ChampionX Reports Fourth Quarter and Full Year 2023 Results, Increases Share Repurchase Authorization to $1.5 Billion and Raises Quarterly Dividend by 12%

February 5, 2024

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 

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(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%

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