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]

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]