ChampionX Corporation

Fourth quarter revenue was $944 million, down 4% year over year and slightly up sequentially. GAAP net income was $77 million, or $0.39 per diluted share, versus $68 million in the prior-year quarter. Adjusted EBITDA was $198 million, up 10% year over year and flat sequentially, with adjusted EBITDA margin at 21%, up 280 bps year over year. Free cash flow was $140 million, with 71% conversion from adjusted EBITDA; cash from operations was $169 million and capex was $29 million net of asset sale proceeds. For full-year 2023, normalized revenue grew 3.4% after adjusting for Russia exit, the end of an Ecolab cross-sell agreement, and the RCT product line exit; adjusted EBITDA grew 25%, margin expanded 430 bps, free cash flow was over $400 million, ROIC was 18%, and $343 million was returned to shareholders. First-quarter 2024 guidance is revenue of $908 million-$938 million and adjusted EBITDA of $179 million-$189 million; capital investment is expected at 3.5% of revenues in 2024, and free cash flow conversion is expected to be at least 50% in 2024.

Soma said 2023 showed the company’s ability to grow earnings, expand margins and generate cash even when revenue was uneven, citing a diversified, production-oriented portfolio and a strong productivity pipeline. He emphasized that 2024 should be a growth year, led by production-oriented businesses, international strength, digital offerings and productivity projects, while acknowledging near-term uncertainty in U.S. land drilling and completions. His tone was confident and shareholder-focused, with repeated emphasis on capital returns, margin expansion and disciplined execution.

Ken highlighted Q4 adjusted EBITDA of $198 million and margin of 21%, along with $140 million of free cash flow, $289 million of cash on hand and $959 million of total liquidity. He said the company ended the quarter at 0.4x net debt to trailing 12-month adjusted EBITDA, and reiterated strong working capital management and capital discipline. He also laid out Q1 guidance of $908 million-$938 million revenue and $179 million-$189 million adjusted EBITDA, noting the quarter is seasonally low and that margins should improve progressively through the year. He added that 2024 capex should be about 3.5% of revenue and free cash flow conversion should be at least 50%.

Analysts pressed on why revenue trailed guidance at times in 2023 while EBITDA held up; management said the issue was mainly short-cycle North American activity, especially drilling, and that productivity and selective share gains protected earnings. Questions also focused on Q1 margin decrementals, and management pointed to higher freight costs tied to the Red Sea situation, ongoing digital/emissions investments, and a less favorable mix, while saying Q1 margins should improve through the year. On growth cadence, management said January activity improved from Q4, North America should see better Opex-driven spending, and drilling/PAT growth could be more second-half weighted. Analysts also asked about capital allocation and emissions; management said M&A remains a high-bar, bolt-on-only priority, while the methane rule could expand the regulated market materially and accelerate emissions business growth.