ChampionX Earnings: New Product Adoption Contributed to Improved Profitability

No-moat ChampionX CHX posted solid first-quarter results, with revenue increasing 10% year over year and firmwide adjusted EBITDA margin increasing 400 basis points over the same period. Sequentially, top-line growth dropped 4% due to standard seasonality in the firm’s non-North American markets, yet the firm’s adjusted EBITDA margin jumped 40 basis points owing to favorable pricing movements and internal productivity gains. We remain optimistic regarding ChampionX’s 2023 prospects and thus maintain our $33 fair value estimate following results.

The firm’s production and automation technologies, or PAT, segment was the top performer this quarter, posting sequential revenue growth of 3% as elevated activity throughout North America—a region representing about 85% of segment sales—maintained high sales volumes while an overall tight oilfield services market facilitated favorable pricing dynamics in the region. The prevailing operating environment also contributed to a 300-basis -point sequential increase in the segment’s adjusted EBITDA margin. A favorable product mix further strengthened profitability, as market adoption of ChampionX’s more premium products and services steadily expands. Management indicated more than half of PAT installations in the first quarter involved technology introduced within the last two years. At just under 24%, PAT was ChampionX’s most profitable segment this quarter, followed closely by the firm’s drilling technologies business.