquidity, a 96% and 52% increase year-over-year, respectively. KLX exited 2023 with an LTM net leverage ratio of only 1.2x, which is our lowest LTM net leverage ratio since the notes were put in place in 2018 and well ahead of our internal goals set at the outset of the merger with QES.

We achieved this financial success despite a 20% decline in rig count and all while improving our TRIR, LTIR and vehicle incident rates by 37%, 48% and 32%, respectively, yielding post-COVID record safety performance. We have seen rapid customer adoption of our latest technologies, including our PhantM Dissolvable Plug and our Oracle Smart Reach ERT.

We sold 56% of our total 2023 dissolvable plug sales in Q4 and experienced an 85% sequential increase in dissolvable plugs sold from Q3 to Q4. We now have surpassed 1.1 million running feet and drilled out almost 3,000 plugs with our new proprietary Smart Oracle ERT.

Customers are excited about Oracle's performance and inherent cleanout benefits, and we believe KLX is now uniquely positioned in the market as we are able to offer a leading fleet of large diameter coiled tubing and cutting-edge proprietary ERT and BHA.

And lastly, we have made a concerted effort over the last 24 months to high grade our customer base. We worked for approximately 680 customers in 2023, which is down materially from greater than 1,200 customers in 2019.

The company today is focused on providing products and services to the largest, most active and best capitalized E&P operators across our geographic areas of operations. Our 2023 top 10 customers accounted for approximately 41% of our revenue and includes seven investment-grade operators and nine of the top 20 operators by rig count.

E&P customers continued their record pace of consolidation with over $100 billion of total mergers and acquisitions announced in 2023 in the Permian Basin alone. An added benefit of our customer high-grading strategy is that KLX has thus far had outsized relationships with the acquirers in the most recent wave of E&P consolidation.

So we believe the consolidation trend will be a net positive for KLX as it creates an opportunity to capture additional market share with these leading customers. With that, I'll now jump into Q4 results. Despite continued softness in underlying U.S.

activity with frac spread count down 6% sequentially and a rig count that is down 25% from 2023 peak, we are pleased with our quarterly results, particularly our ability to continue to generate free cash flow and improved our cash, liquidity and leverage positions.

Consistent with our guide, our fourth quarter performance was negatively affected by reduced seasonal activity during the holiday season and decreased spending due to budget exhaustion and capital discipline.

We observed a significant increase in the number of customers taking nearly a full week off for the Christmas holiday surpassing previous year's trends. Q4 revenue was $194 million, and we reported a 12% adjusted EBITDA margin with a net loss and adjusted EBITDA coming in at negative $9 million and $23 million, respectively.

In the fourth quarter, our revenue mix was well balanced both in terms of geographical distribution and product assortment. Geographically, the Southwest represented 35% of revenue on par with Q3. The Northeast Mid-Con represented 34% of Q4 revenue, up from 30% in Q3, and the Rockies generated 31% of revenue, down sequentially from 35% in Q3.

KLX has broad exposure to both oil and gas producing regions. However, approximately 84% of 2023 revenue was driven by oil-directed activity. Our gas-driven activity represented approximately 16% of 2023 revenue, including the Haynesville, which accounted for approximately 9% and the Northeast, which accounted for approximately 7%.

I would note that we offer a more targeted product service offering in these areas whereby we have large market-leading positions. We actually experienced a sequential increase in the Haynesville revenue from Q3 to Q4 and Q4 represented the strongest Haynesville quarterly revenue since Q1 2023.

From a product line perspective, completion-focused activity drove 51% of Q4 revenue. Drilling was 25% and production and intervention was 24%.

We saw sequential activity declines primarily driven by seasonal slowdowns, budget exhaustion, capital discipline and weather across all of our PSLs other than pressure pumping and downhole production services, which were up sequentially on the previously disclosed frac contract and continued market adoption of our newly commercialized PhantM Dissolvable Plug.

KLX remains committed to optimizing utilization rates and safeguarding pricing strategies to maximize margin and generate free cash flow. KLX's 2023 performance showcases the resiliency of our diversification strategy by illustrating our capacity to generate substantial free cash flow even in a demanding market backdrop.

Throughout 2023, our operations team demonstrated exceptional performance by effectively adapting our cost structures and upholding disciplined pricing strategies. By leveraging the advantages of geographic and PSL diversification, we have successfully driven strong results. Our dedicated team members are strategically positioned across all major U.S.

onshore basins, enabling us to efficiently deliver our extensive range of differentiated services and proprietary products. The exceptional caliber of our team and service offerings positions us to capture a greater portion of customer spending, particularly with a strong emphasis on the largest, most active and well-capitalized operators in the U.S.

onshore market. With that, I'll now turn the call over to Keefer, who will review our financial results in more detail, and I'll return later in the call to discuss our outlook in greater detail.

Keefer?.

Thanks, Chris. Good morning, everyone. As Chris mentioned, we reported quarterly revenue of $194 million, representing a 12% sequential decrease, which is lower than the 21% sequential decline in crude price and a 25% decrease in rig count from 2023 highs.

The Southwest and Mid-Con/Northeast segments contributed 35% and 34% of Q4 revenue, respectively, led in the Southwest by directional drilling, rentals and coiled tubing product service lines and in the Mid-Con by our pressure pumping, directional drilling and accommodation offerings.

The Rockies contributed 31%, led by rentals, coiled tubing and tech services. Fourth quarter consolidated adjusted EBITDA was $23 million and adjusted operating income was approximately $3 million. Full year consolidated adjusted EBITDA was $138 million and adjusted operating income was $62 million.

Total SG&A expense for Q4 was $20 million and was $87 million for the full year. When you back out the nonrecurring cost, adjusted SG&A expense for Q4 would have been only $19 million or just 9.8% of quarterly revenue and full year would have been $77 million or just 8.7% of annual revenues.

We take pride in maintaining one of the most streamlined overhead structures in the sector for a diversified business. Our ongoing focus is on further scaling operations while concurrently reducing G&A expense as a percentage of revenue. We generated a net loss of $9 million in Q4.

On a full year basis, we generated $19 million in net income and $1.22 per diluted share. Full year adjusted net income and adjusted diluted EPS were $24 million and $1.54, respectively. Turning now to a review of our segment results. I'll begin with the Southwest segment.

The Southwest segment experienced a 13% sequential revenue decrease and a 10% year-over-year decrease in revenue to $67 million in the fourth quarter of 2023.

Sequential decline in revenue was largely driven by lower utilization and pricing across most completion, production and intervention product lines, including rentals, fishing, wireline and flowback. Q4 adjusted operating income for the Southwest segment was approximately $2 million, and adjusted EBITDA was $9 million.

The Rocky Mountains segment fourth quarter revenue was $60 million, representing a 22% sequential decrease and a 9% decrease over the prior year quarter. The sequential decrease in fourth quarter revenue was largely driven by reduced regional completions and production activity into year-end.

We experienced sequential revenue declines across all product service lines. Adjusted operating income for the fourth quarter was $7 million and adjusted EBITDA was $13 million.

Northeast/Mid-Con Q4 revenue was $67 million, a 2% increase relative to Q3, driven largely by higher activity in our frac business, where we continue to run two spreads, one of which is now operating under a contract with a top-tier operator.

We pumped twice as many stages in Q4 as compared to Q3 and experienced slightly improved pricing and utilization across a few of our broader completion and production intervention service lines. Segment adjusted operating income for the fourth quarter was just over $4 million and adjusted EBITDA was $11 million for the quarter.

Overall, the sequential decrease in profitability was driven by increased white space and a shift in mix with reduced contribution from some of our higher-margin product service lines, including rentals and fishing. At Corporate, our adjusted operating loss and adjusted EBITDA loss for Q4 were $10.4 million and $9.2 million, respectively.

Corporate adjusted EBITDA loss improved by 6% sequentially and 28% compared to Q4 2022. On a full year basis, our Corporate adjusted operating loss and adjusted EBITDA loss were $45 million and $40 million, respectively, both of which improved approximately 1% compared to 2022.

These results highlight our capability to successfully integrate acquisitions and leverage economies of scale. I'll now turn to net working capital, cash flow and capitalization. Net working capital was approximately $47 million as of Q4. We reduced net debt 11% sequentially, ending the quarter with a net debt balance of $172 million.

And based on last 12 months results, we have a net leverage ratio of just 1.2x. Our year-end cash balance was $113 million. That was up 25% from $90 million in Q3 and up 96% from 2022.

The sequential and year-over-year increases in cash were largely driven by our ability to efficiently convert adjusted EBITDA to free cash flow and proactive efficient management of net working capital.

We ended the fourth quarter with roughly $154 million in liquidity, consisting of $113 million of cash and availability of $42 million under our December 2023 ABL borrowing base certificate. We did not issue shares under our ATM in 2023. Our ABL and senior secured notes both mature in the fall of 2025.

And given our performance in 2023, we believe the business is well positioned and conservatively capitalized. We'll continue to monitor market conditions and opportunities to refinance our senior secured notes and ABL as we progress through 2024. Now turning to CapEx.

Fourth quarter capital expenditures were $13 million, which were primarily focused on maintenance spending across our various segments. Q4 net CapEx, CapEx less asset sales, was approximately $9 million. Going forward, we expect total CapEx for 2024 to be in the range of $50 million to $60 million.

The majority of the budget at CapEx will be allocated to maintenance expenses with around 75% dedicated to supporting ongoing operations. The remaining funds will be allocated to quick payback reactivation and growth initiatives across various areas such as rentals, frac rentals and coiled tubing.

We continually assess capital expenditure levels and drivers to identify current trends and potential inefficiencies to ensure they are in line with prevailing market conditions. During Q4, we sold approximately $3 million in assets. And at the end of the fourth quarter, we still had $2.3 million of assets held for sale reflected on the balance sheet.

Moving forward, our focus remains on optimizing free cash flow, maintaining a strong balance sheet and prudently managing capital as we actively pursue value-enhancing growth and M&A opportunities. I'll now turn the call back to Chris, who will provide some additional color on the current market and our outlook for Q1 and the remainder of 2024..

Thanks, Keefer. Before we wrap up, I'd like to share some additional details on our outlook. As we enter 2024, we are confident that our platform is exceptionally well positioned to capitalize on the growing customer consolidation trend.

Customers continue to search for performance-driven technologically differentiated services providers with exemplary safety records and job execution, and we checked all of those boxes. Our confidence stems from various factors, including our efficient cost structure, expanded asset capacity and utilization of cutting-edge technology.

These elements contribute to the KLX platform's strong market position. Currently, we anticipate that our business will be focused on prioritizing crude utilization and pricing strategies to drive margins and free cash flow. We believe KLX and the broader U.S.

onshore oilfield services industry in general, is positioned exceptionally well as we move into the second half of 2024. More specifically, the forward natural gas strip is highly constructive into 2025 and 2026 due to the much-anticipated incremental LNG offtake demand.

Global LNG demand is expected to double over the next two years, and we believe this increase will drive incremental natural gas directed activity that will ultimately lift and support service pricing and utilization across all basins.

Based on what we know today, we expect our first quarter to be down sequentially, driven by normal seasonality, January's polar vortex weather system, which impacted the majority of our operations, particularly in the Rockies, Mid-Con and Texas. We estimate approximately four to six revenue days were lost in the first quarter due to this event.

Additionally, Q1 activity in the Rockies has been negatively impacted by non-KLX generated safety standdowns for two separate customers. While the revenue loss is expected to be made up over the course of 2024 as customers maintain their budgets, it will not be recovered during Q1.

With that said, based on our current schedules, we expect to exit the first quarter on a strong monthly run rate and to approach 2023 levels of revenue and adjusted EBITDA in the second quarter and beyond.

For the full year of 2024, we expect full year revenue to be in line with or slightly above second half 2023 annualized levels with material shape to the year as the current calendar calls for a slower start in Q1 and increasingly stronger performance through Q2 and Q3 with only modest seasonality in Q4, which we expect will be less pronounced in 2023 as gas directed activity should begin to improve late in the year.

Finally, our M&A strategy remains focused on identifying and pursuing accretive opportunities that add depth or complementary technology to our overall product service offerings and enhance our customer value proposition. If Exxon and Pioneer needs to scale, then everyone needs to scale.

The sell-side is showing signs of life, but the bid-ask spread remains wide. The discrepancy in the rate of consolidation between our customers and the service providers may partly be attributed to the service sectors depressed market multiples and highly fragmented competitive landscape.

However, we firmly believe that we offer M&A counterparties an appealing opportunity to engage in value-creating, equity-linked transactions whereby they can ultimately realize an exit via a well-capitalized, liquid, publicly traded stock.

We have a proven track record in successfully identifying and realizing synergies and quickly integrating acquired entities. With a strong foundation and capitalization, KLX's proactive strategy involves actively pursuing accretive and synergistic M&A opportunities to further expand and scale our existing platform.

In summary, I would like to express my gratitude to every member of the KLX team for their unwavering dedication to safety, customer service and the successful execution of our strategic initiatives.

The hard work and commitment of our team members has been instrumental in driving our success, and I extend my sincere appreciation for their contributions. With that said, we'll now take your questions.

Operator?.

[Operator Instructions] Our first question is from Luke Lemoine with Piper Sandler. Please proceed..

Chris, you talked about getting back to '23 quarterly rev and EBITDA levels in 2Q and beyond. But could you talk about the factors you see driving this? Is it uptake in various products, market share gains, customer mix, basin mix or just any commentary you can provide would be helpful..

Yes. Luke, that's a pretty broad question. I think it ties into our overall guidance and kind of how we're thinking about the macro as a whole.

I think to your initial question around guidance, et cetera, look, I think, first, it feels like general consensus is the first half of the year is going to be slower with more growth in the second half of the year and optimism going into '25 and '26.

Looking at our calendars, as we sit here today, we see a pretty material leg up in Q2, just solely based off customer feedback in our current calendars and schedule. And I think general market expectations are incremental expansion into Q3.

Some of that for us, as you well know, is driven by our weather-sensitive regions in the Rockies, et cetera, in the production and intervention side of our business, is typically much stronger in Q2 and Q3. And so look, Q4, as everybody knows, is a bit of a wildcard.

I think everybody is looking ahead at the wave of gas demand, the forward strip is clearly highly constructive if it holds.

I think two key points that a lot of people are overlooking First, if WTI stays range-bound in the $70 to $80 range and the gas strip holds, the reality is the Eagle Ford and the Mid-Con become much more economic when gas gets above $2.50, let alone $3.

And so we're having customer conversations and I think those basins will see incremental activity in the second half relative to the first. The other is, if you roll the clock back to October of '23, a number of industry veterans and probably including a couple on this call, were calling for 40-plus rigs in the Haynesville being added in 2024.

That hope was clearly thrown out with the bathwater back in December. That being said, look, if we see any semblance of that kind of rig count in Q4, starting in Q4 into 2025, the reality is that's highly accretive to margins across all basins due to the service intensity of the Haynesville.

We've seen it before, service companies will flock back to the Haynesville chasing outsized returns in a basin that's very onerous on assets. And ultimately, I think the timing of the gas-directed activity rebound will lift every basin. And so I think we have a leg up. The timing is what's in question.

And so I think the loaded question is, if the strip holds, do operators stand up rigs in the gas basins in Q4 or do they wait until Q1 of '25? The other last point I would make is, look, we're going to benefit from a full year of the Greene's acquisition as well as the recently commercialized downhole tools that we've been talking about on the dissolvable plug and ERT side.

So I think we have a full year benefit of all three of those. And so as we're sitting here today, we think Q1 is - will be a bit transitory and the back half of the year will finish materially stronger..

Okay. And then just on 1Q, I mean you've talked about a lot of the issues at play and definitely understandable.

But any kind of specificity you can kind of provide surrounding 1Q?.

No, I think, look, we covered it. We said it's going to be down sequentially quarter-over-quarter.

We talked about some of the puts and takes, as you well know, when we're running $2-plus million of revenue a day, a couple of days lost due to polar vortexes, or otherwise, you all can probably do the math, but we haven't provided any quantitative guidance on 1Q yet beyond what we said in the prepared remarks..

Okay. And then maybe take just one more in real quick, Keefer, on working capital. You all did an excellent job in '23 on that and had a nice tailwind.

Any kind of thoughts on '24 working capital kind of based on your revenue and EBITDA outlook for the year?.

Yes. Good question. Based on, I think the revenue guide for the year, shape of working capital probably looks pretty similar for '24 versus 2023. Typically, Q1 is a working capital-intensive quarter for us, particularly on the payroll and AP side. I think you saw that in 2023 as well. But look, we're constantly monitoring working capital.

We very proactively manage. We work really hard on customer collections and work hard with our vendors. So I think we'll be able to continue to efficiently manage working capital on a go-forward basis..

Okay. Thanks, Chris. Thanks, Keefer..

Thank you, Luke..

Our next question is from Steve Ferazani with Sidoti & Company. Please proceed..

Morning, Chris. Morning, Keefer. Appreciate all the detail on the call. I appreciate all the detail on the call. I just want to walk back to sort of your outlook for '24, guiding sequentially down in Q1.

I'm trying to get a feel for how much of the Q1 sequential decline is polar vortex and weather-related issues versus industry-related issues? Because I'm trying to figure out how you get to better Q2 versus Q1..

Yes, it's a great question. And I think some of the transitory issues we talked about, so we referenced on the call prepared remarks, four to six days kind of across the Rockies, Texas and Mid-Con area clearly in January from a polar vortex standpoint.

There's other puts and takes and we'll talk about those because we don't even have them fully quantified yet with the safety standdowns that have gone on in the Bakken and the Rockies specifically. So we can address those in our Q1 remarks next quarter. I think the balance really comes down to just general seasonality.

In the Rockies specifically, we've talked about it before, you have regulatory issues with wildlife migrations, et cetera, you just have overall seasonality, especially when it comes to the production and intervention side, where a lot of times those businesses and those segments really kick off once they receive their full year budget, et cetera, exiting January and into February.

And so we typically see a leg up in March. That's kind of what our calendars are suggesting today as we're seeing an inflection specifically in those basins as well as candidly some of the production and intervention work in the Northeast in March.

And the current calendar, as we see it, all the way out through May continues to see a step up there as well as across our frac rentals business, including our isolation tools, et cetera, in the DJ. So current calendars and outlook definitely suggests an improved Q2.

And I would expect, just based off of - if history repeats itself, Q3 would continue that guide, especially in the northern regions..

Great. That's helpful. Balance sheet significantly improved this year. We've seen some smaller deals, maybe not a ton.

How are you looking at the pipeline? What kind of things would fit? And what are you willing to do with the balance sheet, knowing that the refinancing window probably opens later this year?.

Yes, it's a great question. I think we referenced in our prepared remarks, we really exceeded our expectations. We've kind of had an internal goal for some period of time of getting down to 1.5x or lower on a net leverage ratio basis. We exited the year at 1.2x.

I think Keefer stated in his prepared remarks, the balance sheet is as strong as it's been since the notes were put in place in 2018. So we're very proud of those results. From a deal perspective, look, the bid-ask spread is still there, especially with some of the private equity and kind of sponsor-backed deals.

But it seems like volume is ramping, which I can only assume that means bankers are having very honest discussions with their clients about ability to pay in expected multiples given where the overall sector is trading. We'll see if the bid-ask spread closes or not.

And likewise, I have to assume that selling counterparties are rational and realize the best approach to unlocking value is realizing synergies during a bit of market softness and realizing the equity upside and timing their exit as the market ramps in the back half of the year. But I think the jury is out there, and we'll see.

But we definitely see ample deal flow today. To your point on balance sheet use. Look, we've said it before, and we're still sticking by it today. I think the majority of deals that we would look to execute on will be majority equity linked.

Is - given our cash balance and our overall liquidity situation, is there the ability to use some de minimis amount of cash in a transaction to make it more accretive? Sure. And we'll evaluate that on a deal-by-deal basis..

Just to add on the note side to follow up your latter half of your question. Chris mentioned that we talked about it in the prepared remarks, but obviously, our 2023 results, in our mind, were really strong. We ended the year in a great financial position, $113 million in cash, $154 million in liquidity, net leverage ratio is down to 1.2x.

So I think given our 2023 performance, we believe we're well positioned and the business is conservatively capitalized. You noted, obviously, our notes mature in the fall of 2025. So we're going to work to continue to monitor capital market conditions and opportunities in order to refinance our notes and ABL as we work through the 2024 year..

Thanks, Chris. Thanks, Keefer..

Thanks Steve..

Thank you. Our next question is from John Daniel with Daniel Energy Partners. Please proceed..

Hi, good morning. Hopefully, you can hear me..

Good morning, John..

Chris, I got a question on the safety shutdown, the standdown, are you seeing any of your customers - and it might be a tough one to answer, but are they changing their behavior where they're eliminating or scrutinizing the vendors, some of your smaller service peers, with respect to their safety, maintenance programs and insurance?.

Yes. I think, I sure hope they are, candidly. I think that's one of the benefits we've seen from our customer base, customer selection and diversification strategy.

The reality is you have to be, as you well know, well positioned from a safety perspective, job execution perspective, ability to bundle technologies and drive performance in the field to work for a lot of the blue-chip customers that we work for today.

If you think about our customer list back in 2018, 2019, we would have worked for over 1,200 customers. This year, we worked for just over 650 unique customers. And so we're definitely seeing that. We're seeing a high grading, if you will, of customer opportunity set across the board.

And so as a business, you have to be positioned to work for top 10, top 20 operators by rig count. And so thus far, and this kind of ties back, I'm a little remiss, in part of Luke's question. The reality of it is, thus far, consolidation amongst our customers, as we all know, has been accelerating, and we think that's a net positive for KLX.

By and large, our larger customers have been the consolidators. And so you see some transitory impact where a given customer acquires a smaller customer that's running two rigs and lays down two of the three.

But the reality is in our mind and what we're seeing through the integrations is that it will open opportunity set for KLX to expand our share of the given customer spend and wallet and pull through some of our technologies. So we actually think there's some upside.

And I guess on the last point is, yes, we are very proud of the safety results that our team generated last year. I do think that it comes back - the safety issues come back and the insurance requirements come back to burden some of the smaller mom-and-pop type operators.

But of course, that takes some time to work through the system, right?.

Right. Fair enough. You mentioned the ERT.

How does that - is that just proprietary to you guys on your own equipment? Or do you - can you sell it? Is there an opportunity to - what's the strategy there?.

Yes. No. Look, we're pretty proud of the results that we've seen tremendous customer adoption, especially now in kind of one basin specifically, and we're seeing that expand to other basins. To date, John, we're holding that in-house, and we've only run that tool on the end of KLX coil.

The reality is - I'm sure you'll ask, we were staffed for 13 to 14 units through Q4. We've now expanded four of our units to ultra-deep capacity, so 30-plus-thousand foot of coil. We have the ability to expand seven to eight for really short dollars. And so we see a ton of market opportunity just on the end of KLX coil.

And so for the time being, yes, we're running it as well as just our overall proprietary BHA on our KLX extended reach coil..

Okay. Great. And then the last one for me, the impressive numbers on the sort of quarter-over-quarter adoption of the dissolvable. Can you say, is that one or two customers just going big? Is it concentrated in a specific basin? Just any additional color would be helpful. That's all I got..

Yes, I appreciate the question. I guess the short answer is no, it's not one significant customer. Every customer is significant. But it's been pretty widely dispersed across, I would say, three to four basins at this point in time across multiple customers..

Thank you very much..

This concludes our question-and-answer portion of today's call. I would now like to hand the call over to Chris Baker for any concluding remarks..

Thank you, operator, and thank you once again for joining us on the call today and your interest in KLX Energy Services. We look forward to speaking with you again next quarter..

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