Q2 2023 KLX Energy Services Holdings Inc Earnings Call
Greetings and welcome to the Calix energy Services' second quarter 'twenty twenty-three earnings conference call. At this time all participants are on a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your Tech.
Phone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce your host Zach Vaughan with Dennard Lascar Investor Relations. Thank you Zach you may begin.
Thank you operator, and good morning, everyone. We appreciate you joining us for the KL ex Energy services Conference call and webcast to review second quarter 2023 results with me today are Chris Baker, <unk>, President and Chief Executive Officer.
And Keefer Lehner, Executive Vice President and Chief Financial Officer.
Following my remarks management will provide a high level commentary on the financial details of the second quarter and outlook before opening the call for your questions.
There will be a replay of today's call. It will be available by webcast on the company's website at <unk> Dot com.
And there will also be a telephonic recorded replay available until August 24 2023 more.
More information on how to access. These replay features was included in yesterday's earnings release.
Please note that information reported on this call speaks only as of today August 10, 2023, and therefore, you're advised the time sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.
Also comments on this call will contain forward looking statements within the meaning of the United States Federal Securities laws.
These forward looking statements reflect the current views of Calix management.
However, various risks and uncertainties and contingencies could cause actual results performance or achievements to differ materially from those expressed in the statements made by management.
The listener or reader is encouraged to read the annual report on Form 10-K quarterly reports on Form 10-Q.
And current reports on form 8-K to understand certain of those risks uncertainties and contingencies.
The comments today will also include certain non-GAAP financial measures additional details and reconciliations to the most directly comparable GAAP financial measures are included in our quarterly press release, which can be found on the KL ex energy website.
And now I'll turn the call over to Calix Energy services, President and CEO , Mr. Chris Baker, Chris.
Thank you Zach and good morning, everyone.
We are very pleased with our second quarter performance, we drove sequential improvement in adjusted EBITA, adjusted EBITA margin and free cash flow. Despite a weakening macro environment driven by continued commodity price volatility and an 11% rig count reduction nominally reducing our second quarter revenue by.
Only 2%.
More importantly, our diversification enabled us to drive strong sequential results in the face of a challenging market backdrop.
Q2, net income was $11 $4 million compared to $9 4 million in Q1, an increase of 21% sequentially.
Adjusted net income was $13 $1 million, a 14% sequential increase in adjusted diluted EPS was <unk> 81 cents, which was also up sequentially.
Adjusted EBITDA increased 4% sequentially to $39 $7 million compared to $38 2 million in Q1, and adjusted EBITDA margin was 17%, which represent the strongest second quarter adjusted EBITDA margin since 2019.
Hey, Alex generated $47 million and free cash flow during the second quarter, we upsized and amended our ABL agreement pushing back maturity and increasing liquidity.
And we reduced net debt, 17% sequentially to $202 million, yielding a 1.3 times net leverage ratio for both Q2 annualized and LTM as of Q2 2023 after generating an all time high LTM adjusted EBITDA.
<unk> of $152 million.
We attribute our strong performance to the strength of our team in the field and our diversification both geographic and on a product line basis, our presence and reputation across all major U S onshore basins, coupled with our portfolio of services across the well life cycle positions us well.
<unk> for the most active and best capitalized customers in this sector and enabled us to deliver a strong second quarter.
Additionally, our improving margins and financial results in the face of a declining market bears witness to the quality and commitment of our team in the field and leadership throughout the organization.
Despite an approximate 11% decline in rig count, we experienced relative strength across our completion and production and intervention psl's.
In particular, we saw a greater than 5% revenue improvement in our technical services business driven by the strength in our fishing business and step change advances in our thru tubing technologies that we continue to build upon.
A 3% increase in our rental service line driven by continued strong customer demand for our fleet of latest generation piece and tubular among other items.
And a 66% revenue increase and our frac rental business driven by Greenes activity as well as significant market penetration in the Rockies.
This rotation of activity to higher margin product and service lines enabled us to increase margins across the <unk> platform in the face of a modest overall revenue decline.
On the pricing front, we endeavored to maintain pricing to the detriment of utilization, which partially contributed to the sequential decline in our revenue along with reallocating assets to more attractive basins.
However, with that being said, we were not immune to pricing pressure as the market remains fragmented and many peers were not properly focused on returns.
Inherently service providers are more willing to chase price in order to backfill near term white space and people intensive service lines in the market saw numerous drilling and completion delays in Q2 as customers reduced active rigs and frac spreads.
Based on our recent customer conversations along with the strength in underlying commodity prices. The market appears to be bottoming in Q3, and we are excited about Q4 and 2024 as we believe the market pendulum will again swing in favor of a more balanced market for service providers.
Lastly, during the quarter, we work diligently to complete the integration of the Greens acquisition that was announced in March.
Greens proprietary wellhead protection, flowback, and well testing services provide synergies with our existing frac rental and flowback offering delivering our customers a more comprehensive product offering in the Permian and Eagle Ford basins.
As of this week I'm excited to announce that we have completed the Greens integration fully implementing the previously disclosed synergies and we continue to focus our attention on additional accretive consolidation opportunities.
Q2, Q2s performance highlighted the strength of <unk> diversified and integrated product service offering and demonstrated <unk> ability to generate strong free cash flow in a challenging market.
We continue to make technological advancements across our platform driving utilization of our existing assets and providing more efficient differentiated services to our clients. We believe Q3 will in hindsight be viewed as a minor dip in the overall recovery trend for oilfield services onwards into 2020.
Four.
With that I'll now turn the call over to Keefer, who will review our financial results and I will return later in the call to discuss our outlook in greater detail Keefer.
Thanks, Chris Good morning, everyone.
As Chris mentioned, we reported quarterly revenue of $234 million, representing a nominal 2% sequential decrease but outpacing the 11% sequential decline in rig count.
On a product line basis drilling completion production and intervention services contributed approximately 25%, 54%, 12% and 9% respectively to revenues for the second quarter 2023, which is largely consistent with Q1. Despite the addition of Greens.
The northeast mid Con contributed 35% of Q2 revenue led by our pressure pumping directional drilling and accommodations product service lines. The southwest contributed 37% led by directional drilling frac rentals and coiled tubing.
And the Rockies contributed 28% led by rentals coil tubing and Tech services.
We saw a material sequential shift in geographic revenue contribution as the acquired <unk> business is fully contained within our southwest segment. In Q2 2023 was the first quarter, reflecting a full three month contribution from Brean.
Additionally, we were very pleased to have experienced our sixth consecutive sequential improvement in adjusted EBITDA to $39 $7 million overcoming pricing pressures along with the much discussed commodity price volatility and the rig count decline.
Adjusted EBITDA increased approximately $22 million over the second quarter of 2022 and $1 $5 million sequentially. The.
The sequential increase was driven largely by a shift in product service mix.
Yes weather seasonality in the Rockies in Q2, and the roll off of a portion of.
Of the payroll and unemployment taxes that burdened Q1.
Adjusted operating income for the second quarter was $21 $3 million. This was up 1% sequentially and represents one of the strongest quarter quarterly results in <unk> history.
Total SG&A expense for Q2 was approximately $22 million when you back out the nonrecurring cost adjusted SG&A expense for Q2 would have been only $21 million or just eight 8% of quarterly revenue.
Q2, net income and diluted earnings per share were $11 4 million and 71, respectively. Adjusted.
Adjusted net income and adjusted diluted EPS were $13 $1 million 81, respectively.
$13 $1 million of adjusted net income as our higher highest quarterly result, since Q3 of 2018 and the second highest quarterly result in company history.
Turning now to a review of our segment results.
I'll begin with the Rockies.
Iraqi segment second quarter revenue was $66 $4 million, representing a 2% decrease.
Over first quarter 2023.
Adjusted operating income for the second quarter was $11 $9 million.
The slight decrease in revenue was attributable to a shift in product line mix as well as a slight decrease in activity in the DJ in Wyoming, which is partially offset by an increase in the Bakken.
Despite a slight revenue decline, we experienced a strong sequential increase in profitability.
Adjusted EBITDA was $17 million compared to first quarter adjusted EBITDA of $15 $5 million. The increase in profitability was driven by reduced white space and an increase in contribution from our higher margin services throughout the D. J, Wyoming and Bakken led by rentals Tech services and Frac rentals.
Moving now to our southwest segment.
The southwest experienced a 17, 6% sequential increase in revenue generating revenue of $86 $3 million in Q2 they.
The increase in revenue was primarily driven by a full quarterly contribution from the Greens acquisition, which is 100% contained within this segment offset by a slight decline in the calix based drilling and completions businesses.
Q2, adjusted operating income for this segment was $8 $1 million <unk>.
Adjusted EBITDA was $14 $8 million for the second quarter compared to first quarter, adjusted EBITDA of $10 $2 million.
The dramatic increase in profitability was driven by an elevated contribution from our higher margin Greens acquisition.
Now to wrap up the segment discussion with the northeast and mid Con.
Northeast mid Con Q2 revenue was $81 3 million, a 17% decrease relative to Q1, driven largely by a shift in job mix and our Frac business, where we continue to run two spreads at strong utilization and lower pricing and utilization in our broader drilling and completion service lines driven.
The market disruption and the gas focus areas within this segment.
Adjusted operating income for the second quarter was $12 $6 million and adjusted EBITDA was $18 million for the quarter.
At corporate our adjusted operating income and adjusted EBITDA losses for Q2 were $11 $3 million and $10 $1 million respectively.
Our corporate adjusted EBITDA loss improved by 10% sequentially, demonstrating our ability to layer in acquisitions and to realize significant economies of scale.
This is a core tenet of our consolidation thesis and we've seen the dramatic benefits play out over our last few deals.
I'll now turn to our net working capital cash flow and capitalization.
Our second quarter, 2023, cash balance more than doubled sequentially to $82 $1 million from $39 $6 million in Q1.
The sequential increase in cash was largely driven by a normalization of our working capital and our ability to efficiently convert adjusted EBITDA to free cash flow.
As a reminder, Q1 cash flow was impacted by a variety of working capital timing issues, which have since been resolved with.
We continue to proactively manage working capital.
<unk> cash flow as quickly as possible.
Working capital was approximately $76 million in Q2.
Around 34% from Q1, as GSO and DPM normalized post those Q1 anomalies.
We reduced net debt, 17% sequentially ending the quarter with a net debt balance of $201 $7 million.
Based on annualized Q2, and LTM results, we had a net leverage ratio of one three times.
Total debt outstanding as of June 30 was $283 $8 million, which was in line with our Q1 balance as we did not draw on or pay down the ABL, nor do we execute any additional 309 exchange transactions.
We ended the second quarter with $143 $7 million in total liquidity, consisting of $82 $1 million of cash and availability of $61 $6 million.
Under our June 2023, ABL borrowing base certificate.
As previously announced we entered into an agreement in June to upsize and amend our ABL facility, resulting in considerable financial flexibility better liquidity and an extension on our debt maturity profile.
We consider the amendment to be an important step that enables <unk> to continue its focus on free cash flow generation deleveraging and further accretive consolidation.
Additionally, the amendment gives us ample runway and flexibility to advantageously cover the company's bond refinancing needs over the next 24 months.
We exited the second quarter of 2023 on our strongest financial footing since 2018.
We did not issue shares under our ATM in Q2 have not issued any shares so far this year our share count remained at $16 4 million shares.
Now turning to Capex.
Capital expenditures for the second quarter were approximately $16 million.
Merrily focus on maintenance spending across our various segments.
Going forward, we now expect total capex for 2023 to be in the range of $45 million to $55 million down approximately 20% from our previous guidance range of $60 million to $70 million due to current market conditions.
This spend will be primarily focused on maintenance spending with approximately 80% supporting ongoing operations and the remaining capex earmarked for reactivation and growth focused on quick payback projects.
As always we reassess capital spending in real time based on prevailing market conditions.
During Q2, we sold approximately $3 million in assets and at the end of the second quarter, we still had $2 $3 million of assets held for sale reflected on our balance sheet.
As we look to the remainder of 2023 and begin to think about 2024, our focus remains on maximizing free cash flow and further reducing net debt all while being prudent stewards of capital as we pursue additional value enhancing consolidation.
I'll now turn the call back to Chris who will provide some additional color on the current market and our outlook for Q3 and the remainder of 2023.
Thanks Keefer before.
Before we wrap up I'd like to share some additional detail on our outlook.
<unk> is diversification should help us navigate any near term market disruption and dislocation.
We are well positioned to manage these disruptions given our competitive positioning and ability to take a portfolio allocation approach to managing our assets across a diverse product line and geographic footprint.
Yes, the second quarter was choppy with a larger decline in rig count that expected still we worked to outperform market trends and May result, set a new monthly record for monthly <unk> adjusted EBITDA.
Activity softened in June and as we enter the third quarter, we've seen consolidated rig count decrease an incremental 8% compared to a Q2 average of 719 rigs.
W. Ti price is currently $84, which is 14% above Q2 average and 18% above quarter end and natural gas price touch $3 yesterday for the first time since March.
For the third quarter, we expect modest softening of our result, but the business will continue to perform well as we maximize crew utilization and pricing in order to drive margins and free cash flow.
As we look out to full year 2023, we will continue to proactively manage our portfolio of assets to maximize our results in the face of market volatility and basin rotation with a focus on generating meaningful free cash flow.
Ultimately the strength of commodity prices should drive returns for our customers and ultimately additional underlying activity, but it takes time for the market to respond to changes to come off in commodity prices and our public customers are showing tremendous capital discipline and restraint.
We expect Q3 revenue to be in the range of $215 million to $230 million and adjusted EBITDA margin to be in the range of 14% to 16%.
We have also updated our full year 2023 guidance.
As Keith mentioned, we reduced full year capital Capex guidance by approximately 20% to a range of $45 million to $55 million as we have deferred 2023 growth capex in light of the current market environment.
Given the meaningful reduction in capital spending we are commiserate Lee modifying our full year revenue and adjusted EBITDA guidance full.
Full year 2023 revenue is expected to be in the range of $900 million to $950 million and adjusted EBITDA margin in the range of 15% to 17%.
Given these margin levels and our modified cap Capex guidance. We expect continued strong free cash flow generation over the remainder of 2023 and believe there will be minimal impact on full year free cash flow expectations.
Lastly on consolidation Calix has a long history of accretive inorganic growth and further to our go forward strategy. We continue to actively pursue accretive and synergistic consolidation opportunities to grow and scale our existing platform.
We continue to believe <unk> is the counterparty of choice for potential consolidation partners, both private and publicly traded due to our integration and synergy track record.
In summary, I would like to thank our over 2200 dedicated team members for their commitment to safety and their focus on providing our customers continued top tier execution in the field and market, leading technology and products.
I would also like to thank our stakeholders, who continue to show confidence in our efforts as we strive for excellence each and every day.
With that we will now take your questions operator.
Thank you we will now be conducting a question and answer session.
I'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question I'm going to be a clue.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Our first question comes from David Marsh with singular research. Please proceed with your question.
Hey, good morning, guys and thanks for taking the questions.
First I just wanted to ask.
Great job on the gross margin side is is this kind of a new a new level for you guys or you feel like you can maintain going forward.
Or do you even think there might possibly be a way to continue to grow at a little bit from here.
Yes, David Good morning, It's a great question I think <unk> kind of alluded to a number of puts and takes in prepared remarks, we're very proud of where the gross margin settled out where EBITDA margin settled out.
The big driver in Q2 was the rotation to our higher margin product lines like we talked about and then to my earlier point keepers commentary around various cost rolling out of the system unemployment taxes fight the few to pseudo et cetera, and so those costs by and large are out of the system for the balance of the year.
Here now and will continue to reduce over time I think the question really becomes a why we updated guidance.
As you know what happens with white space crew utilization et cetera. The reality of the situation. As 2023 has not played out like everybody thought it would everybody was calling for kind of a tepid 50 to 40 to 50 rig increase reality as we've lost 120 rigs on a year to date basis and of course the gas market.
It's been challenging that being said everybody is very bullish gas next year.
So as we think through the go forward. We would think that you know the recent strength in commodity prices will have a positive impact on activity.
And we think that the private operators, who basically led the rig count decline on a year to date basis. They typically react quicker throttle activity quicker and we think they will stand up some incremental activity of commodity prices.
It remains strong, but there is always a lag so how does that position KLA and to your point. The margin question look the reality is all the credit for our <unk> performance goes and our LTE performance for that matter goes to the team and the Geo regions in the areas and we're very proud of those results.
I think the question becomes does the product line mix change as activity presumably increases.
The benefit that we have is we're well advantaged to take advantage of increased demand on the drilling and completion side. So even if the production and intervention side, maybe degrades on a percentage basis, which might lower overall margin you would expect that to come in concert with increased revenue perhaps.
The guidance range so.
I'll kind of wrap up with saying look when you're in transition periods of market like this customer delays, especially on any single multi well pad can have outsized impacts on very tight ranges.
Because it impacts multiple KLA services, but the name of the game is to manage our cost structure remains flexible.
And so I think thats, what we do very well on the huge baseball fan we speak to our team every month and say guys focus on winning every single month in baseball if you whenever you're in and you win the game, it's real simple and that's what our teams focused on is winning every month and that continues to lead to outsized quarters.
That's really helpful. Chris Thanks.
And then my second question, Keith You mentioned SG&A would have been closer to about $21 million in the quarter.
Yes, it's still a little bit higher than where he had been but obviously you brought on some new assets in some new folks.
Do you think theres still some more efficiencies to be run.
Hung out there or do you think that 2021.
Range is kind of more where youre going to be as we roll forward.
Yes, good morning, Dave Good question.
I think we're really proud with the way, we manage the cost structure coming out of the downturn.
And then through the integration process with <unk>.
I think if you think about the normalized Q2 G&A level and.
Of that 20 to 21 range I think that's consistent with where it will be on a go forward basis.
We're going to be able to continue to scale the business, both organically and inorganically.
Without adding much from an incremental G&A perspective.
That's a that's a good news story right there.
Hey last question from me and I'll yield to some other folks.
Obviously, the cash balances has grown to a really nice is a very respectable number here but.
You know you are not getting paid a lot sit in cash. So yeah. My question is.
What's the what's the intended use of the cash and in particular with regard to that.
Are the bonds callable here.
Anytime in the near term and you know could you could you do a partial call on the bonds and some of that cash in and maybe reduce that leverage and that interest expense a little more.
Yeah. Thanks for the question.
I'll jump in here.
We have had.
I think tremendous success at generating free cash flow on a year to date basis.
Certainly if you think quarter over quarter cash more than doubled.
Sitting as of 630 at north of $82 million of cash on hand.
I would say that thanks to the fed you actually can make a decent return on our cash balance today. So we.
We actually do have some some nice yielding.
Cash accounts available to us.
And I think from a strategic perspective, when we think about what are we most focused on as a team and as an organization.
It's first and foremost, it's continuing to generate free cash flow.
It's continuing to reduce our net debt obviously, we built cash this last quarter, we drove net debt down to just over $200 million. Our leverage ratio is now down to one three times on both the last quarter annualized as well as an LTM basis. So I think we're sitting.
On really firm footing from a capitalization standpoint.
<unk>.
And lastly, we're going to continue to look to grow the business Inorganically and we've got the Greens integration.
The rearview at this point that went went exceedingly well we were happy to get that done on a pretty expedited timeline.
And we're back to looking at additional opportunities to continue to scale and grow the platform.
The ABL extension and amendment and upsides that we put in place this past quarter.
It also provides us a tremendous amount of flexibility we increased the deal by 20%.
Pushed our maturity out to lineup with our bonds. So we think we're really well positioned from a free cash flow generation standpoint, and flexibility in tenor standpoint, as you think about the capital structure today.
So is there anything you can do with the bonds early in terms of like a partial call her now.
So the bonds are callable today, it's at a premium.
And does it step down to par.
Okay.
Some point in the next 12 months.
Yes.
Okay.
Alright, and then he can do a partial correct. If you wanted to.
Well you could always tender for a portion if you elect it too.
Right right right right, yeah, well nobody's going to want to give him a bit look I think with our capital structure. Today I think we're going to have a wide range of options and opportunities as we think about our ability to refinance the capital structure, but we're on really sound footing, we have a strong cash balance sheet strong free cash flow generation.
And we're exiting the quarter with with right around a 1.3 times leverage ratio.
Sure sure Yeah, I would agree alright, guys. Thanks, so much I'll yield to some other folks.
Yeah. Thank you David I appreciate it.
Our next question comes from Luke Lemoine with Piper Sandler. Please proceed with your question.
Hey, good morning.
Well, good morning Olympics or election, Hey morning on growth Capex reduction could you talk a little bit more about where.
And what investments for trend.
Sure we talked about this a little bit last quarter. If you recall I mean candidly, we continue to experience delays in deploying capital specifically in our rentals business somewhat in our D. D business around tubular as mud motor steel products and then of course, everybody has discussed the well known issues.
Around the engine side of the business right engine and power ends for various frac pulp pulp down pumps coiled tubing units et cetera.
Last quarter, we talked about the deferment of approximately $12 million to $15 million.
Call. It a growth Capex. Some of it is you will definitely understand is also redeployment capex, where you're standing up certain assets than we do.
We evaluate those decisions constantly and in real time in concert with the market and so <unk>.
To date, we've deferred a number of projects in this budget just out of prudence as we watched year to date rig count fall and so as we look at the bucket today, its about $15 million of Capex that ties out to the reduction in overall guidance and it spans multiple product lines that should the market strengthen we'll still have.
Pretty attractive paybacks, but so that would include accommodations that includes some initiatives on the <unk> side that includes standing up the third frac spread as well as various other product lines and so the other thing I would add that ties to your question on Capex as if you recall.
Last quarter, we stated that Greens had some delayed capex and we intend to refurbish some of their existing fleet both on the automotive side and the equipment side and so that initiative is already substantially been undertaken and that incremental Capex is included in the updated range. So I just want to clarify that as well.
Okay got it.
Thanks, a bunch for us.
Yes, absolutely.
I'll now turn the floor over to you.
Thanks, Rob.
John Daniel wasn't able to join the call today, he's traveling but he sent in some questions and.
I will ask those on his behalf now.
Congrats on the strong Q2, despite market volatility as you look out to the rest of 2023.
Which service lines are you getting the most inquiries for Q4.
Great question, John we can catch up off line.
As necessary, but.
As you will know we're candidly in constant conversations with customers about ongoing completion schedules drilling schedules et cetera long before the recent run up in commodity prices. So it doesn't really feel like much has changed yet is how I'll caveat. It that being said look we've got clients in the haynesville that are either picking up rigs.
Diving needs for our accommodations business are discussing stand you know frac spreads.
Late September early October that will drive incremental need for Frac rentals, and flowback business and I know.
Referenced the Haynesville because thats been the focal point for so many people.
That being said we have started to have some conversations and are hearing some chatter about incremental rigs on the <unk> side as well as incremental frac activity in Q4 <unk>.
Elsewhere, we want some dedicated wireline work in Q4, we've got several comprehensive drill out packages that include our <unk>.
Tubular is flowback.
Et cetera that we've won in Q4 in other basins and then we've also been dedicated various clients coiled tubing and thru tubing package work for drill outs in Q4. So we're very excited about that with some technologies, we're bringing to bear and then I guess lastly, we've seen some uptake in adoption of our new Gen III Dissolvable plug.
So we're excited about that.
So I think what it shows is the discussions are really our product portfolio allocation approach and we're seeing opportunities across the full product line.
Great. Thanks, Chris and then as you ponder new deals are you targeting any specific business lines or geographies.
No. It's a good question I think we addressed this last quarter as well, but you know when you know.
We have historically on numerous calls when you think about our regional and service line offering diversity, we're not really myopically focused on any one basin or product line and think there is a fertile opportunity set for consolidation and needed consolidation across a number of psl's to key first point earlier strategic fit values.
Asian leverage profile industrial logic technology, and maybe most importantly culture and then synergy value of course, the drivers, especially in the case of public to public deals where the synergy value could be material. What I will say is deal flow has picked up of late.
Reviewing numerous opportunities. The question I think really is what happens to seller expectations.
And we've seen this all too often sellers prefer to hold on in the face of any sign of an upcycle or commodity price strengthening hoping to outperform on a relative basis. The reality is they would be better off on a through cycle basis, taking equity or some portion of equity realizing valuation uplift from the combined <unk>.
And then timing their exit.
As they realize the cycle upturn to the extent it plays out like they think it will.
I guess on that point valuations are the other major hurdle by and large most small to mid cap companies are trading at very modest multiples by historical standards.
And while there are a select few outliers in both directions. The majority of companies are trading at two to three times and so I've heard more management teams this quarter kind of limit the point publicly than I, probably ever have before and I think a lot of that angst is tied to convincing prior.
Private equity backed and private operators to execute on consolidation opportunities at low multiples. Despite the need for consolidation across the market. So we've got a great track record, we think K electric provides liquidity, where sellers can better time their exit.
We think we've got a great platform for driving consolidation and a great team here to realize the benefits.
So we'll see how the market plays out.
Okay, and then that concludes our question and answer segment now I'll turn it back over to Chris for closing comments.
Zac and thank you once again for joining us on the call today and your interest in Calix Energy services, we look forward to speaking with you again next quarter.
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.