KLX Q2 2026 Earnings: Higher Utilization Lifts Revenue and Margins

KLX Energy Services (Nasdaq: KLXE) reported Q2 2026 revenue of $167.3 million, up 5.2% from $159.0 million a year earlier, while diluted loss narrowed to $0.41 per share from $1.04. For the quarter ended June 30, higher seasonal activity and utilization drove a stronger sequential result, although operating cash flow remained below the prior-year level.

Core financial results

Revenue increased 15.6% from Q1, including $3.4 million from one month of Wolf Pack Rentals ownership. Excluding Wolf Pack, management said the base business grew more than 13% sequentially, supported by coiled tubing, directional drilling, technical services and accommodations.

Profitability also improved sharply from Q1: adjusted EBITDA rose from $11.1 million to $18.7 million, and the adjusted EBITDA margin increased from 7.7% to 11.2%. Year over year, however, adjusted EBITDA was almost unchanged and its margin declined slightly.

Adjusted EBITDA and levered free cash flow are non-GAAP measures. Second-quarter levered free cash flow excludes cash sources and uses associated with the Wolf Pack acquisition.

Business and segment performance

Completion services represented 52% of quarterly revenue, followed by drilling at 23%, production at 16% and intervention at 9%. Geographically, the Northeast/Mid-Con segment delivered the highest adjusted EBITDA and margin, while the Rocky Mountains produced the largest sequential revenue increase but remained below its prior-year results.

Rocky Mountains revenue rose 31.6% sequentially as coiled tubing, technical services and wireline activity increased. Higher utilization lifted adjusted EBITDA from $2.1 million in Q1 to $6.3 million, though that remained below $10.4 million a year earlier.

Southwest revenue increased 20.3% from Q1, driven by coiled tubing, directional drilling and accommodations. Northeast/Mid-Con revenue declined 1.0% sequentially because lower flowback activity offset gains in directional drilling and accommodations, but improved utilization and less idle time raised adjusted EBITDA 14.7% from Q1 and 73.6% year over year.

Profitability, cash flow and the balance sheet

The sequential improvement in adjusted EBITDA reflected better utilization and fixed-cost absorption. Depreciation and amortization declined to $20.8 million from $23.7 million a year earlier, but interest expense increased to $12.5 million from $11.0 million and remained larger than reported operating income.

Operating cash flow improved to $10.5 million from $0.3 million in Q1. Capital expenditures were $8.6 million, primarily for maintenance, and proceeds from asset sales totaled $2.2 million, resulting in $4.1 million of levered free cash flow.

KLX ended the quarter with $7.9 million of cash and $45.4 million of availability under its asset-based revolving facility, for total liquidity of $53.3 million. Net debt increased to $281.0 million from $270.2 million at March 31 and $252.6 million at the end of 2025.

Net working capital declined 15% sequentially to $46.0 million because of acquisition-related liabilities and payroll timing. Management expects another working-capital build in Q3 to support higher anticipated activity, which could use part of the company’s available cash and borrowing capacity.

The Wolf Pack gain amplified GAAP improvement while adjusted earnings stayed near year-ago levels

KLX recorded a $6.5 million bargain purchase gain after closing the Wolf Pack acquisition on June 2. That gain contributed to the shift from an $8.7 million operating loss a year earlier to $2.1 million of operating income, but it is excluded from adjusted results.

After removing the acquisition gain and other adjustments, KLX recorded an adjusted operating loss of $2.7 million, compared with $5.8 million a year earlier. Adjusted EBITDA was only 1.1% higher year over year, showing that the headline improvement in GAAP earnings was larger than the change in underlying adjusted earnings.

The sequential comparison presents a different picture: adjusted EBITDA increased 68% and its margin expanded by 3.5 percentage points from Q1. This indicates that higher activity and utilization produced a meaningful operating improvement even after excluding the Wolf Pack accounting gain.

Guidance

KLX expects Q3 revenue of $176 million to $188 million. The $182 million midpoint is approximately 8.8% above Q2 revenue, reflecting a full quarter of Wolf Pack ownership and expected mid-single-digit sequential growth in the base business when Wolf Pack is excluded from both periods. Management also expects margins to rise as activity improves fixed-cost absorption.

Wolf Pack generated $3.4 million of revenue in June, which management said implies a current annual revenue run rate of approximately $41 million. The company also reported that integration and cross-selling had progressed quickly to date.

Risks investors should watch

• Utilization remains central to margin improvement. The Q3 outlook assumes activity will build and improve fixed-cost absorption, even as management cited broader expectations for flat industry activity.
• Leverage and interest costs remain substantial. Net debt reached $281.0 million, while quarterly interest expense of $12.5 million exceeded operating income. KLX also had only $7.9 million of cash, despite total liquidity of $53.3 million.
• Working-capital requirements could limit cash generation. Management expects an additional Q3 working-capital build, and Q2 operating cash flow remained 45% below the prior-year period despite higher revenue.
• Wolf Pack integration must support the outlook. The Q3 revenue increase includes a full quarter of the acquired business, while the higher synergy estimate depends on continued integration and cross-selling execution.
• Regional results remain uneven. Northeast/Mid-Con produced the strongest year-over-year profit growth, while Rocky Mountains revenue and adjusted EBITDA remained below Q2 2025 levels.

Summary

KLX’s Q2 2026 results showed a clear sequential recovery as seasonal activity, higher utilization and one month of Wolf Pack revenue lifted sales and adjusted EBITDA. The year-over-year picture was more measured: revenue grew modestly, adjusted EBITDA was nearly flat, and the reported profit improvement benefited from a $6.5 million acquisition gain. Q3 activity, Wolf Pack integration, working-capital needs and the company’s leveraged balance sheet are the main areas to monitor.