Fourth-quarter revenue of $943.6 million decreased 4% year-over-year, flat sequentiallyFourth-quarter net income attributable to ChampionX of $77.2 million increased 14% year-over-year, and decreased 1% sequentiallyFourth-quarter adjusted EBITDA of $198.1 million increased 10% year-over-year, flat sequentiallyFourth-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-yearFull-year adjusted EBITDA of $771.2 million increased 25% year-over-yearFull-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 2023Returned $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 billionBoard approved a 12% increase in regular quarterly dividend to $0.095 per share
THE WOODLANDS, Texas, Feb. 05, 2024 (GLOBE NEWSWIRE) — 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 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 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 adjusted 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.
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 RISE™ 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.Closed the first commercial sale of the new Autonomous Chemical Injection Optimization feature within Theta Production Optimization’s XSPOC™ 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.
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
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
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
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
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%
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.
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
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)
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%
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%
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%
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
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
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)
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)
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 $413,360 Less: Capital expenditures, net of proceeds from sale of fixed assets (17,866) (20,743) (19,719) (26,463) (84,791)Free cash flow$(60,991) $53,497 $167,433 $168,630 $328,569 Free Cash Flow to Adjusted EBITDA Ratio Free cash flow$(60,991) $53,497 $167,433 $168,630 $328,569 Adjusted EBITDA$184,859 $190,681 $197,536 $198,145 $771,221 Free cash flow to adjusted EBITDA ratio (33)% 28% 85% 85% 43%
