Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number 001-41732 Kodiak Gas Services, Inc. (Exact name of registrant as specified in its charter) Dela ...

Kodiak Gas Services, Inc. (NYSE:KGS) Q4 2024 Earnings Conference Call March 6, 2025 11:00 AM ET Company Participants Graham Sones - Vice President, Investor Relations Mickey McKee - President & Chief Executive Officer John Griggs - Chief Financial Officer Conference Call Participants Jim Rollyson - Raymond James Derrick Whitfield - Texas Capital John Mackay - Goldman Sachs Doug Irwin - Citi Sebastian Erskine - Redburn Atlantic Neal Dingmann - Truist Securities Theresa Chen - Barclays Robert Mosca - Mizuho B ...

Company Performance - Kodiak Gas Services (KGS) reported quarterly earnings of $0.27 per share, exceeding the Zacks Consensus Estimate of $0.26 per share, and up from $0.19 per share a year ago [1] - The quarterly earnings surprise was 3.85%, and the company had a significant surprise of 57.69% in the previous quarter, where actual earnings were $0.41 per share against an expectation of $0.26 [2] - Revenues for the quarter were $309.52 million, which missed the Zacks Consensus Estimate by 4.78%, compared to $225.98 million in the same quarter last year [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.39, with expected revenues of $332.78 million, and for the current fiscal year, the EPS estimate is $2.12 on revenues of $1.39 billion [8] - The estimate revisions trend for Kodiak Gas is currently favorable, leading to a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [7] Industry Context - Kodiak Gas operates within the Zacks Oil and Gas - Mechanical and Equipment industry, which is currently ranked in the top 17% of over 250 Zacks industries [9] - The industry’s performance can significantly influence the stock's performance, with research indicating that the top 50% of Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1 [9]

Financial Performance - Net income attributable to common shareholders for Q4 2024 was $19.1 million, compared to a net loss of $6.9 million in Q4 2023[2] - Net income for the year ended December 31, 2024, increased to $50,334,000, up 150.0% from $20,066,000 in 2023[36] - Total revenues for the year ended December 31, 2024, reached $1,034,173,000, a 40.7% increase compared to $735,605,000 in 2023[40] - Total revenues for the three months ended December 31, 2024, were $309,519,000, an increase from $225,980,000 for the same period in 2023, representing a growth of 37%[31] - Net income attributable to common shareholders for the year ended December 31, 2024, was $49,895,000, compared to $20,066,000 for 2023, indicating a growth of 148%[31] - Basic net earnings per share for the three months ended December 31, 2024, was $0.21, compared to a loss of $0.07 for the previous quarter[31] Adjusted Metrics - Adjusted EBITDA for 2024 was $609.6 million, a 39.1% increase from $438.1 million in 2023[5] - Adjusted EBITDA for the year ended December 31, 2024, was $609,550,000, representing a 39.0% increase from $438,148,000 in 2023[37] - Adjusted gross margin percentage for the year ended December 31, 2024, was 65.7%, compared to 65.1% in 2023[40] - Adjusted gross margin percentage for the Contract Services segment increased to 66.7% in Q4 2024, up from 65.1% in Q4 2023[5] Revenue Segments - Contract Services segment revenues reached $1.0 billion in 2024, a 40.6% increase from $735.6 million in 2023[9] - Contract Services revenue was $280,211,000 for the three months ended December 31, 2024, compared to $189,616,000 for the same period in 2023, reflecting a 48% increase[31] - Contract Services adjusted gross margin was $679.2 million in 2024, a 41.9% increase from $478.5 million in 2023[9] Cash Flow and Expenditures - Net cash provided by operating activities for the year ended December 31, 2024, was $327,987,000, an increase of 23.2% from $266,326,000 in 2023[38] - Free cash flow for the year ended December 31, 2024, reached $122.319 million, compared to $65.111 million for the year ended December 31, 2023, reflecting a growth of 87.6%[47] - Growth capital expenditures for the year ended December 31, 2024, totaled $285.992 million, compared to $184.487 million in 2023, representing a 55% increase[47] - Maintenance capital expenditures for the year ended December 31, 2024, were $66.200 million, compared to $36.990 million in 2023, reflecting an increase of 78.9%[44] Debt and Leverage - Total debt outstanding as of December 31, 2024, was $2.6 billion, with a credit agreement leverage ratio of 3.9x[11] - Long-term debt as of December 31, 2024, was $2,581,909,000, up from $1,791,460,000 in 2023, reflecting an increase of 44%[33] - The company reported a significant increase in borrowings on debt instruments, totaling $2,642,370,000 for the year ended December 31, 2024, compared to $1,020,102,000 in 2023[36] Shareholder Returns - The company returned a total of $179 million to shareholders in 2024 through dividends and share repurchases[7] - Dividends paid to stockholders increased to $133,886,000 for the year ended December 31, 2024, up from $29,793,000 in 2023[36] Operational Insights - Fleet utilization increased to 97% in Q4 2024, reflecting strong demand for compression services[5] - The company anticipates continued integration of CSI Compressco LP into operations, which is expected to enhance revenue growth and operational efficiencies[27] - The company plans to focus on customer retention and market position to drive future growth and financial results[27] Risks and Challenges - The company has identified potential risks including a reduction in demand for natural gas and oil, which could impact future performance[28] Other Financial Metrics - The company reported a total operating expense of $240,473,000 for the three months ended December 31, 2024, compared to $165,243,000 for the same period in 2023, which is a 45% increase[31] - Cash flows from investing activities showed a net cash outflow of $292,468,000 for the year ended December 31, 2024, compared to an outflow of $218,421,000 in 2023[36] - The company recorded a loss on extinguishment of debt of $6.757 million for the year ended December 31, 2023, with no such losses reported for 2024[47] - Proceeds from the sale of assets for the year ended December 31, 2024, amounted to $35.030 million, significantly higher than $1.449 million in 2023[44] - The change in operating assets and liabilities for the three months ended December 31, 2024, was $1.732 million, a decrease from $19.058 million in the previous year[44] - The company incurred transaction expenses of $32.552 million for the year ended December 31, 2024, compared to $6.001 million in 2023, indicating a substantial increase due to acquisition-related costs[48]

Group 1 - Kodiak Gas Services (KGS) is part of the Oils-Energy sector, which includes 247 individual stocks and has a Zacks Sector Rank of 5 [2] - KGS currently holds a Zacks Rank of 2 (Buy), with a 4.3% increase in the consensus estimate for its full-year earnings over the past three months, indicating improved analyst sentiment [3] - KGS has returned 5.3% year-to-date, outperforming the average gain of 1.7% for the Oils-Energy group [4] Group 2 - Kodiak Gas Services belongs to the Oil and Gas - Mechanical and Equipment industry, which consists of 10 companies and is ranked 30 in the Zacks Industry Rank, with an average gain of 8.3% this year, indicating slight underperformance by KGS [6] - Archrock Inc. is another stock in the Oils-Energy sector that has outperformed, returning 7% year-to-date, and holds a Zacks Rank of 1 (Strong Buy) with a 3.3% increase in its current year EPS estimate [4][5] - The Oil and Gas - Field Services industry, where Archrock operates, has 22 stocks and is ranked 161, with a year-to-date increase of 1.6% [7]

Group 1 - Kodiak Gas Services (KGS) is currently outperforming its Oils-Energy peers with a year-to-date return of 10.9%, compared to the sector average of 3.2% [4] - The Zacks Rank for Kodiak Gas Services is 1 (Strong Buy), indicating a strong potential for outperformance in the market [3] - The Zacks Consensus Estimate for KGS' full-year earnings has increased by 4.3% over the past quarter, reflecting improving analyst sentiment [4] Group 2 - Kodiak Gas Services is part of the Oil and Gas - Mechanical and Equipment industry, which is ranked 89 in the Zacks Industry Rank, with an average gain of 8.5% this year [6] - Another stock in the Oils-Energy sector, Plains All American Pipeline (PAA), has a year-to-date return of 13.6% and also holds a Zacks Rank of 1 (Strong Buy) [5] - The Oil and Gas - Production Pipeline - MLB industry, to which Plains All American Pipeline belongs, is currently ranked 14 and has gained 1.7% this year [7]

Financial Data and Key Metrics Changes - The company reported revenues of $325 million for Q3 2024, representing a 5% sequential increase [32] - Adjusted EBITDA for the quarter was $168 million, an increase of 9% compared to the previous quarter, with an adjusted EBITDA margin of 52% [37] - The company generated $53 million of free cash flow in the quarter [13] - A net loss of $6.2 million was reported, which included several non-cash items totaling nearly $41 million [33] Business Line Data and Key Metrics Changes - In the Contract Services segment, revenues were $284 million with an adjusted gross margin of 66%, matching the high end of the annual guidance [38] - The Other Services segment generated revenues of $40 million with an adjusted gross margin of 19%, showing strong revenue growth from the station construction business [39] Market Data and Key Metrics Changes - The company added approximately 50,000 horsepower of new units to its fleet, all focused on the Permian Basin [15] - Fleet utilization increased sequentially to over 96%, with core large horsepower assets remaining near full utilization in excess of 99% [13][14] Company Strategy and Development Direction - The company is focused on high-grading its compression fleet and simplifying operations by divesting lower-margin small horsepower units [8] - The strategy emphasizes large horsepower compression in liquids-rich basins, with plans to continue high-grading the fleet over time [8] - The company aims to achieve leverage of 3.5 times or less by the end of next year while maintaining a strong and growing dividend [12][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for large horsepower compression and the continued tightness of the market [15][30] - The company increased the low end of its full-year revenue guidance and adjusted EBITDA guidance for 2024, reflecting improved margins and cash flows [26][43] - An early outlook for 2025 anticipates adjusted EBITDA in the range of $675 million to $725 million [27][44] Other Important Information - The company completed its first share repurchase in connection with a follow-on offering, demonstrating confidence in its business outlook [12] - The company is actively working to integrate operations and improve efficiency following the acquisition of CSI [31][65] Q&A Session Summary Question: Can you provide more color on gross margin assumptions for 2025? - Management indicated they would not discuss 2025 margins on this call but expressed pride in achieving a 66% adjusted gross margin in the Contract Services segment [48][50] Question: How do you balance buybacks versus increased liquidity in shares? - Management is open to considering increased buybacks depending on market conditions while maintaining a focus on achieving leverage targets [51] Question: What is the status of the divestiture program? - Management is continuously evaluating the fleet and has plans for small divestitures of lower horsepower units while focusing on the Permian Basin [54] Question: What are the expectations for CapEx next year? - Management expects to add around 160,000 horsepower to the fleet in 2024, with a controlled CapEx spend in 2025 [57] Question: How are new unit costs affecting pricing? - Management noted that the cost of compression equipment is consistently increasing, with new unit prices approximately 20% to 25% higher than the fleet average [72] Question: What is the outlook for working capital movements? - Management is focused on reducing elevated inventory levels as they integrate systems and expects improvements in working capital management moving forward [89][90]

Revenue and Growth - Total revenues for the three months ended September 30, 2024, were $324.647 million, a 40.5% increase from $230.983 million in the same period of 2023[16] - Contract services revenue increased to $284.313 million for the three months ended September 30, 2024, compared to $186.673 million in the prior year, representing a 52.3% growth[16] - For the nine months ended September 30, 2024, the company's revenue increased to $946.9 million, up 3.8% from $912.3 million in the same period in 2023[36] - Total revenues rose by $93.7 million (40.6%) to $324.6 million for the three months ended September 30, 2024, compared to $231.0 million in the prior year[162] Expenses and Losses - Operating expenses for the three months ended September 30, 2024, totaled $258.568 million, up from $170.025 million, reflecting a 52.0% increase[16] - Interest expense for the three months ended September 30, 2024, was $(53.991) million, compared to $(39.710) million in the same period of 2023, indicating a 36.0% increase[16] - Total other expenses, net for the three months ended September 30, 2024, were $(74.474) million, compared to $(31.288) million in the same period of 2023, reflecting a significant increase in expenses[16] - Net loss attributable to common shareholders for the three months ended September 30, 2024, was $(5.648) million, compared to net income of $21.766 million in the same period of 2023[16] - Basic earnings per share for the three months ended September 30, 2024, was $(0.07), down from $0.28 in the prior year[16] - Selling, general and administrative expenses surged by $15.9 million (80.8%) to $35.5 million for the three months ended September 30, 2024, compared to $19.6 million in the prior year[170] Assets and Equity - As of June 30, 2023, total stockholders' equity was $192,875,000, reflecting a net income of $17,517,000 for the quarter[18] - By September 30, 2023, total stockholders' equity increased to $1,171,792,000, with a net income of $21,766,000 for the quarter[18] - As of September 30, 2024, the Company's total assets increased to $4.5 billion compared to $3.2 billion as of September 30, 2023[138] - The weighted average shares of common stock outstanding for the three months ended September 30, 2024, were 84,292,083, compared to 76,731,868 in the same period of 2023, an increase of 9.9%[16] Cash Flow and Debt - Cash flows from operating activities for the nine months ended September 30, 2024, were $209.502 million, slightly up from $203.699 million in the prior year[21] - Borrowings on debt instruments amounted to $2.297 billion, significantly higher than $756.418 million in the prior year, indicating a substantial increase in financing activities[21] - Total long-term debt stood at $2.6 billion as of September 30, 2024, with $1.9 billion due in 2028 and $750 million due in 2029[198] - The Company issued $750 million in 2029 Senior Notes with a 7.25% interest rate on February 2, 2024, which are not subject to mandatory redemption or sinking fund requirements[76] Acquisitions and Impairments - The acquisition of CSI Compressco LP was completed on April 1, 2024, for a total consideration of $342.3 million, which included the issuance of equity shares[24] - The company reported a long-lived asset impairment of $9.921 million for the three months ended September 30, 2024[16] - Goodwill acquired from the CSI Acquisition was recorded at $107.979 million, reflecting strategic benefits expected from the merger[31] - Long-lived asset impairment recorded was $9.9 million for the nine months ended September 30, 2024, with no impairment recorded in the same period of 2023[184] Capital Expenditures - Capital expenditures for the three months ended September 30, 2024, were $86.5 million, an increase from $51.5 million in the same period of 2023[138] - Growth capital expenditures were $214.9 million for the nine months ended September 30, 2024, up from $124.0 million in the same period of 2023[196] - Maintenance capital expenditures increased to $51.3 million for the nine months ended September 30, 2024, compared to $28.1 million in the prior year[196] Tax and Compliance - The Company recorded an income tax benefit of $2.2 million for the three months ended September 30, 2024, compared to an expense of $7.9 million in the same period of 2023[126] - The effective tax rate for the three months ended September 30, 2024, was approximately 26.0%, slightly down from 26.6% in the same period of 2023[126] - The Company was in compliance with all covenants under the ABL Facility and 2029 Senior Notes as of September 30, 2024[75][78] Stock and Dividends - The Company declared a cash dividend of $0.41 per share for the quarterly period ended September 30, 2024, payable on November 8, 2024[116] - The Company repurchased 1,000,000 shares of common stock at $25.00 per share for a total of $25 million on September 11, 2024[99] - A total of 6,375,000 shares of common stock have been reserved for issuance under the Omnibus Incentive Plan, with 2,394,649 shares granted as of September 30, 2024[105]

Company Performance - Kodiak Gas Services (KGS) reported quarterly earnings of $0.41 per share, exceeding the Zacks Consensus Estimate of $0.26 per share, and up from $0.28 per share a year ago [1] - The quarterly report reflects an earnings surprise of 57.69%, following a previous quarter where earnings were $0.23 per share against an expectation of $0.52, resulting in a surprise of -55.77% [2] - Revenues for the quarter ended September 2024 were $324.65 million, surpassing the Zacks Consensus Estimate by 1.14%, and up from $230.98 million year-over-year [3] Stock Performance - Kodiak Gas shares have increased approximately 61.8% since the beginning of the year, compared to a 21.2% gain in the S&P 500 [4] - The current consensus EPS estimate for the upcoming quarter is $0.28 on revenues of $326.42 million, and for the current fiscal year, it is $0.99 on revenues of $1.17 billion [8] Industry Outlook - The Oil and Gas - Mechanical and Equipment industry, to which Kodiak Gas belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, indicating potential challenges ahead [9] - The company has a favorable estimate revisions trend, currently holding a Zacks Rank 1 (Strong Buy), suggesting expected outperformance in the near future [7]

Financial Performance - Contract Services segment revenue reached $284.3 million, a 52% increase from $186.7 million in Q3 2023[5] - Record quarterly Adjusted EBITDA of $168.4 million, compared to $110.1 million in Q3 2023[4] - Free Cash Flow for the quarter was $52.5 million, significantly up from $7.4 million in Q3 2023[2] - Total revenues for the three months ended September 30, 2024, were $324.647 million, an increase of 4.8% from $309.653 million in the previous quarter and a significant increase from $230.983 million in the same quarter last year[19] - Adjusted EBITDA for the three months ended September 30, 2024, was $168,374 thousand, with an adjusted EBITDA percentage of 51.9%, compared to $110,067 thousand and 47.7% for the same period in 2023[24] - Adjusted EBITDA for the three months ended September 30, 2024, was $168.4 million, an increase of 53.0% compared to $110.1 million in the same period last year[26] - Discretionary Cash Flow for the three months ended September 30, 2024, was $103.0 million, up 70.5% from $63.0 million in the same period last year[31] - The company reported a net loss of $6.2 million for the three months ended September 30, 2024, compared to a net income of $21.8 million in the same period last year[31] Debt and Equity - Total debt outstanding as of September 30, 2024, was $2.6 billion, with a credit agreement leverage ratio of 3.9x[6] - Long-term debt increased to $2,595,398 thousand as of September 30, 2024, up from $1,791,460 thousand as of December 31, 2023, indicating a rise of 45.0%[21] - Total stockholders' equity increased to $1,396,392 thousand as of September 30, 2024, from $1,142,653 thousand as of December 31, 2023, reflecting a growth of 22.2%[21] Operational Metrics - Fleet utilization improved to 96.4%, a sequential increase of 2.1%[2] - Contract Services Adjusted Gross Margin Percentage was 66.0%, up from 64.9% in Q3 2023[7] - The gross margin percentage for contract services was 40.2% for the three months ended September 30, 2024, compared to 38.9% in the previous quarter[28] - Adjusted Gross Margin for contract services was $187.7 million for the three months ended September 30, 2024, reflecting a 54.9% increase from $121.2 million in the same period last year[28] Capital Expenditures - Maintenance capital expenditures for the quarter were $21.6 million, while growth capital expenditures totaled $65.1 million[7] - Total capital expenditures for growth were $65.1 million for the three months ended September 30, 2024, compared to $90.4 million in the previous quarter[31] Future Outlook - Full-year 2024 Adjusted EBITDA guidance raised to a range of $600 million to $610 million, reflecting a $10 million increase at the low end[2] - Early outlook for 2025 Adjusted EBITDA is projected between $675 million and $725 million[3] - The company anticipates future revenue growth and earnings, particularly due to the CSI Acquisition, although specific projections were not detailed in the extracted content[15] Risks and Challenges - The company highlighted potential risks including demand reduction for natural gas and oil, competitive pressures, and economic conditions that could impact future performance[16] Cash Flow and Assets - Cash and cash equivalents increased to $7,434 thousand as of September 30, 2024, from $5,562 thousand at the end of 2023, marking a rise of 33.6%[23] - Accounts receivable, net rose significantly to $280,436 thousand as of September 30, 2024, compared to $113,192 thousand as of December 31, 2023, an increase of 147.1%[21] - The company reported cash flows from operating activities of $121 thousand for the nine months ended September 30, 2024, compared to a net cash used in investing activities of $(239,319) thousand[23] Other Financial Metrics - Operating expenses totaled $258.568 million for the three months ended September 30, 2024, compared to $255.486 million in the previous quarter and $170.025 million in the same quarter last year[19] - Basic net earnings per share for the three months ended September 30, 2024, were $(0.07), compared to $0.07 in the previous quarter and $0.28 in the same quarter last year[19] - The company experienced a loss on extinguishment of debt, which was not specified in the current quarter but was $6.757 million in the same quarter last year[19] - The company reported a loss on extinguishment of debt of $4,359 thousand for the nine months ended September 30, 2023[23] - Severance expenses related to the CSI Acquisition were $2.2 million for the three months ended September 30, 2024, compared to $9.0 million in the previous quarter[31] - The change in operating assets and liabilities contributed $84.5 million for the three months ended September 30, 2024, compared to a negative contribution of $32.4 million in the previous quarter[33]