CHX ChampionX Corporation

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 Popebyron.pope@championx.com 281-602-0094

Media Contact: John Breedjohn.breed@championx.com 281-403-5751

CHAMPIONX CORPORATIONCONDENSED 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 CORPORATIONCONDENSED 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 CORPORATIONCONDENSED 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 CORPORATIONBUSINESS 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 CORPORATIONRECONCILIATIONS 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 CORPORATIONRECONCILIATIONS 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 CORPORATIONHISTORICAL 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 CORPORATIONHISTORICAL 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 CORPORATIONHISTORICAL 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 CORPORATIONHISTORICAL 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	%