Financial Data and Key Metrics Changes - Kodiak set new records in total revenue, adjusted EBITDA, discretionary cash flow, and achieved an all-time low leverage of 3.7 times in Q1 2025 [15][20] - Total revenues for Q1 were $330 million, up approximately 7% sequentially, with adjusted EBITDA just under $178 million, up 5% from Q4 [22][24] - The adjusted gross margin percentage for contract services increased to approximately 68%, reflecting higher average prices and operational efficiencies [22][24] Business Line Data and Key Metrics Changes - In the Contract Services segment, monthly dollar revenue generating horsepower increased from $21.97 to $22.48, indicating strength in the large horsepower market [22] - The Other Services segment saw revenues increase to $40.7 million, a 39% sequential increase, supported by project completions [24] - Fleet utilization reached 97%, with large horsepower equipment utilization at 99%, reflecting strong demand [10][11] Market Data and Key Metrics Changes - The Permian Basin continues to play a significant role in U.S. gas supply growth, with natural gas production projected to increase despite flat oil production [8][9] - LNG exports are expected to double by the end of the decade, driving demand for natural gas and compression services [12][13] - The company noted that the U.S. oil and gas industry is largely domestic, which helps mitigate tariff impacts on operations [17][18] Company Strategy and Development Direction - Kodiak's strategy focuses on large horsepower contract compression services, which are resilient to commodity price fluctuations [6][21] - The company is committed to increasing its fleet and enhancing operational efficiencies while maintaining a strong balance sheet [20][29] - Kodiak is exploring potential bolt-on acquisitions as opportunities arise, particularly in light of changing asset valuations [70][71] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth outlook for U.S. natural gas, driven by LNG exports and power generation demand [11][14] - The company remains optimistic about its ability to navigate economic uncertainties and achieve its growth targets [20][32] - Management highlighted the importance of recontracting efforts and the stability provided by fixed revenue, multiyear contracts [10][16] Other Important Information - Kodiak announced a quarterly dividend of $0.45 per share, a 10% increase over the prior quarter, and repurchased approximately $10 million in stock [15][20] - The company is focused on training and developing its workforce to address labor market challenges in the Permian Basin [57] Q&A Session Summary Question: What are the remaining unknowns for 2025 that might influence results? - Management indicated that recontracting strategies and expense management are key factors influencing guidance for 2025 [36][37] Question: Is there a difference in outsourcing demand between midstream and upstream customers? - Management noted that both upstream and midstream customers may prefer to outsource compression to reduce capital expenditures [38][39] Question: What macro backdrop is assumed in the growth outlook? - Management expressed confidence in continued gas production growth in the Permian Basin, even in a flat oil price environment [44][45] Question: How is the company balancing share buybacks with leverage targets? - Management confirmed a focus on achieving a leverage target of 3.5 times while also considering share repurchases [46][48] Question: What actions are being taken to improve margins? - Management highlighted the implementation of AI and machine learning for maintenance efficiencies and repositioning the fleet to enhance profitability [51][54] Question: How is the company addressing labor market challenges? - Management emphasized the importance of training and development to alleviate labor issues in the Permian Basin [57] Question: How do current lead times for new equipment look? - Management reported that lead times for new equipment remain around a year, indicating a tight supply chain [86][87] Question: How much of the revenue increase was due to organic pricing versus mix shift? - Management indicated that a combination of churn and new horsepower growth contributed to the revenue increase, with pricing uplift from recontracting efforts [88][90]

Group 1 - Kodiak Gas Services reported quarterly earnings of $0.42 per share, exceeding the Zacks Consensus Estimate of $0.39 per share, and showing an increase from $0.39 per share a year ago, representing an earnings surprise of 7.69% [1] - The company achieved revenues of $329.64 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 1.06%, and up from $215.49 million year-over-year [2] - Kodiak Gas has surpassed consensus EPS estimates three times over the last four quarters and topped consensus revenue estimates two times in the same period [2] Group 2 - The stock has underperformed, losing about 16.2% since the beginning of the year, compared to the S&P 500's decline of 4.7% [3] - The current consensus EPS estimate for the upcoming quarter is $0.40 on revenues of $336.17 million, and for the current fiscal year, it is $2.09 on revenues of $1.35 billion [7] - The Zacks Industry Rank for Oil and Gas - Mechanical and Equipment is currently in the bottom 15% of over 250 Zacks industries, indicating potential challenges for stock performance [8] Group 3 - The estimate revisions trend for Kodiak Gas is currently favorable, leading to a Zacks Rank 2 (Buy) for the stock, suggesting it is expected to outperform the market in the near future [6] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - The outlook for the industry can significantly impact stock performance, with the top 50% of Zacks-ranked industries outperforming the bottom 50% by more than 2 to 1 [8]

NEWS RELEASE Investor Contact Graham Sones, VP – Investor Relations ir@kodiakgas.com (936) 755-3529 Kodiak Gas Services Announces First Quarter 2025 Financial Results, Provides Updated Full Year 2025 Guidance THE WOODLANDS, Texas — May 7, 2025 — Kodiak Gas Services, Inc. (NYSE: KGS) ("Kodiak" or the "Company"), a leading provider of critical energy infrastructure and contract compression services, today reported financial and operating results for the quarter ended March 31, 2025 and updated full-year 2025 ...

Core Viewpoint - Kodiak Gas Services (KGS) has seen an 8.8% increase in share price over the past four weeks, closing at $34.16, with a mean price target of $43.73 indicating a potential upside of 28% [1] Price Targets - The average of 11 short-term price targets ranges from a low of $35 to a high of $51, with a standard deviation of $4.78, suggesting a potential increase of 2.5% to 49.3% from the current price [2] - A low standard deviation indicates a greater agreement among analysts regarding price movement, which can be a useful metric for investors [2][9] Analyst Sentiment - Analysts are optimistic about KGS's earnings prospects, as indicated by upward revisions in earnings estimates, which have shown a strong correlation with stock price movements [4][11] - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 0.3%, with one estimate moving higher and no negative revisions [12] Zacks Rank - KGS holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors, indicating strong potential for upside [13]

Core Viewpoint - Wall Street anticipates flat earnings for Kodiak Gas Services (KGS) in the upcoming quarter, with earnings expected to be $0.39 per share, unchanged from the previous year, while revenues are projected to increase by 51.4% to $326.16 million [1][3]. Earnings Expectations - The stock price may rise if the actual earnings exceed expectations in the earnings report scheduled for May 7, while a miss could lead to a decline [2]. - The consensus EPS estimate has remained unchanged over the last 30 days, indicating a stable outlook from analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model suggests that the Most Accurate Estimate for Kodiak Gas is lower than the consensus estimate, resulting in an Earnings ESP of -14.29%, indicating a bearish sentiment among analysts [10]. - The current Zacks Rank for Kodiak Gas is 3, which complicates the prediction of an earnings beat [11]. Historical Performance - In the last reported quarter, Kodiak Gas had an earnings surprise of +3.85%, reporting $0.27 per share against an expectation of $0.26 [12]. - Over the past four quarters, the company has beaten consensus EPS estimates three times [13]. Conclusion - Kodiak Gas does not appear to be a strong candidate for an earnings beat based on current estimates and rankings, but investors should consider other factors before making investment decisions [16].

Part I [Business](index=11&type=section&id=Item%201.%20Business) Kodiak Gas Services provides large horsepower contract compression infrastructure in the U.S., expanding its fleet and service offerings through the 2024 CSI Compressco acquisition - On April 1, 2024, the company completed the **CSI Compressco acquisition**, integrating operations and re-evaluating segments into Contract Services and Other Services[28](index=28&type=chunk)[29](index=29&type=chunk) - The company is a market leader in the Permian Basin, focusing on **large horsepower compression units** which comprise approximately **78% of its 4.4 million total fleet horsepower**[30](index=30&type=chunk)[32](index=32&type=chunk) Fleet Overview as of December 31, 2024 | | Fleet Horsepower | Percent of Total Horsepower | Number of Units | Percent of Units | | :--- | :--- | :--- | :--- | :--- | | Large horsepower >1,000 horsepower | 3,428,062 | 78% | 2,100 | 41% | | Medium & small horsepower <1,000 horsepower | 974,685 | 22% | 2,969 | 59% | | Total | 4,402,747 | 100% | 5,069 | 100% | - Approximately **82% of compression assets** are deployed in the Permian Basin and Eagle Ford Shale, regions with expected significant production volumes through at least 2050[42](index=42&type=chunk) [Operations and Contract Structure](index=12&type=section&id=Item%201.%20BusinessOperations) Kodiak provides large horsepower Contract Services under fixed-revenue contracts, typically one to seven years, with customers paying a fixed monthly fee and annual inflation adjustments - Contracts typically have a primary term of **one to seven years**, with large horsepower units contracted for three or more years, continuing month-to-month thereafter[51](index=51&type=chunk) - As of December 31, 2024, approximately **11.3% of revenue-generating horsepower** was on a month-to-month contract term[51](index=51&type=chunk) - Customers pay a **fixed monthly fee**, similar to 'take-or-pay' contracts, often including an annual inflation adjustment, and are responsible for fuel gas and ad valorem taxes[54](index=54&type=chunk) [Governmental Regulation and Climate Change](index=16&type=section&id=Item%201.%20BusinessGovernmental%20Regulation) Kodiak's operations are subject to extensive environmental and safety regulations, with increasing scrutiny on climate change and GHG emissions, potentially imposing significant compliance costs - The company is subject to stringent environmental (CAA, CWA) and health and safety (OSHA) regulations, with customers typically responsible for site-specific air permits[62](index=62&type=chunk)[64](index=64&type=chunk) - The Inflation Reduction Act introduces a methane 'waste emissions charge' starting at **$900 per ton in 2024**, increasing to **$1,500 in 2026**[67](index=67&type=chunk) - The SEC's proposed climate-related disclosure rule, if enacted, could result in increased legal, accounting, and compliance costs[70](index=70&type=chunk) [Recent Developments](index=21&type=section&id=Item%201.%20BusinessRecent%20Developments) In 2024, Kodiak completed the CSI Compressco acquisition, initiated share repurchases, divested non-core assets, and paid a cash dividend in early 2025 - Completed the **acquisition of CSI Compressco** on April 1, 2024[90](index=90&type=chunk) - In November 2024, the Board approved a **$50 million share repurchase program**, with **$15.0 million** repurchased by year-end, in addition to a separate **$25.0 million repurchase** in September[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) - Divested assets in Canada and Argentina in the second half of 2024, recognizing losses of approximately **$7.0 million** and **$13.6 million**, respectively[96](index=96&type=chunk)[97](index=97&type=chunk) - On February 21, 2025, paid a cash dividend of **$0.41 per share**, totaling approximately **$36.0 million**[98](index=98&type=chunk) [Risk Factors](index=23&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant business, regulatory, and financial risks, including dependence on natural gas and oil demand, customer concentration, evolving environmental policies, and substantial indebtedness [Business and Industry Risks](index=23&type=section&id=Item%201A.%20Risk%20FactorsBusiness%20and%20Industry%20Risks) Kodiak's business risks include dependence on the cyclical natural gas and oil industry, high customer and geographic concentration, intense competition, and potential sales tax liabilities - The business is dependent on the cyclical demand for natural gas and oil, which is affected by commodity prices[102](index=102&type=chunk) - The loss of key customers could materially impact financial results, as the **top four customers accounted for 32% of total revenues in 2024**[103](index=103&type=chunk)[44](index=44&type=chunk) - Operations are geographically concentrated in the Permian Basin and Eagle Ford Shale, increasing vulnerability to regional risks[108](index=108&type=chunk) - The company has accrued a contingent liability of **$70.1 million** as of December 31, 2024, related to a Texas sales tax audit[112](index=112&type=chunk) [Regulatory Risks](index=27&type=section&id=Item%201A.%20Risk%20FactorsRegulatory%20Risks) Regulatory risks include evolving environmental, health, and safety regulations, particularly climate change legislation like the Inflation Reduction Act's methane charge, and changes in U.S. trade policy - Evolving regulations under the Clean Air Act (CAA), particularly those targeting methane emissions from the oil and gas sector, could increase compliance costs[126](index=126&type=chunk)[127](index=127&type=chunk) - The Inflation Reduction Act imposes a methane 'waste emissions charge' starting at **$900/ton in 2024** and rising to **$1,500/ton in 2026**, potentially increasing operating costs[128](index=128&type=chunk) - A societal and regulatory shift away from fossil fuels poses a long-term risk to service demand and could impact capital market access[129](index=129&type=chunk)[131](index=131&type=chunk) - Changes in U.S. trade policy, including new tariffs enacted in February 2025, could significantly impact financial results[142](index=142&type=chunk) [Indebtedness Risks](index=36&type=section&id=Item%201A.%20Risk%20FactorsIndebtedness%20Risks) Kodiak's substantial indebtedness of approximately $2.6 billion as of December 31, 2024, imposes restrictive covenants, limits financial flexibility, and exposes the company to interest rate risk - As of December 31, 2024, total long-term debt was approximately **$2.6 billion**, including **$750 million in senior notes**[172](index=172&type=chunk) - The ABL Credit Agreement and Indenture contain restrictive covenants limiting operational and financial flexibility, including restrictions on dividends, additional debt, and investments[179](index=179&type=chunk)[180](index=180&type=chunk) - Borrowings under the ABL Credit Agreement are at variable interest rates, exposing the company to interest rate increase risk[184](index=184&type=chunk) [Cybersecurity](index=42&type=section&id=Item%201C.%20Cybersecurity) Kodiak maintains a cyber risk management program based on NIST and ISO standards, overseen by the Audit & Risk Committee and Board, with no material incidents to date - The company's cyber risk management program is based on recognized frameworks like **NIST CSF and ISO 27001**, and is assessed annually by a third party[209](index=209&type=chunk)[210](index=210&type=chunk) - Cybersecurity is managed by a team led by the CIO, augmented by an outsourced CISO and a Cyber Security Operations Center[211](index=211&type=chunk)[212](index=212&type=chunk) - The Audit & Risk Committee and the Board of Directors oversee the cybersecurity program, reviewing risks and mitigation strategies periodically[215](index=215&type=chunk) - The company believes no prior or current cybersecurity incidents are reasonably likely to have a material adverse effect[214](index=214&type=chunk) [Properties](index=44&type=section&id=Item%202.%20Properties) As of December 31, 2024, Kodiak owns five service facilities in North Dakota and Texas, and leases its corporate headquarters and other facilities across multiple states - The company owns **five service facilities** located in Texas and North Dakota[216](index=216&type=chunk) - The corporate headquarters in The Woodlands, Texas, is leased, along with numerous other service facilities in key operating states[216](index=216&type=chunk) [Legal Proceedings](index=44&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, which management does not expect to have a material adverse effect on its financial position - Management believes the resolution of ordinary course legal proceedings is not expected to have a material adverse effect on the company's financial condition[217](index=217&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=45&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Kodiak's common stock trades on the NYSE, with the company paying quarterly dividends and initiating a $50 million share repurchase program in late 2024 - The company's common stock trades on the New York Stock Exchange under the ticker **'KGS'**[221](index=221&type=chunk) - A quarterly dividend of **$0.41 per share** was declared on February 3, 2025, and paid on February 21, 2025[223](index=223&type=chunk) Share Repurchases for Three Months Ended Dec 31, 2024 | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) | | :--- | :--- | :--- | :--- | :--- | | October 1-31, 2024 | — | — | — | — | | November 1-30, 2024 | 434,783 | $34.50 | 434,783 | $35,000 | | December 1-31, 2024 | — | — | — | — | | Total | 434,783 | $34.50 | 434,783 | $35,000 | - On November 14, 2024, the Board approved a share repurchase program for up to **$50.0 million** of common stock, expiring December 31, 2025[229](index=229&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=46&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2024, Kodiak's financial performance was significantly impacted by the CSI Compressco acquisition, driving total revenue growth to **$1.16 billion** and net income to **$50.3 million**, alongside increased capital expenditures and debt issuance [2024 Operational Highlights](index=50&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations2024%20Operational%20Highlights) In 2024, operational capacity significantly expanded due to the CSI Compressco acquisition, increasing fleet horsepower by **35.0% to 4.4 million**, while fleet utilization remained high at **96.5%** Operational Data Comparison (as of Dec 31) | | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Fleet horsepower | 4,402,747 | 3,261,661 | 35.0 % | | Revenue-generating horsepower | 4,250,499 | 3,258,951 | 30.4 % | | Fleet utilization | 96.5 % | 99.9 % | (3.4)% | [Financial Results of Operations](index=51&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20OperationsFinancial%20Results%20of%20Operations) For 2024, total revenues increased **36.3% to $1.16 billion**, primarily driven by the CSI Acquisition, leading to a **148.7% rise in net income** to **$49.9 million**, despite a **50.1% increase in operating expenses** Selected Financial Data (in thousands) | | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | **Total revenues** | **$1,159,311** | **$850,381** | **36.3 %** | | Contract Services Revenue | $1,034,173 | $735,605 | 40.6 % | | Other Services Revenue | $125,138 | $114,776 | 9.0 % | | **Income from operations** | **$249,450** | **$244,110** | **2.2 %** | | Interest expense | ($197,144) | ($222,514) | (11.4)% | | **Net income attributable to common shareholders** | **$49,895** | **$20,066** | **148.7 %** | - The increase in Contract Services revenue was primarily due to incremental revenues from the **CSI Acquisition**, accounting for approximately **22% of 2024 consolidated revenue**, and growth in revenue-generating horsepower[257](index=257&type=chunk) - Selling, general and administrative (SG&A) expenses increased **106.9% to $151.7 million**, mainly due to **$29.0 million in CSI Acquisition transaction costs** and increased labor and stock compensation expenses[263](index=263&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20OperationsLiquidity%20and%20Capital%20Resources) Kodiak's liquidity is primarily from operations and its ABL Facility, with 2024 seeing increased net cash from operations to **$328.0 million**, significant capital expenditures of **$352.2 million**, and the issuance of **$750 million in senior notes** Cash Flow Summary (in thousands) | | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $327,987 | $266,326 | | Net cash used in investing activities | ($292,468) | ($218,421) | | Net cash used in financing activities | ($36,331) | ($62,774) | - Total capital expenditures for 2024 were **$352.2 million**, a significant increase from **$221.5 million in 2023**, driven by new unit acquisitions and CSI fleet upgrades[273](index=273&type=chunk) - On February 2, 2024, the company issued **$750 million of 7.250% senior notes due 2029**[293](index=293&type=chunk) - As of December 31, 2024, the company had total long-term debt of **$2.6 billion** and **$322.5 million available** under its ABL Facility[172](index=172&type=chunk)[276](index=276&type=chunk) [Non-GAAP Financial Measures](index=59&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20OperationsNon-GAAP%20Financial%20Measures) The company uses non-GAAP measures like Adjusted EBITDA, which increased to **$609.6 million** in 2024, and Free Cash Flow, which grew to **$122.3 million**, reflecting improved operational cash generation Adjusted EBITDA Reconciliation (in thousands) | | 2024 | 2023 | | :--- | :--- | :--- | | Net income | $50,334 | $20,066 | | Interest expense | 197,144 | 222,514 | | Income tax expense | 25,574 | 15,070 | | Depreciation and amortization | 260,272 | 182,869 | | Transaction expenses | 32,552 | 6,001 | | Other adjustments | 43,274 | (18,290) | | **Adjusted EBITDA** | **$609,550** | **$438,148** | Free Cash Flow Reconciliation (in thousands) | | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $327,987 | $266,326 | | Maintenance capital expenditures | (66,200) | (36,990) | | Growth capital expenditures | (285,992) | (184,487) | | Proceeds from sale of assets | 35,030 | 1,449 | | Other adjustments | 11,494 | 8,813 | | **Free cash flow** | **$122,319** | **$65,111** | [Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks include interest rate risk from its variable-rate ABL Facility, counterparty risk, and significant customer concentration risk, with the top four customers accounting for **32% of 2024 revenue** - A **1.0% increase** in average interest rates on the ABL Facility would have increased 2024 interest expense by an estimated **$16.7 million**, excluding swap effects[341](index=341&type=chunk) - The **four largest customers accounted for approximately 32% of total revenues in 2024**, with one customer representing **13.4%**[344](index=344&type=chunk) [Controls and Procedures](index=72&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of December 31, 2024, management concluded disclosure controls were effective, excluding the CSI Compressco acquisition, which represents approximately **22% of consolidated assets and revenues** - Management concluded that disclosure controls and procedures were effective as of December 31, 2024[350](index=350&type=chunk) - Management's assessment of internal control over financial reporting excluded the CSI Compressco acquisition, representing about **22% of consolidated assets and revenues** for the year[352](index=352&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=74&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the forthcoming definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[359](index=359&type=chunk) [Executive Compensation](index=74&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the forthcoming definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[360](index=360&type=chunk) [Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters](index=74&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owner%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details equity compensation plans, with **1,945,134 securities** outstanding and **5,703,962 available** for future issuance as of December 31, 2024 Equity Compensation Plan Information as of December 31, 2024 | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants, and rights | Weighted-average exercise price of outstanding options, warrants, and rights | Number of securities remaining available for future issuance under equity compensation plans | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 1,945,134 | $ — | 5,703,962 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 1,945,134 | $ — | 5,703,962 | [Certain Relationships and Related Transactions, and Director Independence](index=74&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the forthcoming definitive proxy statement - Information is incorporated by reference from the forthcoming definitive proxy statement[362](index=362&type=chunk) [Principal Accounting Fees and Services](index=74&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The company's independent registered public accounting firm is BDO USA, P.C., with further information incorporated by reference from the forthcoming definitive proxy statement - The company's independent auditor is **BDO USA, P.C.**, with further information incorporated by reference from the forthcoming definitive proxy statement[363](index=363&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=75&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section includes the audited consolidated financial statements for 2024, 2023, and 2022, along with the independent auditor's report and a list of all filed exhibits - This section includes the audited consolidated financial statements and related notes for the fiscal years ended December 31, **2024, 2023, and 2022**[347](index=347&type=chunk)[378](index=378&type=chunk) - The independent auditor, **BDO USA, P.C.**, issued an unqualified opinion on the consolidated financial statements[379](index=379&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $4,435,123 | $3,244,106 | | Total Liabilities | $3,061,516 | $2,101,453 | | Total Stockholders' Equity | $1,373,607 | $1,142,653 | Consolidated Statement of Operations Highlights (in thousands) | | 2024 | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Total Revenues | $1,159,311 | $850,381 | $707,913 | | Income from Operations | $249,450 | $244,110 | $222,091 | | Net Income | $50,334 | $20,066 | $106,265 |

Kodiak Gas Services (KGS) Q4 2024 Earnings Call March 06, 2025 10:46 PM ET Company Participants Graham Sones - VP - Investor RelationsMickey McKee - President & CEOJohn Griggs - Executive VP & CFODerrick Whitfield - Managing DirectorDoug Irwin - Vice PresidentNeal Dingmann - Managing Director - Energy ResearchRobert Mosca - Equity Research AssociateBrian Dirubbio - Managing Director Conference Call Participants Jim Rollyson - Director & Equity Research AnalystJohn Mackay - AnalystSebastian Erskine - Analyst ...

Financial Data and Key Metrics Changes - Total revenue for 2024 reached approximately $1.2 billion, a 36% increase from 2023 [19][35] - Adjusted EBITDA grew by 39% to approximately $610 million [19][35] - Free cash flow generated in 2024 was $122 million, with leverage ending the year at 3.9 times [20][42] Business Line Data and Key Metrics Changes - The contract services segment saw an adjusted gross margin percentage increase to approximately 67% in Q4, reflecting successful pricing strategies and divestitures [36] - Average horsepower per unit increased from 734 in Q1 post-CSI acquisition to 926 at year-end [37] - Revenues from the other services segment were just over $29 million in Q4, with a 15% adjusted gross margin [39] Market Data and Key Metrics Changes - Front Month natural gas prices increased from the mid-$2 range to the $4 range due to seasonal demand and new LNG export terminals [22] - Permian producers are generating 10% more gas per barrel of oil production compared to 2020, indicating a positive trend for gas production growth [25] Company Strategy and Development Direction - The company is focused on large horsepower compression in oil-directed basins, actively divesting non-core assets to streamline operations [14][15] - Significant investments are being made in training programs and AI technology to enhance service capabilities and operational efficiency [26][27] - The company plans to continue returning capital to shareholders while targeting a leverage ratio of 3.5 times by the end of 2025 [28][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for natural gas and the company's strategic positioning to capitalize on this growth [24][32] - The outlook for 2025 includes expected revenue between $1.31 billion and $1.38 billion, with adjusted EBITDA guidance of $685 million to $725 million [43][45] - Management noted that the current pricing environment is durable due to higher equipment costs and ongoing demand for compression services [138] Other Important Information - The company returned $139 million to shareholders in 2024, representing about 37% of discretionary cash flow [17] - The company has exited operations in four countries, focusing on the U.S. and Mexico, with over 80% of fleet capacity located in the Permian or Eagle Ford [15] Q&A Session Summary Question: Average revenue per horsepower per month decreased slightly - Management explained that the decrease was due to the sale of non-core horsepower and that removing those sales would show a modest increase in revenue per horsepower [55][59] Question: Impact of macro volatility on customer decisions - Management indicated that inflationary pressures on capital costs are expected to be manageable and that customers may prefer to outsource compression services [78][81] Question: Supply chain management and delivery times - Management reported that delivery times remain stable at around 45 weeks and that they are effectively managing supply chain challenges [124][126] Question: Future capital allocation and buybacks - Management acknowledged the potential for opportunistic buybacks and emphasized the importance of maintaining a disciplined capital allocation strategy [105][106] Question: Labor tightness in the Permian - Management is focusing on training and technology to address labor challenges and ensure continued service quality [113][114] Question: Expectations for 2025 EBITDA outlook - Management noted that the ability to execute on contract renewals and the timing of deploying capital will influence the EBITDA range [116] Question: Market share and competitive landscape - Management stated that they do not focus on market share but rather on disciplined capital spending and strategic growth [118]

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]