UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2025
or
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-38441
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☑ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The registrant had 191.4 million shares of common stock, $0.01 par value, outstanding as of April 24, 2025.
CHAMPIONX CORPORATION
TABLE OF CONTENTS
| Page | ||||||||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact, contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements usually relate to future events and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by the words “believe,” “anticipate,” “expect,” “may,” “intend,” “foresee,” “guidance,” “estimate,” “potential,” “outlook,” “plan,” “should,” “would,” “could,” “target,” “forecast” and similar expressions, including the negative thereof. The absence of these words, however, does not mean that the statements are not forward-looking statements. Forward-looking statements are based on our current expectations, beliefs and assumptions concerning future developments and business conditions and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.
All of our forward-looking statements involve risks, uncertainties and assumptions (some of which are significant or beyond our control) that could cause actual results to materially differ from our historical experience and our present expectations or projections. Known material factors that could cause actual results to materially differ from those contemplated in the forward-looking statements are those set forth in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and in Part II, Item 1A, “Risk Factors,” in this Quarterly Report on Form 10-Q, and include the following:
•The impact of the Merger Agreement (as defined below), including the disruption of management’s attention from ongoing operations, an inability to complete the Merger (as defined below) due to failure to obtain required regulatory approvals or satisfy other closing conditions, the risk that if the Merger is not completed, the market price of our common stock could decline, the risk that we may not be able to retain key personnel, the impact on our relationships with our customers and suppliers, the impact on our operations, the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement.
•Demand for, and profitability of our products and services, is affected by changes in the price of, and demand for, crude oil and natural gas in domestic and international markets;
•Cost inflation and availability of raw materials;
•The impact of inflation on wholesale product costs, labor rates, transportation costs, and on our customers’ financial position and ability to purchase our products;
•Global economic conditions, geopolitical issues, supply chain disruptions, and availability and cost of credit, and the impact thereof on our operations and those of our customers and suppliers;
•Changes in the amount of or types of products and services our customers buy from us due to their decreased spending or demand changes that could reduce our revenues or profit margin;
•Our ability to successfully compete with other companies in our industry;
•Our ability to develop and implement or introduce new technologies, products, and services, as well as our ability to protect and maintain intellectual property assets;
•Our ability to successfully execute potential acquisitions and integrate acquired businesses;
•Potential liabilities arising out of the installation, use or manufacturing of our products or from a chemical spill, release or other hazard;
•Manufacturing disruptions, particularly with respect to our chemical products, including as a result of fires, explosions and chemical spills, releases or discharges;
•Continuing consolidation within our customers’ industry;
•Credit risks related to our customer base or the loss of significant customers;
•Risks relating to our existing international operations and expansion into new geographical markets;
•Risks relating to improper conduct by any of our employees, agents or business partners;
•Failure to attract, retain and develop personnel;
•The impact of natural disasters and other unusual weather conditions on our business;
•Investor sentiment towards companies in the oil and gas industry due to climate change, fossil fuels and other environmental, social and governance matters;
•Changes in domestic and foreign governmental public policies and actions of governments that impact oil and gas operations or favor renewable energy projects, risks associated with entry into emerging markets, changes in statutory tax rates and unanticipated outcomes with respect to tax audits;
•Disruptions in the political, regulatory, economic and social conditions of the countries in which we conduct business;
•Fluctuations in currency markets worldwide;
•The impact of our indebtedness on our financial position and operating flexibility;
•Disruptions in the capital and credit markets;
•The impact of war, terrorism and civil unrest;
•Risks relating to information technology and cybersecurity, including the potential for cyberattacks or security breaches that could disrupt our or our partners’ or suppliers’ operations, compromise confidential or otherwise protected information, damage our reputation, expose us to legal liability, or cause financial losses;
•Changes in federal, state and local legislation and regulations relating to oil and gas development and the potential for related litigation or restrictions on our customers;
•Changes in environmental and health and safety laws and regulations which may increase our costs, limit the demand for our products and services or restrict our operations; and
•The impact of tariffs and other trade measures on our business.
We wish to caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update, revise or correct any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except to the extent required under the federal securities laws.
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| (in thousands, except per share data) | 2025 | 2024 | |||||||||
| Revenue: | |||||||||||
| Product revenue | $ | $ | |||||||||
| Service revenue | |||||||||||
| Lease and other revenue | |||||||||||
| Total revenue | |||||||||||
| Cost of goods and services | |||||||||||
| Gross profit | |||||||||||
| Costs and expenses: | |||||||||||
| Selling, general and administrative expense | |||||||||||
| (Gain) loss on sale-leaseback transaction and disposal group | ( | ||||||||||
| Interest expense, net | |||||||||||
| Foreign currency transaction losses, net | |||||||||||
| Other (income) expense, net | ( | ||||||||||
| Income before income taxes | |||||||||||
| Provision for income taxes | |||||||||||
| Net income | |||||||||||
| Net income attributable to noncontrolling interest | |||||||||||
| Net income attributable to ChampionX | $ | $ | |||||||||
| Earnings per share attributable to ChampionX: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
| Weighted-average shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
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CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||
| Foreign currency translation adjustments | ( | ||||||||||
| Cash flow hedges | ( | ||||||||||
| Defined pension and other post-retirement benefits adjustments, net | ( | ||||||||||
| Other comprehensive income (loss) | ( | ||||||||||
| Comprehensive income | |||||||||||
| Less: Comprehensive income attributable to noncontrolling interest | |||||||||||
| Comprehensive income attributable to ChampionX | $ | $ | |||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (in thousands, except share data) | March 31, 2025 | December 31, 2024 | |||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Receivables, net of allowances of $ | |||||||||||
| Inventories, net | |||||||||||
| Assets held for sale | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
Property, plant, and equipment, net of accumulated depreciation of $ | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Current portion of long-term debt | $ | $ | |||||||||
| Accounts payable | |||||||||||
| Accrued compensation and employee benefits | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
| Liabilities held for sale | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred income taxes | |||||||||||
| Operating lease liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Stockholders’ equity: | |||||||||||
Common stock ( | |||||||||||
| Capital in excess of par value of common stock | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| ChampionX stockholders’ equity | |||||||||||
| Noncontrolling interest | ( | ( | |||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| Common Stock | |||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Shares | Par Value | Capital in Excess of Par Value | Accum. Deficit | Accum. Other Comp. Loss | Non-controlling Interest | Total | ||||||||||||||||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Taxes withheld on issuance of stock-based awards | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Dividends declared to common stockholders ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Cumulative translation adjustments and other | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
| March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Shares | Par Value | Capital in Excess of Par Value | Accum. Deficit | Accum. Other Comp. Loss | Non-controlling Interest | Total | ||||||||||||||||||||||||||||||||||
| December 31, 2023 | $ | $ | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock options exercised | — | — | — | ||||||||||||||||||||||||||||||||||||||
| Taxes withheld on issuance of stock-based awards | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
Dividends declared to common stockholders ($ | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Repurchase and cancellation of common stock | ( | ( | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
| Cumulative translation adjustments | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| March 31, 2024 | $ | $ | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
CHAMPIONX CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash flows from operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| (Gain) loss on sale-leaseback transaction and disposal group | ( | ||||||||||
| Loss on Argentina Blue Chip Swap transaction | |||||||||||
| Stock-based compensation | |||||||||||
| Provision for inventory obsolescence and write-downs | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Loss (gain) on disposal of fixed assets | |||||||||||
| Amortization of deferred loan costs and accretion of discount | |||||||||||
| Other | |||||||||||
| Changes in operating assets and liabilities (net of effects of foreign exchange): | |||||||||||
| Receivables | |||||||||||
| Inventories | ( | ( | |||||||||
| Leased assets | ( | ( | |||||||||
| Other assets | ( | ( | |||||||||
| Accounts payable | |||||||||||
| Other liabilities | ( | ( | |||||||||
| Net cash flows provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from sale of fixed assets | |||||||||||
| Proceeds from sale-leaseback transaction | |||||||||||
| Purchase of investments | ( | ||||||||||
| Sale of investments | |||||||||||
| Acquisitions, net of cash acquired | ( | ||||||||||
| Net cash used for investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Repayment of long-term debt | ( | ( | |||||||||
| Repurchases of common stock | ( | ||||||||||
| Dividends paid | ( | ( | |||||||||
| Payments related to taxes withheld on stock-based compensation | ( | ( | |||||||||
| Payment of finance lease obligations | ( | ( | |||||||||
| Proceeds expected to be remitted under the Accounts Receivable Facility | |||||||||||
| Other | ( | ||||||||||
| Net cash used for financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ||||||||||
| Net increase in cash and cash equivalents | |||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
CHAMPIONX CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
ChampionX Corporation 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. Our expertise, innovative products, and digital technologies provide enhanced oil and gas production, transportation, and real-time emissions monitoring throughout the lifecycle of a well.
Unless the context requires otherwise, references in this report to “we,” “us,” “our,” “the Company,” or “ChampionX” mean ChampionX Corporation, together with its subsidiaries where the context requires.
Merger Agreement
On April 2, 2024, ChampionX entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Schlumberger Limited, a Curaçao corporation (“SLB”), Sodium Holdco, Inc., a Delaware corporation and indirect wholly owned subsidiary of SLB (“Holdco”), and Sodium Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of SLB and Holdco (“Merger Sub”), pursuant to which, and subject to the terms and conditions therein, Merger Sub will be merged with and into ChampionX (the “Merger”, together with the other transactions contemplated by the Merger Agreement, the “Transactions”), with ChampionX surviving the Merger as an indirect wholly owned subsidiary of SLB.
Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”) and by virtue of the Merger, each share of common stock, par value $0.01 per share, of ChampionX issued and outstanding immediately prior to the Effective Time (other than any shares of ChampionX common stock held in the treasury of ChampionX or held by SLB, Holdco or any direct or indirect wholly owned subsidiary of SLB, in each case except for any such shares held on behalf of third parties) will be converted, without any action on the part of the holder thereof, into the right to receive 0.735 shares of common stock, par value $0.01 per share, of SLB (“SLB Common Stock”), which shares will be duly authorized and validly issued in accordance with applicable laws (the “Equity Consideration”) and, if applicable, cash in lieu of fractional shares.
The Merger Agreement contains certain termination rights for each of ChampionX and SLB. Upon termination of the Merger Agreement under specified circumstances, including the termination by either party if certain Mutual Legal Restraints (as defined in the Merger Agreement) exist, specified regulatory approvals have not been obtained or if the consummation of the Merger does not occur on or prior to October 2, 2025 and, subject to certain exceptions, the parties will have satisfied the conditions to the Merger, SLB would be required to pay ChampionX a termination fee of $326.6 million.
During the three months ended March 31, 2025, we recorded third party legal and professional fees of $10.2 million in connection with the pending Merger with SLB. These costs are reflected in selling, general and administrative expense within our condensed consolidated statement of income.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of ChampionX have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial information. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted. Therefore, these financial statements should be read in conjunction with the audited consolidated financial statements, and notes thereto, which are included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and actions that we may undertake in the future, actual results may differ from our estimates. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments unless otherwise specified) necessary for a fair statement of our financial condition and results of operations as of and for the periods presented. Revenue, expenses, assets and liabilities can vary during each quarter of the year. Therefore, the
6
results and trends in these financial statements may not be representative of the results that may be expected for the year ending December 31, 2025.
Significant Accounting Policies
Please refer to “Note 1–Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 for the discussion of our significant accounting policies.
New Accounting Standards Issued
In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2024-03, “Disaggregation of Income Statement Expenses (DISE)” which requires a public business entity to disclose the nature of certain expenses within the footnotes of the financial statements, including purchases of inventory, employee compensation, depreciation, intangible asset amortization and the total amount of selling expenses. The guidance is effective for annual periods beginning after December 15, 2026, with early adoption permitted.
NOTE 2—SEGMENT INFORMATION
Our reporting segments are:
•Production Chemical Technologies—provides oil and natural gas production and midstream markets with solutions to manage and control corrosion, oil and water separation, flow assurance, sour gas treatment and a host of water-related issues.
•Production & Automation Technologies—designs, manufactures, markets and services a full range of artificial lift equipment, and end-to-end digital automation solutions, as well as other production equipment and asset monitoring technologies. Production & Automation Technologies’ products are sold under a collection of brands including Harbison-Fischer, Norris, Alberta Oil Tool, Oil Lift Technology, PCS Ferguson, Pro-Rod, Upco, Unbridled ESP, Norriseal-Wellmark, Quartzdyne, Spirit, Theta, Timberline, Windrock, Artificial Lift Performance and RMSpumptools.
•Drilling Technologies—designs, manufactures and markets polycrystalline diamond cutters and bearings for use in oil and gas drill bits under the US Synthetic brand. On February 24, 2025, the Company entered into a definitive agreement to sell all of its equity interests in US Synthetic Corporation (“US Synthetic”) to a controlled affiliate of LongRange Capital, L.P. See Note 3—Assets Held For Sale
•Reservoir Chemical Technologies—manufactures specialty products that support well stimulation, construction (including drilling and cementing) and remediation needs in the oil and natural gas industry.
We refer to our Production Chemical Technologies segment and our Reservoir Chemical Technologies segment collectively as our Chemical Technologies business. Although Reservoir Chemical Technologies is not required to be disclosed separately as a reportable segment based on materiality, management believes the additional information contributes to a better understanding of the business. Other business activities that do not meet the criteria of an operating segment have been combined into Corporate and other. Corporate and other includes (i) corporate and overhead expenses, and (ii) revenue and costs for activities that are not operating segments.
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Segment revenue and segment operating profit
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Production Chemical Technologies | Production & Automation Technologies | Drilling Technologies | Reservoir Chemical Technologies | Total Reportable Segments | Corporate and other(1) | Total | ||||||||||||||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Cost of goods and services | |||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | |||||||||||||||||||||||||||||||||||||||||
| Other segment items | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Segment operating profit | ( | ||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | ( | ||||||||||||||||||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Production Chemical Technologies | Production & Automation Technologies | Drilling Technologies | Reservoir Chemical Technologies | Total Reportable Segments | Corporate and other(1) | Total | ||||||||||||||||||||||||||||||||||
| Segment revenue | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Cost of goods and services | |||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | |||||||||||||||||||||||||||||||||||||||||
| Other segment items | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||
| Segment operating profit | ( | ||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
_______________________
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Geographic information
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Property, plant, and equipment, net: | |||||||||||
| United States | $ | $ | |||||||||
| Singapore | |||||||||||
| Canada | |||||||||||
| Other Countries | |||||||||||
| Total property, plant, and equipment, net | $ | $ | |||||||||
See Note 4—Revenue for information related to revenue by geography and end markets.
Other business segment information
| Segment Assets | |||||||||||
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
Chemical Technologies (1) | $ | $ | |||||||||
| Production & Automation Technologies | |||||||||||
| Drilling Technologies | |||||||||||
Total segment assets (2) | |||||||||||
Other current assets | |||||||||||
| Noncurrent assets | |||||||||||
| Total assets | $ | $ | |||||||||
_______________________
(1) Our Chemical Technologies business has an integrated supply chain function that serves the Production Chemical Technologies and Reservoir Chemical Technologies reportable segments. As such, segment assets by each reportable segment has not been provided and is not available, since the Company does not produce or utilize such information.
(2) The significant asset categories that is regularly provided to the chief operating decision maker (“CODM”) includes total accounts receivable and inventory. The amounts align with segment level information provided in the CODM package.
| Capital Expenditures Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
Chemical Technologies (1) | $ | $ | |||||||||
| Production & Automation Technologies | |||||||||||
| Drilling Technologies | |||||||||||
Corporate and other | |||||||||||
| Total | $ | $ | |||||||||
_______________________
(1) Our Chemical Technologies business has an integrated supply chain function that serves the Production Chemical Technologies and Reservoir Chemical Technologies reportable segments. As such, capital expenditure information by each reportable segment has not been provided and is not available, since the Company does not produce or utilize such information.
| Depreciation & Amortization Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Production Chemical Technologies | $ | $ | |||||||||
| Production & Automation Technologies | |||||||||||
| Drilling Technologies | |||||||||||
| Reservoir Chemical Technologies | |||||||||||
Corporate and other | |||||||||||
| Total | $ | $ | |||||||||
9
NOTE 3—ASSETS HELD FOR SALE
US Synthetic Corporation
On February 24, 2025, the Company entered into a definitive agreement to sell all of its equity interests in US Synthetic Corporation (“US Synthetic”) to a controlled affiliate of LongRange Capital, L.P. (the “USS Purchase Agreement,” and the transactions contemplated thereby, the “USS Divestiture”). US Synthetic designs, manufactures and markets polycrystalline diamond cutters and bearings for use in oil and gas drill bits and is the only operating entity in our Drilling Technologies segment.
Pursuant to the purchase agreement, ChampionX will receive cash consideration of approximately $300 million, subject to customary adjustments.
The closing of the USS Purchase Agreement is subject to customary closing conditions, including: (i) the absence of certain legal restraints that enjoin, prohibit, prevent or make illegal the consummation of the USS Divestiture; (ii) the expiration or termination of all waiting periods applicable to the USS Divestiture under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (which expired on February 24, 2025) and any commitment to, or agreement with, any governmental entity to delay the consummation of, or not to consummate before a certain date, the USS Divestiture and the receipt of all clearances, consents and approvals under applicable regulatory laws; (iii) the closing of the Merger with SLB; and (iv) certain other customary conditions relating to the parties’ representations and warranties in the USS Purchase Agreement and the performance of their respective obligations. As of March 31, 2025, we had assets of $226.6 million, (including goodwill of $101.1 million) and liabilities of $61.4 million for this business classified as held for sale. The results of US Synthetic will continue to be reported in continuing operations in our condensed consolidated income statement until the sale of US Synthetic is completed.
We classify long-lived assets, or disposal groups as held for sale in the period in which all the held for sale criteria in accordance with Accounting Standard Codification (“ASC”) 360, Property, Plant and Equipment, are met. The long-lived asset (disposal group) is reported at the lower of its carrying value or fair value less cost to sell.
The following table presents information related to the major classes of assets and liabilities that were held for sale in our condensed consolidated balance sheet:
| US Synthetic Corporation | |||||
| (in thousands) | March 31, 2025 | ||||
Receivables, net of allowances of $ | $ | ||||
| Inventories, net | |||||
| Prepaid expenses and other current assets | |||||
Property, plant, and equipment, net of accumulated depreciation of $ | |||||
| Goodwill | |||||
Intangible assets, net of accumulated amortization of $ | |||||
| Operating lease right-of-use assets | |||||
| Other non-current assets | |||||
| Total assets held for sale | $ | ||||
| Accounts payable | $ | ||||
| Accrued compensation and employee benefits | |||||
| Accrued expenses and other current liabilities | |||||
| Operating lease liabilities | |||||
| Total liabilities held for sale | $ | ||||
Other
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NOTE 4—REVENUE
Our revenue is generated primarily from product sales. Service revenue is generated from providing services to our customers. These services include installation, repair and maintenance, laboratory and logistics services, chemical management services, troubleshooting, reporting, water treatment services, technical advisory assistance, emissions detection and monitoring, and other field services. Lease revenue is derived from rental income of leased production equipment. As our costs are shared across the various revenue categories, cost of goods sold is not tracked separately and is not discretely identifiable.
In certain geographical areas, the Company utilizes joint ventures and independent third-party distributors and sales agents to sell and market products and services. Amounts payable to independent third-party distributors and sales agents may fluctuate based on sales and timing of distributor fee payments. For services rendered by such independent third-party distributors and sales agents, the Company records the consideration received on a net basis within product revenue in our condensed consolidated statements of income. Additionally, amounts owed to distributors and sales agents are reported within accrued distributor fees within our condensed consolidated balance sheets.
Revenue disaggregated by geography was as follows:
| Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Production Chemical Technologies | Production & Automation Technologies | Drilling Technologies | Reservoir Chemical Technologies | Corporate and other | Total | |||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Latin America | |||||||||||||||||||||||||||||||||||
| Middle East & Africa | ( | ||||||||||||||||||||||||||||||||||
| Canada | |||||||||||||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||||||||
| Asia-Pacific | |||||||||||||||||||||||||||||||||||
| Australia | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||||||||||||||
| (in thousands) | Production Chemical Technologies | Production & Automation Technologies | Drilling Technologies | Reservoir Chemical Technologies | Corporate and other | Total | |||||||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Latin America | |||||||||||||||||||||||||||||||||||
| Middle East & Africa | ( | ||||||||||||||||||||||||||||||||||
| Canada | |||||||||||||||||||||||||||||||||||
| Europe | |||||||||||||||||||||||||||||||||||
| Asia-Pacific | |||||||||||||||||||||||||||||||||||
| Australia | |||||||||||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
Revenue is attributed to regions based on the location of our direct customer, which in some instances is an intermediary and not necessarily the end user.
Contract Balances
The beginning and ending contract asset and contract liability balances from contracts with customers were as follows:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Contract assets | $ | $ | |||||||||
| Contract liabilities - current | $ | $ | |||||||||
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NOTE 5—INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The components of our definite- and indefinite-lived intangible assets were as follows:
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (in thousands) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||
| Definite-lived intangible assets: | |||||||||||||||||||||||||||||||||||
Customer relationships (1) | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Unpatented technologies (1) | |||||||||||||||||||||||||||||||||||
| Software | |||||||||||||||||||||||||||||||||||
Trademarks (1) | |||||||||||||||||||||||||||||||||||
Patents(1) | |||||||||||||||||||||||||||||||||||
| Other | |||||||||||||||||||||||||||||||||||
| Indefinite-lived intangible assets: | |||||||||||||||||||||||||||||||||||
Trademarks (1) | — | — | |||||||||||||||||||||||||||||||||
| In-process research and development | — | — | |||||||||||||||||||||||||||||||||
| — | — | ||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(1) See Note 3—Assets Held For Sale for additional information related to the US Synthetic intangible assets held for sale. The gross carrying amount of US Synthetic intangible assets (including indefinite-lived intangible assets) reclassified to assets held for sale as of March 31, 2025 is $55.8 million with associated accumulated amortization of $52.2 million.
Goodwill
The carrying amount of goodwill, including changes therein, by reportable segment is below:
| (in thousands) | Production Chemical Technologies | Production & Automation Technologies | Drilling Technologies | Reservoir Chemical Technologies | Total | ||||||||||||||||||||||||
| December 31, 2024 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Reclassified to assets held for sale (1) | ( | ( | |||||||||||||||||||||||||||
| Foreign currency translation | ( | ||||||||||||||||||||||||||||
| March 31, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
______________________
(1) See See Note 3—Assets Held For Sale for additional information related to the US Synthetic Assets Held for Sale.
Goodwill is not subject to amortization but is tested for impairment on an annual basis or more frequently if impairment indicators arise.
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NOTE 6—DEBT
Long-term debt consisted of the following:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| 2022 Revolving Credit Facility | $ | $ | |||||||||
| 2022 Term Loan Facility | |||||||||||
| Total | |||||||||||
| Net unamortized discounts and issuance costs | ( | ( | |||||||||
| Total long-term debt | |||||||||||
Current portion of long-term debt (1) | ( | ( | |||||||||
| Long-term debt, less current portion | $ | $ | |||||||||
_______________________
(1) Includes the mandatory amortization payments due within twelve months related to the 2022 Term Loan Facility as of March 31, 2025.
On June 7, 2022, we entered into a restated credit agreement (the “Restated Credit Agreement”), which amends and restates the prior credit agreement. The Restated Credit Agreement provides for (i) a $625.0 million seven-year senior secured term loan B facility (the “2022 Term Loan Facility”) and (ii) a five-year senior secured revolving credit facility in an aggregate principal amount of $700.0 million, of which $100.0 million is available for the issuance of letters of credit (the “2022 Revolving Credit Facility,” and, together with the 2022 Term Loan Facility, the “Senior Secured Credit Facility”). Proceeds from future borrowings under the 2022 Revolving Credit Facility are expected to be used for working capital and general corporate purposes. The initial amount drawn under the 2022 Revolving Credit Facility has been repaid. As of March 31, 2025, we had no amounts outstanding under the 2022 Revolving Credit Facility.
The 2022 Term Loan Facility matures June 7, 2029 and the 2022 Revolving Credit Facility matures June 7, 2027. The 2022 Term Loan Facility is subject to mandatory amortization payments of 1 % per annum of the initial commitment paid quarterly, which began on December 30, 2022. The Senior Secured Credit Facility contains customary representations and warranties, covenants, and events of default for loan facilities of this type. We were in compliance with all covenants as of March 31, 2025.
On September 29, 2023, we amended the Restated Credit Agreement to, among other things, reprice the Company’s $620.3 million of existing term loans under the 2022 Term Loan Facility, in connection with which new term loans in the same amount were issued. The new term loans bear interest at a per annum rate of (i) an adjusted SOFR Rate plus 2.75 % per annum or (ii) a base rate plus 1.75 %. The new term loans may be prepaid at any time without penalty, subject to the payment of customary breakage costs in the case of the SOFR rate loans. No other material terms of the Senior Secured Credit Facility were changed as part of the September 2023 amendment.
On June 29, 2022, the Company executed a five-year amortizing floating-to-fixed interest rate swap to hedge our exposure to increases in variable interest rates on the 2022 Term Loan Facility. This interest rate swap agreement is based on a $300.0 million notional amount for the first three years, reducing to $150.0 million for years four and five. See Note 11—Fair Value Measurements and Note 12—Derivatives and Hedging Transactions for additional information on interest rate swaps.
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NOTE 7—COMMITMENTS AND CONTINGENCIES
The Company is subject to various claims and contingencies related to, among other things, workers’ compensation, general liability (including product liability), automobile claims, health care claims, environmental matters, and lawsuits. We record liabilities where a contingent loss is probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. In accordance with applicable GAAP, the Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred.
Guarantees and Indemnifications
We have provided indemnities in connection with sales of certain businesses and assets, including indemnities for environmental health and safety, tax, and employment matters. We do not have any material liabilities recorded for these indemnifications and are not aware of any claims or other information that would give rise to material payments under such indemnities.
As of March 31, 2025 and December 31, 2024, we had $76.6 million and $70.3 million, respectively, of outstanding letters of credit, surety bonds and guarantees, which expire at various dates through 2039. These financial instruments are primarily maintained as security for insurance, warranty, and other performance obligations. Generally, we would only be liable for the amount of these letters of credit, surety bonds, and guarantees in the event of default in the performance of our obligations, the probability of which we believe is remote.
Litigation and Environmental Matters
The Company is party to various proceedings and claims incidental to its business, including matters arising under provisions relating to the protection of the environment. We review the probable outcome of such proceedings, the costs and expenses reasonably expected to be incurred and accrued to date, and the availability and extent of insurance coverage. We accrue a liability for legal matters that are probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. While many of these matters involve inherent uncertainty, we believe that the amount of the liability, if any, ultimately incurred with respect to these proceedings and claims will not have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows.
Environmental Matters
The Company is currently participating in environmental assessments and remediation at approximately eight locations, the majority of which are in the United States (“U.S.”). Environmental liabilities have been accrued to reflect our best estimate of future costs. Potential insurance reimbursements are not anticipated in the Company’s accruals for environmental liabilities. As of March 31, 2025 and December 31, 2024, environmental liability accruals 5.7 million and $5.7 million, respectively.
Prior to the commencement of our operations as an independent publicly traded company in 2018, groundwater contamination was discovered at the Norris Sucker Rods plant site located in Tulsa, Oklahoma. Initial remedial efforts were undertaken at the time of discovery of the contamination and we have since coordinated monitoring and remediation with the Oklahoma Department of Environmental Quality (“ODEQ”). ODEQ approved our long-term remediation plan, prepared in connection with an engineering and consulting firm engaged for this purpose and we have accrued liabilities of approximately
$1.2 million for this remediation plan. We are now in discussion with ODEQ to finalize a consent order and we cannot fully anticipate the timing, outcome or possible impact of further remedial activities that may be required in a final order, financial or otherwise. Liabilities could increase in the future until such time as we ultimately reach agreement with ODEQ on our remediation plan in a final consent order and such liabilities become probable and can be reasonably estimated; however, there have been no changes to our estimated liability as of March 31, 2025.
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NOTE 8—STOCKHOLDERS' EQUITY
Dividends
Our first quarter cash dividend of $0.095 18.7 million on our condensed consolidated balance sheet as of March 31, 2025. Subsequent dividend declarations, if any, including the amounts and timing of future dividends, are subject to approval by our Board of Directors (the “Board”) and will depend on future business conditions, financial conditions, results of operations and other factors.
Repurchases
NOTE 9—EARNINGS PER SHARE
A reconciliation of the number of shares used for the basic and diluted earnings per share calculation was as follows:
| Three Months Ended March 31, | |||||||||||
| (in thousands, except per share data) | 2025 | 2024 | |||||||||
| Net income attributable to ChampionX | $ | $ | |||||||||
| Weighted-average number of shares outstanding | |||||||||||
| Dilutive effect of stock-based compensation | |||||||||||
| Total shares and dilutive securities | |||||||||||
| Earnings per share attributable to ChampionX: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
For all periods presented, the computation of diluted earnings per share excludes awards with an anti-dilutive impact. For the three months ended March 31, 2025 and March 31, 2024, the diluted shares include the dilutive impact of equity awards except for approximately 0.1 million and 0.5 million shares, respectively, that were excluded because their inclusion would be anti-dilutive.
NOTE 10—ACQUISITIONS, DIVESTITURES AND SALE-LEASEBACK
Acquisitions
OTS Consulting Services LLP
On January 5, 2024 we completed an agreement with OTS Consulting Services LLP (“OTS”), a privately held engineering services company based in Pune, India, to acquire the assets and liabilities relating solely to the services performed by OTS for us prior to the acquisition. OTS specializes in digital transformation and advanced IT solutions. The acquired assets and liabilities are included in our Production & Automation Technologies segment. Under the terms of the agreement, we paid $8.7 million, inclusive of working capital adjustments. As part of our purchase price allocation, we recorded goodwill of $6.4 million. The pro forma effect of this acquisition on revenue and net income has been determined to be immaterial to our financial statements.
Artificial Lift Performance Limited
On February 26, 2024, we acquired Artificial Lift Performance Limited (“ALP”), a provider of advanced analytics solutions for enhancing oil and gas production performance based in Edinburgh, Scotland. These assets and liabilities have been included in
15
our Production & Automation Technologies segment. Under the terms of the agreements, we paid $13.4 million, inclusive of working capital adjustments, with an additional $1.7 million paid on the first anniversary of the closing date, and a maximum earn out potential of $3.0 million over the next year. As part of our purchase price allocation, we recorded definite-lived intangible assets of $10.4 million which consists of assumed software, trademarks and customer relationships and recorded $9.4 million of goodwill, which is inclusive of purchase price accounting adjustments. In addition, we assumed liabilities of $7.6 million, which includes the holdback payment and earn-out consideration. The pro forma effect of this acquisition on revenue and net income has been determined to be immaterial to our financial statements.
RMSpumptools Limited
On July 8, 2024, we completed the acquisition of RMSpumptools Limited, a UK-based company that designs and manufactures highly engineered mechanical and electrical solutions for complex artificial lift applications. The purpose of the acquisition is to create growth opportunities in the artificial lift business internationally and this business is included in our Production & Automation Technologies segment. We paid $106.1 million, and as part of our purchase price allocation, we recorded definite-lived intangible assets of $53.0 million, which consists of customer relationships, unpatented technology and trade names and recorded $45.0 million of goodwill, which is inclusive of purchase price accounting adjustments. In addition, we assumed liabilities of $29.0 million, which includes a $13.8 million deferred tax liability. The pro forma effect of this acquisition on revenue and net income has been determined to be immaterial to our financial statements.
The following table provides the initial allocation of the purchase price as of the acquisition date.
| (in thousands) | |||||
| Cash and cash equivalents | $ | ||||
| Receivables | |||||
| Inventories | |||||
| Prepaid expenses and other current assets | |||||
| Property, plant, and equipment | |||||
| Identifiable intangible assets | |||||
| Operating leases right-of-use asset | |||||
| Other noncurrent assets | |||||
| Total identifiable assets acquired | |||||
| Accounts payable | |||||
| Accrued compensation and employee benefits | |||||
| Accrued expenses and other current liabilities | |||||
| Deferred income taxes | |||||
| Operating lease liabilities | |||||
| Total liabilities assumed | |||||
| Net identifiable assets acquired | |||||
| Goodwill | |||||
| Total net assets acquired | $ | ||||
The purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed based on their preliminary fair value estimates as of the acquisition date. The measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and thus represent Level 3 inputs. The excess of the purchase price over such fair values was recorded as goodwill.
16
Divestitures
Russia
Due to the deteriorating business conditions in Russia following the Ukraine invasion and the resultant sanctions imposed by the United States, European Union, and United Kingdom, we initiated a plan to dispose of our operations in Russia (the “CT Russia Business”), which is included in our Production Chemical Technologies segment. As a result, the CT Russia Business met the criteria to be classified as held for sale during the second quarter of 2022 and we measured the carrying value of the disposal group to the lower of its carrying value or fair value less costs to sell, resulting in net charges of $16.5 million for the year ended December 31, 2022.
We assess the fair value of the CT Russia Business (less any costs to sell) each reporting period that it remains classified as held for sale and report any subsequent changes as an adjustment to the carrying value of the asset or disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale.
Due to the continued deterioration of the business environment, increasing trade regulations and sanctions and Russia’s imposition of an exit tax on divestments to facilitate exit from in-country operations, we assessed the fair value less cost to sell the business as of March 31, 2023 to be zero , resulting in a $13.0 million pre-tax impairment expense recorded during the three months ended March 31, 2023, which is reflected in loss (gain) on disposal group and sale-leaseback transaction within our consolidated statements of income. There were no charges during the period ended March 31, 2025.
Sale-Leaseback
Orem, Utah
NOTE 11—FAIR VALUE MEASUREMENTS
Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. A hierarchy has been established for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs be used when available. The hierarchy is broken down into three levels:
Level 1- Inputs are quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.
Level 2- Inputs include observable inputs other than quoted prices in active markets.
Level 3- Inputs are unobservable inputs for which there is little or no market data available.
The carrying amount and the estimated fair value for assets and liabilities measured on a recurring basis are as follows:
17
| Carrying Amount | |||||||||||||||||
| (in thousands) | Measurement Level | March 31, 2025 | December 31, 2024 | ||||||||||||||
| Foreign currency forward contracts | Level 2 | $ | $ | ||||||||||||||
| Interest rate swaps | Level 2 | ||||||||||||||||
| Total | $ | $ | |||||||||||||||
| Foreign currency forward contracts | Level 2 | $ | $ | ||||||||||||||
| Interest rate swaps | Level 2 | ||||||||||||||||
| Total | $ | $ | |||||||||||||||
The carrying value of foreign currency forward contracts is at fair value, which is determined based on foreign currency exchange rates as of the balance sheet date and is classified within Level 2. For purposes of fair value disclosure above, derivative values are presented gross. See Note 12—Derivatives and Hedging Transactions for further discussion of gross versus net presentation of the Company’s derivatives.
The fair value of our term loan facility is based on Level 2 quoted market prices for the same or similar debt instruments. The fair value of the revolving line of credit approximates carrying value due to the variable interest rates charged on the borrowings, which reprice frequently (Level 2). The carrying amount and the estimated fair value of long-term debt, including current maturities, held by the Company were:
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| (in thousands) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||||||
| 2022 Revolving Credit Facility | $ | $ | $ | $ | |||||||||||||||||||
| 2022 Term Loan Facility | $ | $ | $ | $ | |||||||||||||||||||
NOTE 12—DERIVATIVES AND HEDGING TRANSACTIONS
The Company uses foreign currency forward contracts to manage risks associated with foreign currency exchange rates. The Company also utilizes floating-to-fixed interest rate swap agreements as cash flow hedges on certain debt to mitigate interest rate risk. The Company does not hold derivative financial instruments of a speculative nature or for trading purposes. Derivative contracts are recorded as assets and liabilities on the balance sheet at fair value. We evaluated the interest rate swap hedge effectiveness and determined it to be perfectly effective. We evaluate foreign currency forward contracts’ hedge effectiveness at contract inception and thereafter on a quarterly basis. If a derivative is no longer expected to be effective, hedge accounting is discontinued. Changes in fair value are recognized immediately in earnings unless the derivative qualifies and is designated as a hedge. Changes in fair value attributable to changes in spot exchange rates for derivative contracts that have been designated as cash flow hedges are recognized in accumulated other comprehensive income (“AOCI”) and reclassified into earnings in the same period the hedged transaction affects earnings and are presented in the same income statement line as the earnings effect of the hedged item. The Company accounts for the interest rate swap agreements as a cash flow hedge, thus the effective portion of gains and losses resulting from changes in fair value are recognized in AOCI and are amortized to interest expense over the term of the respective debt. Cash flows from derivatives are classified in the statement of cash flows in the same category as the cash flows from the items subject to designated hedge or undesignated (economic) hedge relationships.
The Company is exposed to credit risk in the event of nonperformance of counterparties for foreign currency forward exchange contracts and interest rate swaps. We monitor our exposure to credit risk by using major banks and financial institutions as counterparties and monitoring their financial condition and credit profile. The Company does not anticipate nonperformance by any of these counterparties, and therefore, recording a valuation allowance against the Company’s derivative balance is not considered necessary.
Derivative Positions Summary
Certain of the Company’s derivative transactions are subject to master netting arrangements that allow the Company to settle with the same counterparties. These arrangements generally do not call for collateral and as of the applicable dates presented in
18
the following table, no cash collateral had been received or pledged related to the underlying derivatives. We have elected to present our derivative balances on a gross basis on the condensed consolidated balance sheet.
The following table summarizes the gross fair value of the Company’s outstanding derivatives and the lines in which they are presented on the condensed consolidated balance sheet.
| Derivative Assets | Derivative Liabilities | ||||||||||||||||||||||
| (in thousands) | March 31, 2025 | December 31, 2024 | March 31, 2025 | December 31, 2024 | |||||||||||||||||||
| $ | $ | $ | — | $ | — | ||||||||||||||||||
| — | — | ||||||||||||||||||||||
| — | — | ||||||||||||||||||||||
| — | — | ||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
The following table summarizes the notional values of the Company’s outstanding derivatives:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Notional value of foreign currency forward contracts and interest rate swaps | $ | $ | |||||||||
Cash Flow Hedges
The Company utilizes foreign currency forward contracts to hedge the effect of foreign currency exchange rate fluctuations on forecasted foreign currency transactions, primarily related to business combinations and inventory purchases. These forward contracts are designated as cash flow hedges. The changes in fair value of these contracts attributable to changes in spot exchange rates are recorded in AOCI until the hedged items affect earnings, at which time the gain or loss is reclassified into the same line item in the condensed consolidated statements of income as the underlying exposure being hedged. The forward points are marked-to-market monthly and recognized in the same line item in the condensed consolidated statements of income as the underlying exposure being hedged.
Under interest rate swaps, we agree with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional principal amount. Any unrealized gain or loss at the time of settlement will be reclassified to interest expense, where we record the interest expense on the associated debt.
Derivatives Not Designated as Hedging Instruments
The Company also uses foreign currency forward contracts to offset its exposure to the change in value of certain foreign currency denominated assets and liabilities, primarily receivables and payables, which are remeasured at the end of each period. Although the contracts are effective economic hedges, they are not designated as accounting hedges. Therefore, changes in the value of these derivatives are recognized immediately in earnings, thereby offsetting the current earnings effect of the related foreign currency denominated assets and liabilities.
Effect of Derivative Instruments on Income
The loss (gain) of all derivative instruments recognized is summarized below:
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Loss (gain) reclassified from AOCI to income on cash flow hedges: | |||||||||||
| Cost of goods and services | $ | ( | $ | ( | |||||||
| Interest expense | ( | ( | |||||||||
| Loss (gain) on derivatives not designated as hedging instruments: | |||||||||||
| Other (income) expense, net | ( | ||||||||||
| Total loss (gain) of derivative instruments | $ | ( | $ | ( | |||||||
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NOTE 13—INVENTORIES
Inventories consisted of the following:
| (in thousands) | March 31, 2025 | December 31, 2024 | |||||||||
| Raw materials | $ | $ | |||||||||
| Work in progress | |||||||||||
| Finished goods | |||||||||||
| Inventory reserve | ( | ( | |||||||||
LIFO adjustments (1) | ( | ( | |||||||||
| Inventories, net | $ | $ | |||||||||
(1) Represents the amount by which the current cost of LIFO inventories exceeded their carrying value.
NOTE 14—ACCOUNTS RECEIVABLE FACILITIES
On June 28, 2022, we entered into an uncommitted accounts receivable purchase agreement (the “JPM Accounts Receivable Facility”) with JPMorgan Chase Bank, N.A. as the purchaser. The amount available for sale under the JPM Accounts Receivable Facility fluctuates over time based on the total amount of eligible receivables generated during the normal course of business. A maximum of $160.0 million in receivables may be sold and remain unpaid under the JPM Accounts Receivable Facility at any time.
On March 28, 2024, we entered into an uncommitted accounts receivable purchase agreement (the “HSBC Accounts Receivable Facility” and, together with the JPM Accounts Receivable Facility, the “Accounts Receivable Facilities”) with HSBC Bank USA, National Association, as the purchaser. The amount available for sale under the HSBC Accounts Receivable Facility fluctuates over time based on the total amount of eligible receivables generated during the normal course of business. A maximum of CAD $40.0 million or approximately $30.0 million in receivables may be sold and remain unpaid under the HSBC Accounts Receivable Facility at any time.
Accounts receivable sold under the JPM Accounts Receivable Facility were $120.4 million for the three months ended March 31, 2025. The accounts receivable sold that remained outstanding under the JPM Accounts Receivable Facility as of March 31, 2025 was $101.5 million. Accounts receivable sold under the HSBC Accounts Receivable Facility were $42.9 million for the three months ended March 31, 2025. The accounts receivable sold that remained outstanding under the HSBC Accounts Receivable Facility as of March 31, 2025 was $26.9 million.
During this period, cash receipts from the purchaser at the time of the sale were classified as operating activities in our condensed consolidated statement of cash flows. The difference between the carrying amount of the accounts receivables sold and the sum of the cash received is recorded as a loss on sale of receivables in other income (expense), net in our condensed consolidated statements of income. The loss on sale of accounts receivable was $1.1 million and $1.9 million for the three months ended March 31, 2025 and 2024, respectively, under the JPM Accounts Receivable Facility. The loss on sale of accounts receivable was $0.3 million for the three months ended March 31, 2025, under the HSBC Accounts Receivable Facility. During the three months ended March 31, 2024, no accounts receivable related to the HSBC Accounts Receivable Facility were sold.
NOTE 15—SUPPLY CHAIN FINANCE
We use a supply chain finance program in connection with the purchase of goods, which allows our suppliers to work directly with a third party to provide financing by purchasing their receivables earlier in the payment cycle. We maintain the same contractually agreed upon invoice terms prior to each supplier entering into the program. As of March 31, 2025, we had approximately $38.3 million outstanding under the program, which is included in on our condensed consolidated balance sheet.
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NOTE 16—CASH FLOW INFORMATION
Leased Asset Program
Our electrical submersible pumping leased asset program is reported in our Production & Automation Technologies segment. At the time of purchase, assets are recorded to inventory and are transferred to property, plant, and equipment when a customer contracts for an asset under our leased asset program. During the three months ended March 31, 2025 and 2024, we transferred $28.9 million and $29.5 million, respectively, of inventory into property, plant, and equipment as a result of assets entering our leased asset program.
Expenditures for assets that are placed into our leased asset program expected to be recovered through sale are reported in leased assets in the operating section of our condensed consolidated statements of cash flows. All other capitalizable expenditures for assets that are placed into our leased asset program are classified as capital expenditures in the investing section of our condensed consolidated statements of cash flows.
Argentina Blue Chip Swap
The Central Bank of Argentina maintained currency controls that limited our ability to access U.S. dollars in Argentina and remit cash from our Argentine operations. The execution of certain trades known as Blue Chip Swaps, effectively resulted in the use of a parallel U.S. dollar exchange rate to convert available Argentine pesos to U.S. dollars. This parallel rate, which cannot be used as the basis to remeasure our net monetary assets in U.S. dollars under GAAP, was 31 % higher than Argentina's official exchange when the swaps occurred. The Blue Chip Swap transactions resulted in $4.1 million pre-tax loss on investment during the three months ended March 31, 2024. These losses are reflected in other expense (income), net, within our condensed consolidated statements of income. We did no t enter into any Blue Chip Swaps during the first quarter of 2025.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This section provides our analysis of our financial performance, financial condition and significant trends that may affect our future performance. It should be read in conjunction with the condensed consolidated financial statements, and notes thereto, included elsewhere in this report. It contains forward-looking statements including, without limitation, statements relating to ChampionX’s plans, strategies, objectives, expectations and intentions that are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by the words “believe,” “anticipate,” “expect,” “may,” “intend,” “foresee,” “guidance,” “estimate,” “potential,” “outlook,” “plan,” “should,” “would,” “could,” “target,” “forecast” and similar expressions, including the negative thereof. We undertake no obligation to publicly update, revise or correct any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except to the extent required under the federal securities laws. Readers are cautioned that such forward-looking statements should be read in conjunction with the disclosures under the heading “CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS.”
EXECUTIVE OVERVIEW AND BUSINESS OUTLOOK
We are 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. Our expertise, innovative products, and digital technologies provide enhanced oil and gas production, transportation, and real-time emissions monitoring throughout the lifecycle of a well. Our business is organized into four reportable segments: Production Chemical Technologies, Production & Automation Technologies, Drilling Technologies, and Reservoir Chemical Technologies and we refer to the Production Chemical Technologies segment and Reservoir Chemical Technologies segment together as the Chemical Technologies business.
Business Environment
We monitor macro-economic conditions and industry-specific drivers and key risk factors affecting our business segments as we formulate our strategic plans and make decisions related to allocating capital and human resources. Our business segments provide a broad range of technologies and products to support oil and gas production, exploration and development, and the midstream sector. As a result, we are substantially dependent upon global oil production levels, as well as new investment activity levels in the oil and gas and midstream sectors. Demand for our products, technologies and services is impacted by overall global demand for oil and gas, ongoing depletion rates of existing oil and gas wells, and our customers’ willingness to invest in the exploration for and development of new oil and gas resources. Our customers determine their operating and capital budgets based on current and expected future crude oil and natural gas prices, U.S. and worldwide rig count, U.S. well completions, as well as expected industry cost levels, among other factors. Crude oil and natural gas prices are impacted by supply and demand, which are influenced by macroeconomic, geopolitical, and other events, and have historically been subject to substantial volatility and cyclicality. Rig count, footage drilled and completed, and exploration and production investment by oil and gas operators have often been used as leading indicators for the level of drilling and development activity and future production levels in the oil and gas sector.
Market Conditions and Outlook
Historically, oil prices have been cyclical and volatile, driven by fundamental supply and demand considerations as well as other factors including global and regional geopolitical developments. Oil prices decreased slightly from approximately $70 per barrel as of December 31, 2024 to $68 per barrel as of March 31, 2025 and have since then declined further. The voluntary production cuts of the Organization of the Petroleum Exporting Countries and other major international producers (collectively, “OPEC+”) extends through April 2025 and will be followed by announced production increases beginning May 2025. OPEC+ has stated that they do not expect the increased production to have a substantial effect on global oil supply. However, as a result, oil prices are likely to remain under pressure for the remainder of 2025. Longer term, we continue to expect oil prices to remain cyclical, driven by both supply and demand as well as geopolitical factors, including recently announced tariffs and other trade measures.
We continue to monitor the effects of the recent tariffs imposed by the U.S. administration during the second quarter of 2025, the reciprocal tariffs and retaliatory tariffs imposed by other countries, and the impact on our global supply chain. Tariffs increase our material input costs, and further trade restrictions, retaliatory trade measures or additional tariffs implemented could result in higher input costs for our products. We target to increase customer selling prices to offset cost increases and inflation. We also attempt to control such costs and volatility through commercial contract discipline, supply chain adjustments
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and productivity programs. Tariffs and other retaliatory trade measures imposed by the U.S. and other nations have not yet had a significant impact on our business or results of operations.
Inflation rates continued to moderate during the first quarter of 2025. Nonetheless, we continue to actively monitor market trends specifically related to the sourcing of raw materials and other cost components. Inflation trends are likely to be impacted by tariffs and other trade measures imposed by the U.S. and other nations. We will continue to work diligently to ensure selling prices offset the impact of any raw material, labor, and tariff and logistics-related inflation on our businesses. Our productivity and continuous improvement initiatives are focused on delivering expanding profit margins in all our businesses.
Merger Agreement
On April 2, 2024, ChampionX entered into the Merger Agreement with SLB, Holdco, and Merger Sub, pursuant to which, and subject to the terms and conditions therein, Merger Sub will be merged with and into ChampionX (the “Merger,” together with the other transactions contemplated by the Merger Agreement, the “Transactions”), with ChampionX surviving the Merger as an indirect wholly owned subsidiary of SLB.
Pursuant to the Merger Agreement, at the Effective Time and by virtue of the Merger, each share of ChampionX common stock issued and outstanding immediately prior to the Effective Time (other than any shares of ChampionX common stock held in the treasury of ChampionX or held by SLB, Holdco or any direct or indirect wholly owned subsidiary of SLB, in each case except for any such shares held on behalf of third parties) will be converted, without any action on the part of the holder thereof, into the right to receive 0.735 shares of (“SLB Common Stock”), which shares will be duly authorized and validly issued in accordance with applicable laws and, if applicable, cash in lieu of fractional shares.
The parties’ obligations to consummate the Merger are subject to satisfaction or waiver of customary closing conditions set forth in the Merger Agreement, including, among others: (a) adoption by ChampionX stockholders of the Merger Agreement; (b) the receipt of approval for listing of the shares of SLB Common Stock which will comprise Equity Consideration on the New York Stock Exchange, subject to official notice of issuance; (c) the absence of certain legal restraints that enjoin, prohibit, prevent or make illegal the consummation of the Transactions; (d) the expiration or termination of all waiting periods applicable to the Transactions under (the “HSR Act”), and any commitment to, or agreement with, any governmental entity to delay the consummation of, or not to consummate before a certain date, the Transactions and the receipt of all clearances, consents and approvals under certain specified regulatory laws; (e) the effectiveness of the registration statement on Form S-4 to be filed by SLB in connection with the issuance of the Equity Consideration, which will include a proxy statement of ChampionX (the “Form S-4”); (f) with respect to closing conditions for the benefit of SLB, (i) the absence of certain specified legal restraints that enjoin, prohibit, prevent or make illegal the consummation of the Transactions, (ii) the absence of investigations of the Transaction under specified regulatory laws, (iii) the expiration of all waiting periods applicable under specified regulatory filings following SLB’s determination to submit such filings (“Specified Regulatory Filings”), (iv) receipt of all clearances, consents and approvals under the Specified Regulatory Filings and (v) the absence of certain other regulatory laws prohibiting or making illegal the consummation of the Transactions or otherwise as set forth in the Merger Agreement and (g) certain other customary conditions relating to the parties’ representations and warranties in the Merger Agreement and the performance of their respective obligations. On May 15, 2024, the Form S-4 and proxy statement/prospectus that was filed with the Securities and Exchange Commission (the “SEC”) in connection with the Transactions was declared effective by the SEC. On June 18, 2024, ChampionX’s stockholders adopted the Merger Agreement at a special meeting of the stockholders. SLB and ChampionX are continuing to pursue clearances, consents and approvals under certain specified regulatory laws.
Additional information about the Merger is set forth in our Current Report on Form 8-K/A filed with the SEC on April 3, 2024 and the Definitive Proxy on Schedule 14A filed with the SEC on May 15, 2024.
CRITICAL ACCOUNTING ESTIMATES
Refer to our “Critical Accounting Estimates” included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of our critical accounting estimates.
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CONSOLIDATED RESULTS OF OPERATIONS
| Three Months Ended | |||||||||||||||||
| March 31, | December 31, | Variance | |||||||||||||||
| (in thousands) | 2025 | 2024 | $ | ||||||||||||||
| Revenue | $ | 864,464 | $ | 912,037 | $ | (47,573) | |||||||||||
| Cost of goods and services | 572,938 | 600,154 | (27,216) | ||||||||||||||
| Gross profit | 291,526 | 311,883 | (20,357) | ||||||||||||||
| Selling, general and administrative expense | 177,045 | 184,722 | (7,677) | ||||||||||||||
| Interest expense, net | 13,196 | 12,375 | 821 | ||||||||||||||
| Foreign currency transaction losses (gains), net | 1,504 | 1,697 | (193) | ||||||||||||||
| Other (income) expense, net | (4,631) | (5,026) | 395 | ||||||||||||||
| Income before income taxes | 104,412 | 118,115 | (13,703) | ||||||||||||||
| Provision for income taxes | 15,384 | 33,204 | (17,820) | ||||||||||||||
| Net income | 89,028 | 84,911 | 4,117 | ||||||||||||||
| Net income attributable to noncontrolling interest | 3,231 | 2,145 | 1,086 | ||||||||||||||
| Net income attributable to ChampionX | $ | 85,797 | $ | 82,766 | $ | 3,031 | |||||||||||
Revenue. Revenue decreased $47.6 million, or 5%, sequentially primarily due to a slowdown in market activity.
Gross profit. Gross profit decreased $20.4 million, or 7%, sequentially mainly due to decreased volumes.
Selling, general and administrative expense. Selling, general and administrative expense decreased $7.7 million, or 4%, sequentially, primarily due to a reduction in third party legal and professional fees incurred related to the Merger transaction with SLB.
Foreign currency transaction losses (gains), net. Foreign currency transaction losses, net was relatively flat, sequentially.
Other (income) expense, net. Other income, net was relatively flat, sequentially.
Provision for income taxes. Our provision for income taxes reflected effective tax rates (“ETR”) of 14.7% and 28.1% for the three months ended March 31, 2025 and December 31, 2024, respectively. The decrease to the ETR for the quarter ended March 31, 2025 was primarily due to discrete tax benefits related to stock compensation and changes in uncertain tax positions.
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SEGMENT RESULTS OF OPERATIONS
| Three Months Ended | |||||||||||||||||
| March 31, | December 31, | Variance | |||||||||||||||
| (in thousands) | 2025 | 2024 | $ | ||||||||||||||
| Segment revenue: | |||||||||||||||||
| Production Chemical Technologies | $ | 523,390 | $ | 569,662 | $ | (46,272) | |||||||||||
| Production & Automation Technologies | 264,377 | 269,568 | (5,191) | ||||||||||||||
| Drilling Technologies | 50,530 | 51,942 | (1,412) | ||||||||||||||
| Reservoir Chemical Technologies | 26,926 | 21,937 | 4,989 | ||||||||||||||
| Corporate and other | (759) | (1,072) | 313 | ||||||||||||||
| Total revenue | $ | 864,464 | $ | 912,037 | $ | (47,573) | |||||||||||
| Segment operating profit (loss): | |||||||||||||||||
| Production Chemical Technologies | $ | 82,172 | $ | 103,567 | $ | (21,395) | |||||||||||
| Production & Automation Technologies | 37,554 | 39,027 | (1,473) | ||||||||||||||
| Drilling Technologies | 8,174 | 10,703 | (2,529) | ||||||||||||||
| Reservoir Chemical Technologies | 5,529 | 2,294 | 3,235 | ||||||||||||||
| Total segment operating profit | 133,429 | 155,591 | (22,162) | ||||||||||||||
Corporate expense and other(1) | 15,821 | 25,101 | (9,280) | ||||||||||||||
| Interest expense, net | 13,196 | 12,375 | 821 | ||||||||||||||
| Income before income taxes | $ | 104,412 | $ | 118,115 | $ | (13,703) | |||||||||||
Production Chemical Technologies
Revenue. Production Chemical Technologies revenue decreased $46.3 million, or 8%, in the first quarter of 2025 compared to the prior quarter, mainly due to lower international sales volumes.
Operating profit. Production Chemical Technologies operating profit decreased $21.4 million, or 21%, in the first quarter of 2025 compared to the prior quarter mainly due to seasonally lower international sales volumes.
Production & Automation Technologies
Revenue. Production & Automation Technologies revenue decreased $5.2 million, or 2%, in the first quarter of 2025 compared to the prior quarter primarily due to seasonally lower international sales volumes.
Operating profit. Production & Automation Technologies operating profit is flat compared to the prior quarter.
Drilling Technologies
Revenue. Drilling Technologies revenue decreased $1.4 million, or 3%, in the first quarter of 2025 compared to the prior quarter primarily due to lower sales volumes in the inserts product line.
Operating profit. Drilling Technologies first quarter operating profit decreased $2.5 million or 24% in the first quarter of 2025 compared to the prior quarter primarily due to lower sales volume, as mentioned above, one-time bonuses and some increased production costs.
Reservoir Chemical Technologies
Revenue. Reservoir Chemical Technologies revenue increased $5.0 million, or 23%, in the first quarter of 2025 compared to the prior quarter primarily due to higher sales volumes in the U.S. and internationally.
Operating profit. Reservoir Chemical Technologies operating profit increased $3.2 million or 141% in the first quarter of 2025 compared to the prior quarter primarily due to higher sales volume, as mentioned above, and favorable product and regional mix.
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CAPITAL RESOURCES AND LIQUIDITY
Overview
Our primary source of cash is from operating activities. We have historically generated, and expect to continue to generate, positive cash flow from operations. Cash generated from operations is generally allocated to working capital requirements, investments to support profitable revenue growth and maintain our facilities and systems, acquisitions that create value through add-on capabilities that broaden our existing businesses and support our growth strategy, as well as share repurchases, dividend payments to stockholders, and debt repayments to reduce our leverage.
At March 31, 2025, we had cash and cash equivalents of $526.6 million compared to $507.7 million at December 31, 2024, primarily for working capital and operational purposes. At March 31, 2025, we had total liquidity of $1.2 billion, comprised of $526.6 million of cash and cash equivalents and $673.6 million of available capacity under the 2022 Revolving Credit Facility (as defined below).
The Company maintains a restated credit agreement (the “Restated Credit Agreement”) that provides for (i) a $625.0 million seven-year senior secured term loan B facility (the “2022 Term Loan Facility”) and (ii) a five-year senior secured revolving credit facility in an aggregate principal amount of $700.0 million, of which $100.0 million is available for the issuance of letters of credit (the “2022 Revolving Credit Facility” together with the 2022 Term Loan Facility, the “Senior Secured Credit Facility”). On September 29, 2023, we amended the Restated Credit Agreement to, among other things, reprice the Company’s $620.3 million of existing term loans under the 2022 Term Loan Facility, in connection with which new term loans in the same amount were issued. The new term loans bear interest at a per annum rate of (i) an adjusted SOFR Rate plus 2.75% per annum or (ii) a base rate plus 1.75%. The new term loans may be prepaid at any time without penalty, subject to the payment of customary breakage costs in the case of the SOFR rate loans. No other material terms of the Senior Secured Credit Facility were changed as part of the September 2023 amendment.
At March 31, 2025, we had a long-term debt balance of $590.7 million, net of the current portion of long-term debt of $6.2 million, consisting of the 2022 Term Loan Facility with a principal amount of $611.0 million and no amounts outstanding on the 2022 Revolving Credit Facility.
Outlook
We expect to generate cash from operations to support our business requirements and, if necessary, through the use of the 2022 Revolving Credit Facility. Volatility in credit, equity and commodity markets can create uncertainty for our businesses. However, the Company believes, based on our current financial condition and current expectations of future market conditions, that we will meet our short- and long-term needs with a combination of cash on hand, cash generated from operations, the 2022 Revolving Credit Facility and access to capital markets.
On January 31, 2024, our Board of Directors (“Board”) approved an increase of our regular quarterly cash dividend to $0.095 per share of the Company’s common stock. Our first quarter cash dividend of $0.095 per share was declared on February 19, 2025 and is payable on April 25, 2025, to shareholders of record on April 4, 2025. As a result, we recorded a dividend payable of $18.7 million on our condensed consolidated balance sheet as of March 31, 2025. Subsequent dividend declarations, if any, including the amounts and timing of future dividends, are subject to approval by the Board and will depend on future business conditions, financial conditions, results of operations and other factors.
On March 7, 2022, the Company announced that our Board approved a $250 million share repurchase program (“Share
Repurchase Program”) which was increased to $750 million by the Board on October 24, 2022. On January 31, 2024, our Board authorized a further increase in the aggregate value of shares that may be repurchased under the Share Repurchase Program to $1.5 billion. Under the Share Repurchase Program, shares of the Company’s common stock may be repurchased periodically, including in the open market or privately negotiated transactions. We expect to fund share repurchases from cash generated from operations. During the three months ended March 31, 2025, we did not repurchase any shares under the Share Repurchase Program. The actual timing, manner, number, and value of shares repurchased under the program will depend on a number 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 considerations.
Over the next year, we expect to fund our capital expenditures and reduce outstanding debt through earnings and working capital improvements. We project capital spending for 2025 to be approximately 4.0% of revenue inclusive of capital investments for our electric submersible pump leased assets.
Information related to guarantees is incorporated herein by reference from Note 7—Commitments and Contingencies to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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Cash Flows
| Three Months Ended March 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Cash from operating activities | $ | 66,802 | $ | 173,508 | |||||||
| Cash used in investing activities | (28,246) | (10,794) | |||||||||
| Cash used in financing activities | (20,149) | (64,093) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | 471 | (1,161) | |||||||||
| Net increase (decrease) in cash and cash equivalents and restricted cash | $ | 18,878 | $ | 97,460 | |||||||
Operating Activities
Cash provided by operating activities during the three months ended March 31, 2025 was $66.8 million as compared to $173.5 million for the three months ended March 31, 2024. The change was primarily driven by the decrease in net income of $24.1 million, and increased use of cash for working capital items. Changes in working capital items used cash of $83.9 million during the three months ended March 31, 2025 compared to cash generated of $26.6 million during the three months ended March 31, 2024. The change in working capital items primarily related to a decrease in accounts payable as compared to the prior year period and a $47.6 million tax payment that was deferred and paid in the first quarter of 2025.
Expenditures for assets that are placed into our leased asset program expected to be recovered through sale are reported in leased assets in the operating section of our condensed consolidated statements of cash flows. All other capitalizable expenditures for assets that are placed into our leased asset program are classified as capital expenditures in the investing section of our condensed consolidated statements of cash flows.
Investing Activities
Cash used in investing activities was $28.2 million for the three months ended March 31, 2025, and was primarily comprised of capital expenditures of $31.3 million, partially offset by $3.0 million from the sale of fixed assets.
Cash used in investing activities was $10.8 million for the three months ended March 31, 2024, and was primarily comprised of capital expenditures of $31.9 million and acquisitions net of cash acquired of $21.5 million, partially offset by $46.7 million of cash proceeds from the sale of fixed assets.
Financing Activities
Cash used in financing activities of $20.1 million for the three months ended March 31, 2025 was primarily the result of dividends paid of $18.1 million, payments related to taxes withheld on stock-based compensation of $12.5 million, payment of finance lease obligations of $3.8 million and net repayments totaling $1.6 million on long-term debt. This was partially offset by $17.2 million of proceeds expected to be remitted under the Accounts Receivable Facility (as defined below).
Cash used in financing activities of $64.1 million for the three months ended March 31, 2024 was primarily the result of repurchases of our common stock of $49.4 million, dividends paid of $16.2 million, net repayments totaling $1.6 million on long-term debt and payments related to taxes withheld on stock-based compensation of $11.8 million. This was partially offset by $17.1 million of proceeds expected to be remitted under the Accounts Receivable Facility.
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Revolving Credit Facility
A summary of the 2022 Revolving Credit Facility at March 31, 2025 was as follows:
(in millions) Description | Amount | Debt Outstanding | Letters of Credit | Unused Capacity | Maturity | ||||||||||||||||||||||||
| Five-year revolving credit facility | $ | 700.0 | $ | — | $ | 26.4 | $ | 673.6 | June 2027 | ||||||||||||||||||||
Additionally, we have letters of credit outside of the 2022 Revolving Credit Facility totaling approximately $1.3 million. As of March 31, 2025, we were in compliance with all restrictive covenants under the 2022 Revolving Credit Facility.
Accounts Receivable Facilities
On June 28, 2022, we entered into an uncommitted accounts receivable purchase agreement (the “JPM Accounts Receivable Facility”) with JPMorgan Chase Bank, N.A. as the purchaser. The amount available for sale under the JPM Accounts Receivable Facility fluctuates over time based on the total amount of eligible receivables generated during the normal course of business. A maximum of $160.0 million in receivables may be sold and remain unpaid under the JPM Accounts Receivable Facility at any time.
On March 28, 2024, we entered into an uncommitted accounts receivable purchase agreement (the “HSBC Accounts Receivable Facility” and, together with the JPM Accounts Receivable Facility, the “Accounts Receivable Facilities”) with HSBC Bank USA, National Association, as the purchaser. The amount available for sale under the HSBC Accounts Receivable Facility fluctuates over time based on the total amount of eligible receivables generated during the normal course of business. A maximum of CAD $40.0 million or approximately $30.0 million in receivables may be sold and remain unpaid under the HSBC Accounts Receivable Facility at any time.
Accounts receivable sold under the JPM Accounts Receivable were $120.4 million for the three months ended March 31, 2025. The accounts receivables sold that remained outstanding under the JPM Accounts Receivable Facility as of March 31, 2025 was $101.5 million. During this period, cash receipts from the purchaser at the time of the sale were classified as operating activities in our condensed consolidated statement of cash flows. The difference between the carrying amount of the accounts receivables sold and the sum of the cash received is recorded as a loss on sale of receivables in other income (expense), net in our condensed consolidated statements of income. The loss on sale of accounts receivable was $1.1 million and $1.9 million for the three months ended March 31, 2025 and 2024, respectively.
Accounts receivable sold under the HSBC Accounts Receivable Facility were $42.9 million for the three months ended March 31, 2025. The accounts receivables sold that remained outstanding under the HSBC Accounts Receivable Facility as of March 31, 2025 was $26.9 million. The loss on sale of accounts receivable was $0.3 million for the three months ended March 31, 2025 under the HSBC Accounts Receivable Facility. As of March 31, 2024, no accounts receivable related to the HSBC agreement were sold.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We may be exposed to certain market risks arising from the use of financial instruments in the ordinary course of business. For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report on Form 10-K for the year ended December 31, 2024. Our exposure to market risk has not materially changed since December 31, 2024.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, carried out an evaluation, pursuant to Rule 13a-15(b) of the Exchange Act, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2025.
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Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are involved in various pending or potential legal actions in the ordinary course of our business. Management is unable to predict the ultimate outcome of these actions because of the inherent uncertainty of litigation. However, management believes the most probable, ultimate resolution of these matters will not have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows. See Note 7—Commitments and Contingencies to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
There have not been material changes from the risk factors previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not repurchase any equity securities registered under Section 12 of the Exchange Act during the first quarter of 2025.
On March 7, 2022, the Company announced that our Board authorized the Company to repurchase up to $250 million of its common stock. On October 24, 2022, our Board increased the authorization under this program to $750 million. On January 31, 2024, our Board authorized an increase in the aggregate value of shares that may be repurchased under the Share Repurchase Program to $1.5 billion. This program has no time limit and does not obligate the Company to acquire any particular amount of shares of its common stock. As of March 31, 2025, the approximate dollar value of shares that may yet be purchased under the Share Repurchase Program is $996.7 million.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Insider Trading Arrangements and Policies
During the three months ended March 31, 2025, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) informed us of the adoption termination
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ITEM 6. EXHIBITS
| Incorporated by Reference | ||||||||||||||||||||
| Exhibit No. | Exhibit Description | Form | Exhibit No. | Filing Date | ||||||||||||||||
| 2.1 | 8-K/A | 2.1 | April 3, 2024 | |||||||||||||||||
| 2.2† | 8-K | 2.1 | February 25, 2025 | |||||||||||||||||
| 3.1 | 8-K | 3.1 | May 11, 2023 | |||||||||||||||||
| 3.2 | 8-K | 3.2 | May 11, 2023 | |||||||||||||||||
| 10.1†† | 8-K | 10.1 | February 21, 2024 | |||||||||||||||||
| 10.2*† | ||||||||||||||||||||
| 31.1* | ||||||||||||||||||||
| 31.2* | ||||||||||||||||||||
| 32.1** | ||||||||||||||||||||
| 32.2** | ||||||||||||||||||||
| 101.INS* | XBRL Instance Document | |||||||||||||||||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |||||||||||||||||||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||||||||||||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |||||||||||||||||||
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |||||||||||||||||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||||||||||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | |||||||||||||||||||
| * Filed herewith | ||||||||||||||||||||
| ** Furnished herewith | ||||||||||||||||||||
| † Schedules (or similar attachments) have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules (or similar attachments) upon request by the Securities and Exchange Commission. | ||||||||||||||||||||
| †† Denotes management contract or compensatory plan or arrangement | ||||||||||||||||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CHAMPIONX CORPORATION | ||||||||
| (Registrant) | ||||||||
| /s/ ANTOINE MARCOS | ||||||||
| Antoine Marcos | ||||||||
| Vice President, Corporate Controller and Chief Accounting Officer | ||||||||
| (Principal Accounting Officer and a Duly Authorized Officer) | ||||||||
| Date: | April 30, 2025 | |||||||
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