Company Overview - Archrock Inc. (AROC) is expected to report a year-over-year increase in earnings, with a projected EPS of $0.37, reflecting a +48% change, and revenues anticipated at $360.26 million, up 33.2% from the previous year [3]. Earnings Expectations - The consensus EPS estimate has been revised 2.44% lower over the last 30 days, indicating a reassessment by analysts [4]. - The Most Accurate Estimate for Archrock is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +10.81% [12]. Earnings Surprise History - In the last reported quarter, Archrock exceeded expectations by delivering an EPS of $0.42 against an expected $0.39, resulting in a surprise of +7.69% [13]. - Over the last four quarters, Archrock has beaten consensus EPS estimates three times [14]. Market Sentiment - Despite the positive Earnings ESP, Archrock currently holds a Zacks Rank of 4 (Sell), complicating predictions of an earnings beat [12][20]. - The stock's movement may be influenced by how actual results compare to estimates, with potential for upward movement if results exceed expectations [2].

Company Performance - Archrock Inc. (AROC) closed at $23.44, reflecting a -2.46% change from the previous day, underperforming compared to the S&P 500's 0.61% gain [1] - Prior to the latest trading session, AROC shares had decreased by 3.1%, lagging behind the Oils-Energy sector's gain of 5.17% and the S&P 500's gain of 3.85% [1] Earnings Projections - The upcoming earnings disclosure for Archrock is projected to show earnings per share (EPS) of $0.37, which is a 48% increase from the same quarter last year [2] - Revenue is estimated to be $360.26 million, indicating a 33.17% growth compared to the corresponding quarter of the prior year [2] - Full-year Zacks Consensus Estimates forecast earnings of $1.55 per share and revenue of $1.47 billion, representing year-over-year changes of +47.62% and +27.02%, respectively [3] Analyst Estimates and Valuation - Recent adjustments to analyst estimates for Archrock reflect near-term business trends, with upward revisions indicating analysts' positivity towards the company's operations [4] - The Zacks Rank system, which evaluates estimate changes, currently ranks Archrock at 4 (Sell), following a 4.83% fall in the Zacks Consensus EPS estimate over the past month [6] - Archrock is currently traded at a Forward P/E ratio of 15.55, which is a premium compared to the industry average Forward P/E of 14.94 [7] - The company has a PEG ratio of 1.3, while the Oil and Gas - Field Services industry holds an average PEG ratio of 3.71 [7] Industry Context - The Oil and Gas - Field Services industry, part of the Oils-Energy sector, has a Zacks Industry Rank of 218, placing it in the bottom 12% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Company Overview - Archrock is the largest outsourced compression provider in the U S [10] - The company has a market capitalization of $2 25 billion and an enterprise value of $4 1 billion [10] - Archrock's dividend is $0 165 per quarter, resulting in a yield of 4% [10] - 85% of Archrock's fleet is focused on large horsepower units, primarily serving midstream gathering systems [12] Financial Performance and Outlook - Archrock anticipates an adjusted EBITDA between $500 million and $530 million for 2024 [14] - The company's dividend coverage is strong at 2 8x [12] - Archrock is targeting a leverage ratio of 3 0-3 5x in 2024 [12] Market and Strategy - Approximately 2/3 of Archrock's operating horsepower is concentrated in the Permian and Eagle Ford basins [24] - The company's utilization rate reached 96% exceeding prior cycle peak [27] - Archrock is increasing return of capital to shareholders YoY and long-term, with dividend growth complimented by strong expected dividend coverage of well above 2 0x [42]

Company Performance - Archrock Inc. (AROC) closed at $24.36, reflecting a -2.33% change from the previous day's closing price, underperforming the S&P 500 which gained 0.96% [1] - Over the past month, shares of Archrock have appreciated by 0.65%, underperforming the Oils-Energy sector's gain of 6.67% but outperforming the S&P 500's gain of 0.5% [2] - Analysts expect Archrock to report earnings of $0.38 per share, indicating a year-over-year growth of 52%, with a revenue estimate of $360.26 million, representing a 33.17% increase from the same quarter last year [3] - For the entire fiscal year, earnings are projected at $1.62 per share and revenue at $1.47 billion, reflecting changes of +54.29% and +27.02% respectively from the prior year [4] Analyst Estimates - Recent changes to analyst estimates for Archrock indicate a positive outlook on the company's business operations and profit generation capabilities [5] - The Zacks Rank system, which evaluates estimate changes, currently ranks Archrock at 4 (Sell), with the consensus EPS estimate remaining unchanged over the last 30 days [7] Valuation Metrics - Archrock is trading at a Forward P/E ratio of 15.36, which aligns with the industry average [8] - The company has a PEG ratio of 1.28, compared to the Oil and Gas - Field Services industry's average PEG ratio of 3.65 [9] Industry Context - The Oil and Gas - Field Services industry, part of the Oils-Energy sector, holds a Zacks Industry Rank of 141, placing it in the bottom 43% of over 250 industries [10]

Core Insights - Archrock, Inc. (NYSE: AROC) has experienced a significant share price increase of 30.97% year-over-year [1] - The company's Q1 2025 revenue rose by 29.32% year-over-year, reaching $347.2 million compared to $268.5 million in Q1 2024 [1] Company Performance - Archrock's revenue growth indicates strong operational performance and demand for its natural gas compression services [1] - The increase in revenue from $268.5 million to $347.2 million reflects a robust market position and potential for continued growth in the energy infrastructure sector [1]

```markdown [Part I. Financial Information](index=8&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements (unaudited)](index=8&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Archrock reported significant Q1 2025 growth, with total revenue up **29.3%** to **$347.2 million** and net income up **74.8%** to **$70.9 million**, driven by contract operations and the TOPS Acquisition - The financial statements are unaudited and should be read in conjunction with the 2024 Annual Report on Form 10-K They reflect all normal recurring adjustments necessary for a fair statement of the interim period results[29](index=29&type=chunk) - Subsequent to the quarter's end, on May 1, 2025, the company completed the acquisition of Natural Gas Compression System, Inc. (NGCS) for total consideration of **$352.3 million**, consisting of **$299.3 million** in cash and approximately **2.25 million shares** of common stock[124](index=124&type=chunk) [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets increased to **$3.96 billion** from **$3.82 billion** at year-end 2024, primarily due to property, plant, and equipment growth, while total liabilities rose to **$2.61 billion** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$3,964,732** | **$3,824,205** | | Total current assets | $271,973 | $233,122 | | Property, plant and equipment, net | $3,429,357 | $3,323,830 | | **Total Liabilities** | **$2,614,749** | **$2,500,674** | | Total current liabilities | $184,627 | $188,604 | | Long-term debt | $2,297,767 | $2,198,376 | | **Total Equity** | **$1,349,983** | **$1,323,531** | [Condensed Consolidated Statements of Operations](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2025, total revenue increased **29.3%** year-over-year to **$347.2 million**, driven by a **34.7%** rise in contract operations revenue, leading to net income growth of **74.8%** to **$70.9 million** Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | **Total Revenue** | **$347,163** | **$268,488** | | Contract operations | $300,397 | $223,051 | | Aftermarket services | $46,766 | $45,437 | | **Income before income taxes** | **$91,986** | **$53,585** | | **Net Income** | **$70,850** | **$40,532** | | **Diluted EPS** | **$0.40** | **$0.26** | | Diluted weighted-average shares | 174,371 | 154,501 | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to **$115.6 million** in Q1 2025 from **$137.7 million** in Q1 2024, while investing activities used **$164.0 million** and financing activities provided **$48.8 million** Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $115,628 | $137,702 | | Net cash used in investing activities | ($164,031) | ($85,923) | | Net cash provided by (used in) financing activities | $48,819 | ($51,962) | | **Net increase (decrease) in cash** | **$416** | **($183)** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes strong Q1 2025 performance to robust industry fundamentals and the TOPS Acquisition, with contract operations revenue growing **35%** YoY and adjusted gross margin expanding **45%** - Total operating horsepower at period end increased to **4,283,000 HP** in Q1 2025 from **3,593,000 HP** in Q1 2024, with horsepower utilization remaining high at **96%**[128](index=128&type=chunk) - The company plans to spend approximately **$475 million to $540 million** on capital expenditures in 2025, with **$330 million to $370 million** for growth and **$110 million to $120 million** for maintenance[159](index=159&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Consolidated revenue for Q1 2025 increased by **$78.7 million** YoY, primarily driven by a **$77.3 million** increase in contract operations, leading to net income rising to **$70.9 million** Contract Operations Performance (in thousands) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $300,397 | $223,051 | 35% | | Adjusted Gross Margin | $210,598 | $145,308 | 45% | | Adjusted Gross Margin % | 70% | 65% | 5% | Aftermarket Services Performance (in thousands) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Revenue | $46,766 | $45,437 | 3% | | Adjusted Gross Margin | $11,509 | $10,437 | 10% | | Adjusted Gross Margin % | 25% | 23% | 2% | - Transaction-related costs of **$3.9 million** were incurred in Q1 2025, comprising **$2.9 million** for the NGCS Acquisition and **$1.1 million** for the TOPS Acquisition[148](index=148&type=chunk) - The increase in interest expense was due to a higher average outstanding debt balance, primarily from the 2032 Notes offering[147](index=147&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Primary liquidity sources are cash from operations and the **$1.1 billion** Credit Facility, with Q1 2025 operating cash flow at **$115.6 million** and **$164.0 million** used in investing activities Capital Expenditures (in millions) | Type | Q1 2025 (in millions) | Q1 2024 (in millions) | | :--- | :--- | :--- | | Growth Capital | $139.4 | $77.3 | | Maintenance Capital | $22.8 | $19.5 | - As of March 31, 2025, the company was in compliance with all covenants under its Credit Facility, and all undrawn capacity was available for borrowing[162](index=162&type=chunk) - On April 24, 2025, the Board of Directors declared a quarterly dividend of **$0.19 per share**[160](index=160&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate changes on the variable-rate Credit Facility, with **$507.3 million** outstanding as of March 31, 2025, where a **1%** rate change impacts annual interest expense by **$5.1 million** - As of March 31, 2025, the company had **$507.3 million** of variable interest rate debt outstanding under its Credit Facility[169](index=169&type=chunk) - A **1%** increase or decrease in the effective interest rate would result in an annual change in interest expense of **$5.1 million**[170](index=170&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2025, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[174](index=174&type=chunk) - There were no changes in internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[175](index=175&type=chunk) [Part II. Other Information](index=49&type=section&id=Part%20II.%20Other%20Information) [Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions in the ordinary course of business, but management believes they will not have a material adverse effect on financial position or results - In the ordinary course of business, the company is involved in various pending or threatened legal actions, but does not expect any to have a material adverse effect[177](index=177&type=chunk) [Risk Factors](index=49&type=page&id=Item%201A.%20Risk%20Factors) New risks relate to the NGCS Acquisition, including potential integration difficulties, failure to achieve expected benefits, and assumption of unknown liabilities, which could adversely affect business results - A new risk factor has been added concerning the NGCS Acquisition, stating the company may not achieve expected benefits and could encounter significant difficulties in integration[179](index=179&type=chunk) - Challenges of integration include managing the combined workforce, aligning business practices, and potential for increased costs, liabilities, or diversion of management's attention[181](index=181&type=chunk)[184](index=184&type=chunk) - Acquisitions, including the NGCS deal, involve risks such as assuming unknown liabilities and could potentially reduce the company's ability to make distributions to common stockholders[183](index=183&type=chunk)[185](index=185&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2025, the company repurchased **513,528 shares**, including **9,161** under its program at **$24.39 per share** and **504,367** withheld for employee tax obligations Share Repurchases and Withholding - Q1 2025 | Description | Number of Shares | Average Price Paid per Share | | :--- | :--- | :--- | | Shares repurchased under program | 9,161 | $24.39 | | Shares withheld for tax obligations | 504,367 | $29.69 | | **Total** | **513,528** | **$29.59** | [Other Information](index=53&type=section&id=Item%205.%20Other%20Information) During Q1 2025, none of the company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[191](index=191&type=chunk) ```

Archrock, Inc. (NYSE:AROC) Q1 2025 - Earnings Conference Call May 6, 2025 10:30 AM ET Company Participants Megan Repine – VP, IR Bradley Childers - President and CEO Doug Aron - CFO of Archrock Conference Call Participants Jim Rollyson - Raymond James Gab Moreen - Mizuho Securities Doug Irwin - Citi Selman Akyol - Stifel Steve Ferazani - Sidoti Nate Pendleton - Texas Capital Operator Speaker 0: Good morning. Welcome to Archrock First Quarter 2025 Conference Call. Your host for today's call is Megan Repine, ...

Financial Data and Key Metrics Changes - Archrock reported a net income of $71 million for Q1 2025, with adjusted net income of $74 million or $0.42 per share, reflecting a significant increase compared to the previous year [25][26] - Adjusted EBITDA for Q1 2025 was $198 million, showing strong underlying business performance [26] - The leverage ratio at the end of the quarter was 3.2 times, down from 3.3 times in the previous quarter, indicating improved financial strength [29] Business Line Data and Key Metrics Changes - Contract operations revenue reached $300 million in Q1 2025, up 5% from Q4 2024 and 35% year-over-year, driven by organic horsepower growth and higher pricing [27] - The aftermarket services segment reported revenue of $47 million, up from $40 million in the previous quarter, with an adjusted gross margin percentage of 25% [28] - Monthly revenue per horsepower increased to a record $23.54 during Q1 2025, with a consistent adjusted gross margin percentage of 70% for two consecutive quarters [19][20] Market Data and Key Metrics Changes - The compression market fundamentals remained strong, with utilization rates at 96% and a substantial contracted backlog for 2025 [11][18] - The company is closely monitoring market developments, particularly regarding OPEC's production actions and their potential impact on natural gas demand [12][13] Company Strategy and Development Direction - Archrock is focused on value-creating industry consolidation, with the integration of Total Operations and Production Services (TOPS) progressing as planned and the recent acquisition of NGCS expected to enhance scale and customer relationships [10][30] - The company plans to maintain a leverage ratio between 3 to 3.5 times while continuing to invest in growth capital expenditures between $330 million and $370 million [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage through macroeconomic uncertainties, citing a stable production-oriented business model and strong customer demand for natural gas [12][13] - The company anticipates continued growth in global natural gas demand, supporting infrastructure investments in the U.S. for decades to come [16][17] Other Important Information - Archrock increased its quarterly dividend per share by 15% year-over-year, with a robust dividend coverage of 3.9 times [9][29] - The company has repurchased approximately 977,000 shares at an average price of $23.22 per share, with a remaining capacity of $65 million for additional buybacks [9][29] Q&A Session Summary Question: Impact of macro headwinds on gas and oil growth - Management noted that while some producers are reducing CapEx modestly, the committed backlog for 2025 remains unaffected, ensuring continued growth [36][37] Question: Equipment pricing and tariffs - Management indicated that pricing for equipment is largely locked in for 2025 and that the impact of tariffs on costs is estimated to be in the low single digits [39][40] Question: Decisive actions in response to market conditions - Management emphasized the importance of staying close to customers and highlighted the operational flexibility to adjust CapEx and OpEx as needed [44][45] Question: Pricing assumptions and guidance for NGCS - Management confirmed that there are no changes in pricing strategy and that the acquisition of NGCS can be absorbed without increasing CapEx guidance [48][50] Question: Compression intensity in different basins - Management explained that compression intensity is highest in the Permian, but they have the ability to adjust operations based on where gas production is occurring [57][58] Question: Demand for electric compression - Management stated that about 30% of the new build CapEx budget is still dedicated to electric compression, but availability of power remains a limiting factor [70][71] Question: Positioning for potential slowdowns - Management highlighted the differentiated positioning of the company compared to past cycles, with a more balanced customer base and a younger, higher horsepower fleet [75][76] Question: Contract flexibility and outsourcing trends - Management confirmed that contracts are binding but they work with customers to accommodate changes within limits, and noted an increase in outsourcing among customers [79][81] Question: Pricing of older versus new compression assets - Management indicated that there is no significant pricing differential between new and used equipment within the first few contract applications, although older equipment may see some differences [84][85]

Financial Data and Key Metrics Changes - Archrock reported a net income of $71 million for Q1 2025, with adjusted net income of $74 million or $0.42 per share, reflecting a significant increase compared to the previous year [23][27] - Adjusted EBITDA for Q1 2025 was $198 million, showing strong underlying business performance [23] - The leverage ratio at the end of the quarter was 3.2 times, down from 3.3 times in the previous quarter, indicating improved financial stability [26] Business Line Data and Key Metrics Changes - Contract operations revenue reached $300 million in Q1 2025, up 5% sequentially and 35% year-over-year, driven by organic horsepower growth and higher pricing [24][25] - The aftermarket services segment reported revenues of $47 million, up from $40 million in the previous quarter, with an adjusted gross margin percentage of 25% [26] - Monthly revenue per horsepower increased to a record $23.54 during Q1 2025, with a consistent adjusted gross margin percentage of 70% [17][18] Market Data and Key Metrics Changes - The compression market fundamentals remained strong, with utilization rates at 96% and a substantial contracted backlog for 2025 [10][16] - Archrock is closely monitoring market developments, particularly regarding OPEC's production actions and their potential impact on WTI prices [11][12] Company Strategy and Development Direction - Archrock is focused on value-creating industry consolidation, with the integration of Total Operations and Production Services (TOPS) progressing as planned and the recent acquisition of NGCS expected to enhance scale and customer relationships [8][9] - The company aims to maintain a leverage ratio between 3 to 3.5 times while continuing to invest in growth capital expenditures between $330 million and $370 million for 2025 [19][20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's ability to manage business in various market conditions, citing a stable production-oriented business model and a disciplined capital allocation strategy [12][13] - The long-term outlook remains positive, with expectations for continued growth in global natural gas demand supporting infrastructure investments in the U.S. [14][15] Other Important Information - The quarterly dividend per share was increased by 15% year-over-year, with a robust dividend coverage of 3.9 times [7][27] - Archrock has repurchased approximately 977,000 shares at an average price of $23.22 per share, with a remaining capacity of $65 million for additional buybacks [7][27] Q&A Session Summary Question: Impact of macro headwinds on gas outlook - Management noted that while some producers are adjusting CapEx modestly, the committed backlog for 2025 remains unaffected, indicating stability in deployment plans [33][34] Question: Equipment pricing and tariffs - Management indicated that pricing for orders is locked in, and the estimated impact of tariffs on equipment costs is in the low single-digit range [36][37] Question: Decisive actions in response to market conditions - Management emphasized operational flexibility, with the ability to adjust both OpEx and CapEx quickly in response to market changes [41][42] Question: Pricing assumptions and guidance - Management confirmed no changes in overall pricing strategy, with pricing increases moderating but still reflecting a tight compression market [45][46] Question: NGCS acquisition details - The acquisition is expected to contribute positively to earnings without requiring additional material investment in equipment [50][51] Question: Compression intensity in different basins - Management highlighted that the Permian has the highest compression intensity, but growth in other basins is being observed without a shift away from the Permian [53][54] Question: Demand for electric compression - Approximately 30% of the new build CapEx budget is allocated to electric compression, with demand remaining stable [65][66] Question: Positioning for potential slowdowns - Management noted that the current customer mix and high utilization levels provide a different level of stability compared to previous cycles [68][70]

Core Insights - Archrock Inc. reported revenue of $347.16 million for Q1 2025, a year-over-year increase of 29.3% and a surprise of +1.55% over the Zacks Consensus Estimate of $341.88 million [1] - The company achieved an EPS of $0.42, compared to $0.26 a year ago, with an EPS surprise of +7.69% against the consensus estimate of $0.39 [1] Revenue Breakdown - Aftermarket services revenue was $46.77 million, slightly below the two-analyst average estimate of $49.76 million, reflecting a year-over-year change of +2.9% [4] - Contract operations revenue reached $300.40 million, exceeding the two-analyst average estimate of $292.43 million, with a year-over-year change of +34.7% [4] Gross Margin Analysis - Gross margin for aftermarket services was reported at $11.51 million, slightly above the estimated $11.45 million [4] - Gross margin for contract operations was $210.60 million, surpassing the estimated $204.19 million [4] Stock Performance - Archrock Inc. shares have returned +12.7% over the past month, outperforming the Zacks S&P 500 composite's +0.4% change [3] - The stock currently holds a Zacks Rank 1 (Strong Buy), indicating potential for outperformance in the near term [3]