ChampionX Reports Fourth Quarter and Full Year 2023 Results,
Increases Share Repurchase Authorization to $1.5 Billion and Raises Quarterly Dividend by 12%
•Fourth-quarter revenue of $943.6 million decreased 4% year-over-year, flat sequentially
•Fourth-quarter net income attributable to ChampionX of $77.2 million increased 14% year-over-year, and decreased 1% sequentially
•Fourth-quarter adjusted EBITDA of $198.1 million increased 10% year-over-year, flat sequentially
•Fourth-quarter cash from operating activities of $169.0 million and free cash flow of $139.8 million
•Full-year net income attributable to ChampionX of $314.2 million increased 103% year-over-year
•Full-year adjusted EBITDA of $771.2 million increased 25% year-over-year
•Full-year cash from operating activities of $540.3 million and free cash flow of $412.5 million
•Repurchased $118 million of common stock in Q4’23 and $277 million in full-year 2023
•Returned $343 million of cash to our shareholders in 2023, representing 63% of cash flow from operating activities and 83% of free cash flow
•Board approved increase in share repurchase program authorization to $1.5 billion
•Board approved a 12% increase in regular quarterly dividend to $0.095 per share
THE WOODLANDS, TX, February 5, 2024 -- ChampionX Corporation (NASDAQ: CHX) (“ChampionX” or the “Company”) today announced fourth quarter of 2023 and full year 2023 results. For the fourth quarter of 2023, revenue was $943.6 million, net income attributable to ChampionX was $77.2 million, and adjusted EBITDA was $198.1 million. Income before income taxes margin was 12.1%, and adjusted EBITDA margin was 21.0%. Cash provided by operating activities was $169.0 million, and free cash flow was $139.8 million.
CEO Commentary
“2023 was a year of continued strong earnings momentum for ChampionX as we delivered extremely robust adjusted EBITDA growth with differentiated adjusted EBITDA margin expansion, strong free cash flow generation, and increased capital returns to our shareholders. I want to thank all our worldwide employees for their continued dedication and commitment to serving our customers and communities well,” ChampionX’s President and Chief Executive Officer Sivasankaran “Soma” Somasundaram said.
“During the fourth quarter of 2023, we generated revenue of $944 million, up slightly sequentially and down 4% year-over-year. International revenue increased 6% sequentially, driven by seasonal strength in our Production Chemical Technologies business which grew 8% in international markets during the quarter. In North America, 2% sequential growth in Production Chemical Technologies was offset by typical seasonal declines in our Production & Automation Technologies and Drilling Technologies businesses into the year-end holidays. We generated net income attributable to ChampionX of $77 million, which increased 14% year-over-year and decreased 1% sequentially, and adjusted EBITDA of $198 million, which increased 10% year-over-year, and was flat sequentially. Our income before income taxes margin improved by 39 basis point sequentially, and our adjusted EBITDA margin was 21%, flat sequentially, and representing our highest adjusted EBITDA margin level since the ChampionX merger.
“We once again demonstrated our strong cash flow profile. Cash flow from operating activities was $169 million during the fourth quarter, which represented 219% of net income attributable to ChampionX. We generated free cash flow of $140 million during the fourth quarter, converting 71% of our adjusted EBITDA for the period. We returned $135 million of cash to our shareholders in the fourth quarter, through our regular cash dividend of $17 million and approximately $118 million of ChampionX share repurchases. For the full year 2023, we returned $343 million of cash to our shareholders, representing 63% of cash flow from operating activities and 83% of our free cash flow.
“We remain committed to return at least 60% of free cash flow to shareholders through-the-cycle. Consistent with this commitment, we announced today that our Board of Directors approved an increase to our share repurchase program, which
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authorizes ChampionX to repurchase up to $1.5 billion of its outstanding common stock, which is an increase of $750 million to the program previously increased in the fourth quarter of 2022. In addition, I am pleased to announce that we are increasing our regular cash dividend by 12%, which reflects confidence in our demonstrated strong and consistent free cash flow generation capability. Our balance sheet remains strong and we ended the year with $959 million of liquidity, including $289 million of cash and approximately $670 million of available capacity on our revolving credit facility.
We expect 2024 to be a positive growth year, driven by the constructive market environment, particularly for our international businesses, and expect our revenues, adjusted EBITDA and adjusted EBITDA margin to progressively improve through the year. As we look to the first quarter, we expect typical seasonal declines in our international operations, partially offset by sequential improvement in our North American businesses. On a consolidated basis, in the first quarter, we expect revenue to be between $908 million and $938 million. We expect adjusted EBITDA of $179 million to $189 million. We expect our 2024 cash generation to be strong, converting at least 50% of our adjusted EBITDA to free cash flow, and we remain committed to returning at least 60% of our free cash flow to our shareholders during the year.
We are excited about the positive revenue outlook driven by multi-year healthy fundamentals for our sector. This, combined with our productivity efforts, drives our confidence in delivering continued earnings growth, adjusted EBITDA margin expansion and strong cash generation. Our high-margin, production-focused equipment, technology and chemicals portfolio is built to deliver attractive earnings and robust free cash flow reliably through the cycle. This, in turn, supports value creation for our shareholders through a disciplined capital allocation framework, with clear priorities for capital deployment, including high-return investment and returning cash to shareholders. ChampionX is well positioned for profitable growth by helping our customers maximize the value of their producing assets in sustainable and cost-effective ways leveraging our technology, digital and emissions capabilities and first-class customer service. I am excited about the year ahead given the resiliency of the cycle as well as increasing needs for ChampionX solutions and I remain honored to lead our remarkable team”
Fourth Quarter Highlights
Production Chemical Technologies
Production Chemical Technologies revenue in the fourth quarter of 2023 was $634.1 million, an increase of $29.9 million, or 5%, sequentially, due to seasonally higher volumes in certain international markets and higher volumes in North America.
Segment operating profit was $102.2 million and adjusted segment EBITDA was $139.1 million. Segment operating profit margin was 16.1%, an increase of 46 basis points, sequentially, and adjusted segment EBITDA margin was 21.9%, essentially flat, sequentially, in each case due to volumes and product mix.
Production & Automation Technologies
Production & Automation Technologies revenue in the fourth quarter of 2023 was $241.3 million, a decrease of $14.9 million, or 6%, sequentially, due primarily to seasonality in our North American businesses into the year-end holidays.
Revenue from digital products was $52.7 million in the fourth quarter of 2023, a decrease of $5.4 million, or 9%, compared to $58.0 million in the third quarter of 2023, due primarily to seasonality into the year-end holidays.
Segment operating profit was $22.1 million, and adjusted segment EBITDA was $52.8 million. Segment operating profit margin was 9.2%, a decrease of 188 basis points, sequentially, and adjusted segment EBITDA margin was 21.9%, a decrease of 126 basis points, sequentially, in each case due to lower volumes seasonally and product mix.
Drilling Technologies
Drilling Technologies revenue in the fourth quarter of 2023 was $46.8 million, a decrease of $8.0 million, or 15%, sequentially, due to lower rig count in U.S. land and end of year inventory destocking.
Segment operating profit was $8.7 million, and adjusted segment EBITDA was $10.4 million. Segment operating profit margin was 18.5%, a decrease of 380 basis points, sequentially, and adjusted segment EBITDA margin was 22.1%, a decrease of 300 basis points, sequentially, in each case due to lower volumes.
2
Reservoir Chemical Technologies
Reservoir Chemical Technologies revenue in the fourth quarter of 2022 was $21.4 million, a decrease of $3.7 million, or 15%, sequentially, due primarily to lower product volumes into the year-end holidays.
Segment operating profit was $3.9 million, and adjusted segment EBITDA was $5.5 million. Segment operating profit margin was 18.3%, as compared to 9.8% in the prior quarter, and adjusted segment EBITDA margin was 25.7%, an increase of 897 basis points, sequentially, in each case due to favorable product mix.
Share Repurchase Program
ChampionX announces that our Board of Directors approved an increase to our share repurchase program (the “Share Repurchase Program”). Pursuant to such increase, ChampionX is authorized to repurchase up to $1.5 billion of its outstanding common stock, representing an increase of $750 million to the Share Repurchase Program previously increased on October 24, 2022. The increased share repurchase authority is effective immediately. ChampionX repurchased $118 million of its outstanding common stock during the fourth quarter of 2023, with a total of $457 million repurchased under the Share Repurchase Program since its inception, implying a remaining authorization of over $1 billion, incorporating today’s announcement.
Repurchases under the Share Repurchase Program may be made, from time to time, in amounts and at prices ChampionX deems appropriate and will be subject to a variety of factors, including the availability of excess free cash, the market price of the Company’s common stock, general market and economic conditions, applicable requirements, and other business conditions. The Share Repurchase Program may be suspended, modified or discontinued at any time without prior notice.
Dividend
ChampionX also announces that our Board of Directors has declared an increased regular quarterly dividend of $0.095 per share on the Company’s common stock, par value $0.01 per share, to be paid on April 26, 2024 to shareholders of record on April 5, 2024.
Other Business Highlights
Chemical Technologies
•Continued to strengthen its market-leading production chemicals position in deepwater through the award of various flow assurance chemistries to treat three new U.S. Gulf of Mexico subsea tiebacks, each connecting back to a different host platform.
•Significantly strengthened its market position with an independent Canadian producer looking for consistent technical support across its asset base. The customer’s positive experience with ChampionX, coupled with our disciplined customer account management process, resulted in Chemical Technologies being awarded a sole supply agreement.
•Awarded an additional three-year contract extension with a customer in Australia which Chemical Technologies has served for approximately four decades. The contract extension award was as a result of detailed account management and strong customer value delivery.
Production & Automation Technologies
•Installed its Pro-Rod breakthrough product, AnXTM corrosion-resistant coiled rod, in multiple wells in Oman operated by a large NOC, demonstrating the effectiveness and reliability of the technology in some of the world’s most extreme and corrosive environments. Pro-Rod is a leader in anti-corrosion technology, and AnXTM is a step-change in sucker rod corrosion control, allowing for meaningful improvements in mean time to failure in rod-driven wells.
•Secured the adoption by a large IOC of our UNBRIDLED ESP Systems’ HIGH RISETM Kronos technology as their primary gas-handling pump for high gas-to-oil ESP applications in unconventional wells. Kronos is a specialized rotodynamic ESP gas handling pump that compresses gas slugs more effectively by increasing fluid pressure and priming the fluid stream. By preventing gas from breaking out of solution, the production pump can handle more gas. Kronos handles up to 75% gas volume fraction (GVF) before gas locking, providing 50% greater system gas handling capability, on average. Kronos also provides better pump efficiency at higher GVF, which reduces power consumption.
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•Closed the first commercial sale of the new Autonomous Chemical Injection Optimization feature within Theta Production Optimization’s XSPOCTM production optimization software, which allows producers to adjust automatically their chemical injection rates to dynamic parameters being tracked in the software, such as production volumes or temperature. This solution was instrumental in providing a Permian-based operator with intelligent dosing, rather than fixed dosage rates, ensuring that the correct amount of chemicals was delivered proportionately to the well's dynamic productivity. Initial implementation has shown promising results of improving chemical assurance while effectively managing cost efficiency.
•Secured commitment from an IOC for a large order of 10,000-psi radial flow lubricators for use in the customer’s South Texas operations, for which the majority have been installed on both new well completions and gas lift conversions. Engineered for maximum operational adaptability and durability, the “drop-in” design helps operators manage production from post-completion flowback through gas lift, to plunger-assisted gas lift (PAGL), and finally to plunger lift without having to modify the wellhead or activate a workover rig. The units are fast and easy to install on new wells, which minimizes well down time and reduces on-site welding, pipe make-up requirements, and roustabout time by 50%. The lubricators also contain internal adjustment sleeves to easily increase or decrease the flow area to adapt to changing well production profiles.
•Awarded a significant customer commitment with a large operator for supply and service of our high-pressure Rod-Lock BOPs in Argentina’s Vaca Muerta field. This industry-leading technology enhances safety and protects adjacent wells from frac breakthrough, and this customer commitment demonstrates our strong partnership and ability to offer innovative and reliable solutions to customers in both domestic and international unconventional resource plays.
•Won a contract expansion with an IOC in the Delaware Basin for use of our Phantom single-point chemical injection systems on nearly 100 wells. ChampionX has an exclusive distribution agreement for the FlowCoreTM Phantom technology, which features 99% injection accuracy and a dual communications system that allows for autonomously adjusting injection rates in real time based on production data from the customer’s Scada system. This capability is especially important for the dynamic well conditions in unconventional wells. The injection system also uses a cloud-based platform where the chemical provider can monitor chemical tank levels, injection variances, and potential injection system reliability issues.
•Exited 2023 with our Emissions Technologies business serving 60 operators worldwide, illustrating our extensive market presence and strong customer engagement.
Drilling Technologies
•Full-year 2023 diamond bearing sales increased by more than 40% year-over-year.
Other
•ChampionX Middle East was awarded the OPAL Award for best practices in 2023 in the “Omanisation” Category for the Large Contractor sector. The award recognizes the most innovative policies and procedures implemented towards recruiting, developing and retaining Omani workforce.
•ChampionX was named a winner of the Frost & Sullivan 2023 Enlightened Growth Leadership Award for its leadership in chemical solutions, artificial lift systems, and engineering solutions. The award recognizes organizations that have embraced emerging technologies, and generated opportunities for all while demonstrating best practices for sustainable growth.
Conference Call Details
ChampionX Corporation will host a conference call on Tuesday, February 6, 2024, to discuss its fourth quarter and full year 2023 financial results and outlook. The call will begin at 9:00 a.m. Eastern Time. Presentation materials that supplement the conference call will be available on ChampionX’s website at investors.championx.com.
To listen to the call via a live webcast, please visit ChampionX’s website at investor.championx.com. The call will also be available by dialing 1-888-259-6580 in the United States and Canada or 1-416-764-8624 for international calls. Please call approximately 15 minutes prior to the scheduled start time and reference ChampionX conference call number 83686329.
A replay of the conference call will be available for 30 days on ChampionX’s website.
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About Non-GAAP Measures
In addition to financial results determined in accordance with generally accepted accounting principles in the United States (“GAAP”), this news release presents non-GAAP financial measures. Management believes that adjusted EBITDA, adjusted EBITDA margin, adjusted net income attributable to ChampionX and adjusted diluted earnings per share attributable to ChampionX, provide useful information to investors regarding the Company’s financial condition and results of operations because they reflect the core operating results of our businesses and help facilitate comparisons of operating performance across periods. In addition, free cash flow, free cash flow to adjusted EBITDA ratio, and free cash flow to revenue ratio are used by management to measure our ability to generate positive cash flow for debt reduction and to support our strategic objectives. Although management believes the aforementioned non-GAAP financial measures are good tools for internal use and the investment community in evaluating ChampionX’s overall financial performance, the foregoing non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in the accompanying financial tables.
This press release contains certain forward-looking non-GAAP financial measures, including adjusted EBITDA. The Company has not provided projected net income attributable to ChampionX or a reconciliation of projected adjusted EBITDA. Management cannot predict with a reasonable degree of accuracy certain of the necessary components of net income attributable to ChampionX, such as depreciation and amortization expense. As such, a reconciliation of projected adjusted EBITDA to projected net income attributable to ChampionX is not available without unreasonable effort. The actual amount of depreciation and amortization, highly inflationary currency changes, and other amounts excluded from adjusted EBITDA could have a significant impact on net income attributable to ChampionX.
About ChampionX
ChampionX is a global leader in chemistry solutions, artificial lift systems, and highly engineered equipment and technologies that help companies drill for and produce oil and gas safely, efficiently, and sustainably around the world. ChampionX’s expertise, innovative products, and digital technologies provide enhanced oil and gas production, transportation, and real-time emissions monitoring throughout the lifecycle of a well. To learn more about ChampionX, visit our website at www.ChampionX.com.
Forward-Looking Statements
This news release contains statements relating to future actions and results, which are "forward-looking statements" within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, ChampionX's market position and growth opportunities. Forward-looking statements include statements related to ChampionX’s expectations regarding the performance of the business, financial results, liquidity and capital resources of ChampionX. Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, changes in economic, competitive, strategic, technological, tax, regulatory or other factors that affect the operations of ChampionX’s businesses. You are encouraged to refer to the documents that ChampionX files from time to time with the Securities and Exchange Commission (“SEC”), including the “Risk Factors” in ChampionX’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and in ChampionX’s other filings with the SEC. Readers are cautioned not to place undue reliance on ChampionX’s forward-looking statements. Forward-looking statements speak only as of the day they are made and ChampionX undertakes no obligation to update any forward-looking statement, except as required by applicable law.
Investor Contact: Byron Pope
byron.pope@championx.com
281-602-0094
Media Contact: John Breed
john.breed@championx.com
281-403-5751
5
CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
Three Months Ended
Years Ended
Dec 31,
Sep 30,
Dec 31,
December 31,
(in thousands, except per share amounts)
2023
2023
2022
2023
2022
Revenue
$
943,555
$
939,783
$
985,855
$
3,758,285
$
3,805,948
Cost of goods and services
661,337
647,923
703,232
2,618,646
2,907,284
Gross profit
282,218
291,860
282,623
1,139,639
898,664
Selling, general and administrative expense
147,415
162,317
146,835
633,032
592,282
Goodwill impairment
—
—
39,617
—
39,617
Long-lived asset impairments and loss on disposal groups
—
—
1,978
12,965
18,493
Interest expense, net
13,808
13,744
11,622
54,562
45,204
Foreign currency transaction losses (gains), net
14,651
7,992
(2,687)
36,334
8,555
Other income, net
(7,584)
(1,994)
(2,019)
(21,078)
(2,293)
Income before income taxes
113,928
109,801
87,277
423,824
196,806
Provision for income taxes
35,771
29,009
21,008
105,105
40,243
Net income
78,157
80,792
66,269
318,719
156,563
Net income (loss) attributable to noncontrolling interest
959
3,081
(1,588)
4,481
1,594
Net income attributable to ChampionX
$
77,198
$
77,711
$
67,857
$
314,238
$
154,969
Earnings per share attributable to ChampionX:
Basic
$
0.40
$
0.40
$
0.34
$
1.60
$
0.77
Diluted
$
0.39
$
0.39
$
0.33
$
1.57
$
0.75
Weighted-average shares outstanding:
Basic
193,191
195,881
199,232
196,083
201,740
Diluted
196,649
199,592
204,389
199,906
207,259
6
CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31,
(in thousands)
2023
2022
Assets
Current Assets:
Cash and cash equivalents
$
288,557
$
250,187
Receivables, net
534,534
601,061
Inventories, net
521,549
542,543
Prepaid expenses and other current assets
80,777
104,790
Total current assets
1,425,417
1,498,581
Property, plant and equipment, net
773,552
734,810
Goodwill
669,064
679,488
Intangible assets, net
243,553
305,010
Other non-current assets
130,116
169,594
Total assets
$
3,241,702
$
3,387,483
Liabilities
Current portion of long-term debt
$
6,203
$
6,250
Accounts payable
451,680
469,566
Other current liabilities
324,866
383,160
Total current liabilities
782,749
858,976
Long-term debt
594,283
621,702
Other long-term liabilities
203,639
229,590
Stockholders’ equity:
ChampionX stockholders’ equity
1,676,622
1,694,550
Noncontrolling interest
(15,591)
(17,335)
Total liabilities and equity
$
3,241,702
$
3,387,483
7
CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Years Ended December 31,
(in thousands)
2023
2022
Cash flows from operating activities:
Net income
$
318,719
$
156,563
Depreciation and amortization
235,936
241,880
Loss on disposal groups
12,965
16,515
Goodwill impairment
—
39,617
Loss on debt extinguishment and modification
—
4,043
Gain on disposal of fixed assets
(1,046)
(1,683)
Deferred income taxes
(22,272)
(45,282)
Receivables
70,021
(23,988)
Inventories
18,753
(52,426)
Accounts payable
(53,891)
(13,366)
Other assets
20,395
(1,838)
Leased assets
(51,247)
(25,275)
Other operating items, net
(8,062)
118,600
Net cash provided by operating activities
540,271
413,360
Cash flows from investing activities:
Capital expenditures
(142,324)
(102,808)
Proceeds from sale of fixed assets
14,545
18,017
Acquisitions, net of cash acquired
—
(3,198)
Net cash used for investing activities
(127,779)
(87,989)
Cash flows from financing activities:
Proceeds from long-term debt
15,500
995,038
Repayment of long-term debt
(45,176)
(1,092,950)
Payment of debt issuance costs
(1,028)
(8,008)
Repurchases of common stock
(277,575)
(180,142)
Dividends paid
(64,980)
(45,594)
Other
94
6,851
Net cash used for financing activities
(373,165)
(324,805)
Effect of exchange rate changes on cash and cash equivalents
(957)
(5,557)
Net increase (decrease) in cash and cash equivalents
38,370
(4,991)
Cash and cash equivalents at beginning of period
250,187
255,178
Cash and cash equivalents at end of period
$
288,557
$
250,187
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CHAMPIONX CORPORATION
BUSINESS SEGMENT DATA
(UNAUDITED)
Three Months Ended
Years Ended
Dec 31,
Sep 30,
Dec 31,
December 31,
(in thousands)
2023
2023
2022
2023
2022
Segment revenue:
Production Chemical Technologies
$
634,137
$
604,254
$
636,539
$
2,404,377
$
2,347,526
Production & Automation Technologies
241,294
256,148
244,181
1,003,146
954,646
Drilling Technologies
46,821
54,869
53,797
215,721
229,479
Reservoir Chemical Technologies
21,402
25,093
25,698
96,154
145,197
Corporate and other
(99)
(581)
25,640
38,887
129,100
Total revenue
$
943,555
$
939,783
$
985,855
$
3,758,285
$
3,805,948
Income (loss) before income taxes:
Segment operating profit (loss):
Production Chemical Technologies
$
102,179
$
94,560
$
96,418
$
350,216
$
239,936
Production & Automation Technologies
22,110
28,299
18,104
118,409
89,133
Drilling Technologies
8,679
12,255
9,426
45,481
54,512
Reservoir Chemical Technologies
3,907
2,461
(16,884)
10,541
(90,212)
Total segment operating profit
136,875
137,575
107,064
524,647
293,369
Corporate and other
9,139
14,030
8,165
46,261
51,359
Interest expense, net
13,808
13,744
11,622
54,562
45,204
Income before income taxes
$
113,928
$
109,801
$
87,277
$
423,824
$
196,806
Operating profit margin / income (loss) before income taxes margin:
Production Chemical Technologies
16.1
%
15.6
%
15.1
%
14.6
%
10.2
%
Production & Automation Technologies
9.2
%
11.0
%
7.4
%
11.8
%
9.3
%
Drilling Technologies
18.5
%
22.3
%
17.5
%
21.1
%
23.8
%
Reservoir Chemical Technologies
18.3
%
9.8
%
(65.7)
%
11.0
%
(62.1)
%
ChampionX Consolidated
12.1
%
11.7
%
8.9
%
11.3
%
5.2
%
Adjusted EBITDA
Production Chemical Technologies
$
139,107
$
133,101
$
121,204
$
506,991
$
377,489
Production & Automation Technologies
52,800
59,288
51,137
232,672
197,453
Drilling Technologies
10,361
13,786
10,999
51,986
61,932
Reservoir Chemical Technologies
5,501
4,198
3,460
18,498
6,000
Corporate and other
(9,624)
(12,837)
(7,390)
(38,926)
(25,716)
Adjusted EBITDA
$
198,145
$
197,536
$
179,410
$
771,221
$
617,158
Adjusted EBITDA margin
Production Chemical Technologies
21.9
%
22.0
%
19.0
%
21.1
%
16.1
%
Production & Automation Technologies
21.9
%
23.1
%
20.9
%
23.2
%
20.7
%
Drilling Technologies
22.1
%
25.1
%
20.4
%
24.1
%
27.0
%
Reservoir Chemical Technologies
25.7
%
16.7
%
13.5
%
19.2
%
4.1
%
ChampionX Consolidated
21.0
%
21.0
%
18.2
%
20.5
%
16.2
%
9
CHAMPIONX CORPORATION
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
The Company defines adjusted EBITDA as net income (loss) plus (i) depreciation and amortization, (ii) interest expense, net, (iii) foreign currency transaction losses (gains), net, (iv) provision for income taxes, and (v) other material items that management believes do not reflect our core operating performance.
Previously, the Company defined adjusted EBITDA inclusive of the impact of foreign currency transaction gains and losses. However, beginning with the fourth quarter of 2023, the Company revised the definition in order to remove the impact related to foreign currency fluctuations as we believe it provides a more consistent basis for comparing underlying operating performance on a currency neutral basis across periods. The comparative periods were also adjusted based on the revised definition. See the following tables for the reconciliation of adjusted EBITDA for the current and historical periods using the revised definition.
Three Months Ended
Years Ended
Dec 31,
Sep 30,
Dec 31,
December 31,
(in thousands)
2023
2023
2022
2023
2022
Net income attributable to ChampionX
$
77,198
$
77,711
$
67,857
$
314,238
$
154,969
Pre-tax adjustments:
Loss on disposal groups (1)
—
—
1,978
12,965
18,493
Russia sanctions compliance and impacts (2)
160
95
(2,909)
1,209
928
Goodwill impairment
—
—
39,617
—
39,617
Loss on debt extinguishment and modification
—
—
—
—
6,070
Restructuring and other related charges
2,407
1,228
(16,784)
13,387
65,158
Merger integration costs
—
—
1,001
245
10,759
Acquisition costs and related adjustments (3)
(6,817)
—
(7,112)
(12,670)
(17,648)
Intellectual property defense
638
220
27
1,545
781
Merger-related indemnification responsibility
—
722
—
722
—
Tulsa, Oklahoma storm damage
660
1,895
—
3,162
—
Foreign currency transaction losses, net
14,651
7,992
574
36,334
9,110
Tax impact of adjustments
(2,600)
(2,702)
3,604
(12,650)
(20,940)
Adjusted net income attributable to ChampionX
86,297
87,161
87,853
358,487
267,297
Tax impact of adjustments
2,600
2,702
(3,604)
12,650
20,940
Net income (loss) attributable to noncontrolling interest
959
3,081
(1,588)
4,481
1,594
Depreciation and amortization
58,710
61,839
64,119
235,936
241,880
Provision for income taxes
35,771
29,009
21,008
105,105
40,243
Interest expense, net
13,808
13,744
11,622
54,562
45,204
Adjusted EBITDA
$
198,145
$
197,536
$
179,410
$
771,221
$
617,158
_______________________
(1) Amounts represent the loss recorded to properly adjust the carrying value of our Chemical Technologies operations in Russia to the lower of carrying value or fair value less costs to sell.
(2) Includes charges incurred related to legal and professional fees to comply with, as well as additional foreign currency exchange losses associated with, the sanctions imposed in Russia.
(3) Includes revenue associated with the amortization of a liability established as part of the merger transaction with Ecolab Inc. (“Ecolab”) to acquire the Chemical Technologies business, representing unfavorable terms under the Cross Supply Agreement, as well as costs incurred for the acquisition of businesses. During the fourth quarter of 2023, we recorded a fair value adjustment to contingent consideration on a prior acquisition as well as the settlement of an item pursuant to the tax matters agreement with Ecolab.
10
Three Months Ended
Years Ended
Dec 31,
Sep 30,
Dec 31,
December 31,
(in thousands)
2023
2023
2022
2023
2022
Diluted earnings per share attributable to ChampionX
$
0.39
$
0.39
$
0.33
$
1.57
$
0.75
Per share adjustments:
Loss on disposal groups
—
—
0.01
0.06
0.09
Russia sanctions compliance and impacts
—
—
(0.01)
—
—
Goodwill impairment
—
—
0.19
—
0.19
Loss on debt extinguishment and modification
—
—
—
—
0.03
Restructuring and other related charges
0.01
0.01
(0.08)
0.07
0.31
Merger integration costs
—
—
—
—
0.05
Acquisition costs and related adjustments
(0.03)
—
(0.03)
(0.06)
(0.09)
Intellectual property defense
—
—
—
0.01
—
Merger-related indemnification responsibility
—
0.01
—
—
—
Tulsa, Oklahoma storm damage
0.01
0.01
—
0.02
—
Foreign currency transaction losses
0.07
0.04
—
0.18
0.04
Tax impact of adjustments
(0.01)
(0.02)
0.02
(0.06)
(0.08)
Adjusted diluted earnings per share attributable to ChampionX
$
0.44
$
0.44
$
0.43
$
1.79
$
1.29
11
CHAMPIONX CORPORATION
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Three Months Ended
Years Ended
Dec 31,
Sep 30,
Dec 31,
December 31,
(in thousands)
2023
2023
2022
2023
2022
Production Chemical Technologies
Segment operating profit
$
102,179
$
94,560
$
96,418
$
350,216
$
239,936
Non-GAAP adjustments
11,194
9,079
1,703
51,717
45,678
Depreciation and amortization
25,734
29,462
23,083
105,058
91,875
Segment adjusted EBITDA
$
139,107
$
133,101
$
121,204
$
506,991
$
377,489
Production & Automation Technologies
Segment operating profit
$
22,110
$
28,299
$
18,104
$
118,409
$
89,133
Non-GAAP adjustments
1,231
2,089
3,978
5,246
4,728
Depreciation and amortization
29,459
28,900
29,055
109,017
103,592
Segment adjusted EBITDA
$
52,800
$
59,288
$
51,137
$
232,672
$
197,453
Drilling Technologies
Segment operating profit
$
8,679
$
12,255
$
9,426
$
45,481
$
54,512
Non-GAAP adjustments
109
(8)
(6)
313
781
Depreciation and amortization
1,573
1,539
1,579
6,192
6,639
Segment adjusted EBITDA
$
10,361
$
13,786
$
10,999
$
51,986
$
61,932
Reservoir Chemical Technologies
Segment operating profit
$
3,907
$
2,461
$
(16,884)
$
10,541
$
(90,212)
Non-GAAP adjustments
4
72
15,590
1,486
81,550
Depreciation and amortization
1,590
1,665
4,754
6,471
14,662
Segment adjusted EBITDA
$
5,501
$
4,198
$
3,460
$
18,498
$
6,000
Corporate and other
Segment operating profit
$
(22,947)
$
(27,774)
$
(19,787)
$
(100,823)
$
(96,563)
Non-GAAP adjustments
(839)
920
(4,873)
(1,863)
531
Depreciation and amortization
354
273
5,648
9,198
25,112
Interest expense, net
13,808
13,744
11,622
54,562
45,204
Segment adjusted EBITDA
$
(9,624)
$
(12,837)
$
(7,390)
$
(38,926)
$
(25,716)
12
Free Cash Flow
Three Months Ended
Years Ended
Dec 31,
Sep 30,
Dec 31,
December 31,
(in thousands)
2023
2023
2022
2023
2022
Free Cash Flow
Cash provided by operating activities
$
168,953
$
163,030
$
195,093
$
540,271
$
413,360
Less: Capital expenditures, net of proceeds from sale of fixed assets
(29,142)
(48,469)
(26,463)
(127,779)
(84,791)
Free cash flow
$
139,811
$
114,561
$
168,630
$
412,492
$
328,569
Cash From Operating Activities to Revenue Ratio
Cash provided by operating activities
$
168,953
$
163,030
$
195,093
$
540,271
$
413,360
Revenue
$
943,555
$
939,783
$
985,855
$
3,758,285
$
3,805,948
Cash from operating activities to revenue ratio
18
%
17
%
20
%
14
%
11
%
Free Cash Flow to Revenue Ratio
Free cash flow
$
139,811
$
114,561
$
168,630
$
412,492
$
328,569
Revenue
$
943,555
$
939,783
$
985,855
$
3,758,285
$
3,805,948
Free cash flow to revenue ratio
15
%
12
%
17
%
11
%
9
%
Free Cash Flow to Adjusted EBITDA Ratio
Free cash flow
$
139,811
$
114,561
$
168,630
$
412,492
$
328,569
Adjusted EBITDA
$
198,145
$
197,536
$
179,410
$
771,221
$
617,158
Free cash flow to adjusted EBITDA ratio
71
%
58
%
94
%
53
%
53
%
13
CHAMPIONX CORPORATION
HISTORICAL BUSINESS SEGMENT DATA
(UNAUDITED)
Three Months Ended
Year Ended
Mar 31,
Jun 30,
Sep 30,
Dec 31,
Dec 31,
(in thousands)
2023
2023
2023
2023
2023
Segment revenue:
Production Chemical Technologies
591,684
574,302
604,254
634,137
$
2,404,377
Production & Automation Technologies
251,548
254,156
256,148
241,294
1,003,146
Drilling Technologies
56,707
57,324
54,869
46,821
215,721
Reservoir Chemical Technologies
25,806
23,853
25,093
21,402
96,154
Corporate and other
22,602
16,965
(581)
(99)
38,887
Total revenue
$
948,347
$
926,600
$
939,783
$
943,555
$
3,758,285
Income (loss) before income taxes:
Segment operating profit (loss):
Production Chemical Technologies
66,314
87,163
94,560
102,179
$
350,216
Production & Automation Technologies
34,792
33,208
28,299
22,110
118,409
Drilling Technologies
11,887
12,660
12,255
8,679
45,481
Reservoir Chemical Technologies
1,987
2,186
2,461
3,907
10,541
Total segment operating profit
114,980
135,217
137,575
136,875
524,647
Corporate and other
10,701
12,391
14,030
9,139
46,261
Interest expense, net
12,466
14,544
13,744
13,808
54,562
Income before income taxes
$
91,813
$
108,282
$
109,801
$
113,928
$
423,824
Operating profit margin / income (loss) before income taxes margin:
Production Chemical Technologies
11.2
%
15.2
%
15.6
%
16.1
%
14.6
%
Production & Automation Technologies
13.8
%
13.1
%
11.0
%
9.2
%
11.8
%
Drilling Technologies
21.0
%
22.1
%
22.3
%
18.5
%
21.1
%
Reservoir Chemical Technologies
7.7
%
9.2
%
9.8
%
18.3
%
11.0
%
ChampionX Consolidated
9.7
%
11.7
%
11.7
%
12.1
%
11.3
%
Adjusted EBITDA
Production Chemical Technologies
$
113,608
$
121,175
$
133,101
$
139,107
$
506,991
Production & Automation Technologies
59,943
60,641
59,288
52,800
232,672
Drilling Technologies
13,463
14,376
13,786
10,361
51,986
Reservoir Chemical Technologies
4,414
4,385
4,198
5,501
18,498
Corporate and other
(6,569)
(9,896)
(12,837)
(9,624)
(38,926)
Adjusted EBITDA
$
184,859
$
190,681
$
197,536
$
198,145
$
771,221
Adjusted EBITDA margin
Production Chemical Technologies
19.2
%
21.1
%
22.0
%
21.9
%
21.1
%
Production & Automation Technologies
23.8
%
23.9
%
23.1
%
21.9
%
23.2
%
Drilling Technologies
23.7
%
25.1
%
25.1
%
22.1
%
24.1
%
Reservoir Chemical Technologies
17.1
%
18.4
%
16.7
%
25.7
%
19.2
%
ChampionX Consolidated
19.5
%
20.6
%
21.0
%
21.0
%
20.5
%
14
Three Months Ended
Year Ended
Mar 31,
Jun 30,
Sep 30,
Dec 31,
Dec 31,
(in thousands)
2022
2022
2022
2022
2022
Segment revenue:
Production Chemical Technologies
514,972
552,411
643,604
636,539
$
2,347,526
Production & Automation Technologies
220,349
242,399
247,717
244,181
954,646
Drilling Technologies
56,859
57,858
60,965
53,797
229,479
Reservoir Chemical Technologies
39,900
44,114
35,485
25,698
145,197
Corporate and other
33,880
35,790
33,790
25,640
129,100
Total revenue
$
865,960
$
932,572
$
1,021,561
$
985,855
$
3,805,948
Income (loss) before income taxes:
Segment operating profit (loss):
Production Chemical Technologies
$
31,263
$
25,606
$
86,649
$
96,418
$
239,936
Production & Automation Technologies
24,710
23,650
22,485
18,104
89,133
Drilling Technologies
15,220
15,043
14,856
9,426
54,512
Reservoir Chemical Technologies
(3,469)
(8,147)
(61,711)
(16,884)
(90,212)
Total segment operating profit
67,724
56,152
62,279
107,064
293,369
Corporate and other
11,794
17,896
13,354
8,165
51,359
Interest expense, net
11,363
10,765
11,454
11,622
45,204
Income before income taxes
$
44,567
$
27,491
$
37,471
$
87,277
$
196,806
Operating profit margin / income (loss) before income taxes margin:
Production Chemical Technologies
6.1
%
4.6
%
13.5
%
15.1
%
10.2
%
Production & Automation Technologies
11.2
%
9.8
%
9.1
%
7.4
%
9.3
%
Drilling Technologies
26.8
%
26.0
%
24.4
%
17.5
%
23.8
%
Reservoir Chemical Technologies
(8.7)
%
(18.5)
%
(173.9)
%
(65.7)
%
(62.1)
%
ChampionX Consolidated
5.1
%
2.9
%
3.7
%
8.9
%
5.2
%
Adjusted EBITDA
Production Chemical Technologies
$
69,340
$
80,743
$
106,202
$
121,204
$
377,489
Production & Automation Technologies
45,257
48,797
52,262
51,137
197,453
Drilling Technologies
17,319
17,088
16,526
10,999
61,932
Reservoir Chemical Technologies
(191)
(300)
3,031
3,460
6,000
Corporate and other
(4,124)
(5,809)
(8,393)
(7,390)
(25,716)
Adjusted EBITDA
$
127,601
$
140,519
$
169,628
$
179,410
$
617,158
Adjusted EBITDA margin
Production Chemical Technologies
13.5
%
14.6
%
16.5
%
19.0
%
16.1
%
Production & Automation Technologies
20.5
%
20.1
%
21.1
%
20.9
%
20.7
%
Drilling Technologies
30.5
%
29.5
%
27.1
%
20.4
%
27.0
%
Reservoir Chemical Technologies
(0.5)
%
(0.7)
%
8.5
%
13.5
%
4.1
%
ChampionX Consolidated
14.7
%
15.1
%
16.6
%
18.2
%
16.2
%
15
CHAMPIONX CORPORATION
HISTORICAL RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Three Months Ended
Year Ended
Mar 31,
Jun 30,
Sep 30,
Dec 31,
Dec 31,
(in thousands)
2023
2023
2023
2023
2023
Net income attributable to ChampionX
$
63,532
$
95,797
$
77,711
$
77,198
$
314,238
Pre-tax adjustments:
Loss on disposal groups (1)
12,965
—
—
—
12,965
Russia sanctions compliance and impacts (2)
521
433
95
160
1,209
Restructuring and other related charges
4,399
5,353
1,228
2,407
13,387
Merger integration costs
245
—
—
—
245
Acquisition costs and related adjustments (3)
(3,512)
(2,341)
—
(6,817)
(12,670)
Intellectual property defense
—
687
220
638
1,545
Merger-related indemnification responsibility
—
—
722
—
722
Tulsa, Oklahoma storm damage
—
607
1,895
660
3,162
Foreign currency transaction losses, net
9,252
4,439
7,992
14,651
36,334
Tax impact of adjustments
(5,307)
(2,041)
(2,702)
(2,600)
(12,650)
Adjusted net income attributable to ChampionX
82,095
102,934
87,161
86,297
358,487
Tax impact of adjustments
5,307
2,041
2,702
2,600
12,650
Net income (loss) attributable to noncontrolling interest
(388)
829
3,081
959
4,481
Depreciation and amortization
56,710
58,677
61,839
58,710
235,936
Provision for income taxes
28,669
11,656
29,009
35,771
105,105
Interest expense, net
12,466
14,544
13,744
13,808
54,562
Adjusted EBITDA
$
184,859
$
190,681
$
197,536
$
198,145
$
771,221
16
Three Months Ended
Year Ended
Mar 31,
Jun 30,
Sep 30,
Dec 31,
Dec 31,
(in thousands)
2022
2022
2022
2022
2022
Net income attributable to ChampionX
$
36,702
$
27,342
$
23,068
$
67,857
$
154,969
Pre-tax adjustments:
Loss on disposal groups (1)
—
22,924
(6,409)
1,978
18,493
Russia sanctions compliance and impacts (2)
—
5,457
(1,620)
(2,909)
928
Goodwill impairment
—
—
—
39,617
39,617
Loss on debt extinguishment and modification
—
6,070
—
—
6,070
Restructuring and other related charges
9,107
5,302
67,533
(16,784)
65,158
Merger integration costs
5,241
3,865
652
1,001
10,759
Acquisition costs and related adjustments (3)
(3,512)
(3,512)
(3,512)
(7,112)
(17,648)
Intellectual property defense
363
376
15
27
781
Foreign currency transaction losses, net
2,773
2,251
3,512
574
9,110
Tax impact of adjustments
(2,934)
(8,974)
(12,636)
3,604
(20,940)
Adjusted net income attributable to ChampionX
47,740
61,101
70,603
87,853
267,297
Tax impact of adjustments
2,934
8,974
12,636
(3,604)
20,940
Net income (loss) attributable to noncontrolling interest
1,471
1,554
157
(1,588)
1,594
Depreciation and amortization
57,699
59,530
60,532
64,119
241,880
Provision for (benefit from) income taxes
6,394
(1,405)
14,246
21,008
40,243
Interest expense, net
11,363
10,765
11,454
11,622
45,204
Adjusted EBITDA
$
127,601
$
140,519
$
169,628
$
179,410
$
617,158
17
CHAMPIONX CORPORATION
HISTORICAL RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Three Months Ended
Year Ended
Mar 31,
Jun 30,
Sep 30,
Dec 31,
Dec 31,
(in thousands)
2023
2023
2023
2023
2023
Production Chemical Technologies
Segment operating profit
$
66,314
$
87,163
$
94,560
$
102,179
$
350,216
Non-GAAP adjustments
23,115
8,329
9,079
11,194
51,717
Depreciation and amortization
24,179
25,683
29,462
25,734
105,058
Segment adjusted EBITDA
$
113,608
$
121,175
$
133,101
$
139,107
$
506,991
Production & Automation Technologies
Segment operating profit
$
34,792
$
33,208
$
28,299
$
22,110
$
118,409
Non-GAAP adjustments
914
1,012
2,089
1,231
5,246
Depreciation and amortization
24,237
26,421
28,900
29,459
109,017
Segment adjusted EBITDA
$
59,943
$
60,641
$
59,288
$
52,800
$
232,672
Drilling Technologies
Segment operating profit
$
11,887
$
12,660
$
12,255
$
8,679
$
45,481
Non-GAAP adjustments
—
212
(8)
109
313
Depreciation and amortization
1,576
1,504
1,539
1,573
6,192
Segment adjusted EBITDA
$
13,463
$
14,376
$
13,786
$
10,361
$
51,986
Reservoir Chemical Technologies
Segment operating profit
$
1,987
$
2,186
$
2,461
$
3,907
$
10,541
Non-GAAP adjustments
810
600
72
4
1,486
Depreciation and amortization
1,617
1,599
1,665
1,590
6,471
Segment adjusted EBITDA
$
4,414
$
4,385
$
4,198
$
5,501
$
18,498
Corporate and other
Segment operating profit
$
(23,167)
$
(26,935)
$
(27,774)
$
(22,947)
$
(100,823)
Non-GAAP adjustments
(969)
(975)
920
(839)
(1,863)
Depreciation and amortization
5,101
3,470
273
354
9,198
Interest expense, net
12,466
14,544
13,744
13,808
54,562
Segment adjusted EBITDA
$
(6,569)
$
(9,896)
$
(12,837)
$
(9,624)
$
(38,926)
18
CHAMPIONX CORPORATION
HISTORICAL RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Three Months Ended
Year Ended
Mar 31,
Jun 30,
Sep 30,
Dec 31,
Dec 31,
(in thousands)
2022
2022
2022
2022
2022
Production Chemical Technologies
Segment operating profit
$
31,263
$
25,606
$
86,649
$
96,418
$
239,936
Non-GAAP adjustments
14,100
31,072
(1,197)
1,703
45,678
Depreciation and amortization
23,977
24,065
20,750
23,083
91,875
Segment adjusted EBITDA
$
69,340
$
80,743
$
106,202
$
121,204
$
377,489
Production & Automation Technologies
Segment operating profit
$
24,710
$
23,650
$
22,485
$
18,104
$
89,133
Non-GAAP adjustments
(3,938)
430
4,442
3,977
4,728
Depreciation and amortization
24,485
24,717
25,335
29,055
103,592
Segment adjusted EBITDA
$
45,257
$
48,797
$
52,262
$
51,137
$
197,453
Drilling Technologies
Segment operating profit
$
15,220
$
15,043
$
14,856
$
9,426
$
54,512
Non-GAAP adjustments
363
376
15
(6)
781
Depreciation and amortization
1,736
1,669
1,655
1,579
6,639
Segment adjusted EBITDA
$
17,319
$
17,088
$
16,526
$
10,999
$
61,932
Reservoir Chemical Technologies
Segment operating profit
$
(3,469)
$
(8,147)
$
(61,711)
$
(16,884)
$
(90,212)
Non-GAAP adjustments
802
4,005
61,152
15,589
81,550
Depreciation and amortization
2,476
3,842
3,590
4,754
14,662
Segment adjusted EBITDA
$
(191)
$
(300)
$
3,031
$
3,460
$
6,000
Corporate and other
Segment operating profit
$
(23,157)
$
(28,661)
$
(24,808)
$
(19,787)
$
(96,563)
Non-GAAP adjustments
2,645
6,850
(4,241)
(4,870)
531
Depreciation and amortization
5,025
5,237
9,202
5,648
25,112
Interest expense, net
11,363
10,765
11,454
11,622
45,204
Segment adjusted EBITDA
$
(4,124)
$
(5,809)
$
(8,393)
$
(7,390)
$
(25,716)
19
Free Cash Flow
Three Months Ended
Year Ended
Mar 31,
Jun 30,
Sep 30,
Dec 31,
Dec 31,
(in thousands)
2023
2023
2023
2023
2023
Free Cash Flow
Cash provided by operating activities
$
92,378
$
115,910
$
163,030
$
168,953
$
540,271
Less: Capital expenditures, net of proceeds from sale of fixed assets
(23,025)
(27,143)
(48,469)
(29,142)
(127,779)
Free cash flow
$
69,353
$
88,767
$
114,561
$
139,811
$
412,492
Free Cash Flow to Adjusted EBITDA Ratio
Free cash flow
$
69,353
$
88,767
$
114,561
$
139,811
$
412,492
Adjusted EBITDA
$
184,859
$
190,681
$
197,536
$
198,145
$
771,221
Free cash flow to adjusted EBITDA ratio
38
%
47
%
58
%
71
%
53
%
Three Months Ended
Year Ended
Mar 31,
Jun 30,
Sep 30,
Dec 31,
Dec 31,
(in thousands)
2022
2022
2022
2022
2022
Free Cash Flow
Cash provided by operating activities
$
(43,125)
$
74,240
$
187,152
$
195,093
$
413,360
Less: Capital expenditures, net of proceeds from sale of fixed assets