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USA Compression Partners, LP Investor Presentation September 2024 This presentation contains forward-looking statements related to the operations of the Partnership that are based on management's current expectations, estimates, and projections about its operations. You can identify many of these forward-looking statements by words such as "believe," "expect," "intend," "project," "anticipate," "estimate," "continue," "if," "outlook," "will," "could," "should," or similar words or the negatives thereof. You ...

Core Insights - USA Compression Partners (USAC) reported a first-quarter adjusted net profit of 18 cents per common unit, missing the Zacks Consensus Estimate of 22 cents due to higher costs and expenses, but improved from 16 cents in the same quarter last year [1] - The company generated revenues of $245.2 million, a 7% increase year-over-year, surpassing the Zacks Consensus Estimate of $244 million, driven by a 3.2% rise in Contract operations and a significant 165.5% increase in Related party revenues [1] - Adjusted EBITDA rose by 7.2% to $149.5 million, exceeding the estimate of $146.2 million, while net income decreased to $20.5 million from $23.6 million year-over-year [2] Financial Performance - Adjusted gross operating margin decreased to 66.7% from 67.3% in the previous year [3] - Revenue-generating capacity increased by 2.4% year-over-year to 3.6 million horsepower, although below the estimate of 1.9% [3] - Average monthly revenue per horsepower rose to $21.06 from $19.96, but was below the estimate of $21.62 [3] Utilization and Cash Flow - Average quarterly horsepower utilization rate was 94.4%, slightly down from 94.8% a year ago [4] - Distributable cash flow (DCF) available to limited partners totaled $88.7 million, providing 1.4X distribution coverage, up 2.7% from the previous year [5] - The company declared a cash distribution of 52.5 cents per unit for the first quarter, to be paid on May 9, 2025 [5] Costs and Capital Expenditures - Total costs and expenses were reported at $175.8 million, an 8.3% increase from $162.4 million in the prior-year quarter [6] - Growth capital expenditures amounted to $22.2 million, while maintenance capital expenditures were $10.9 million [6] - As of March 31, 2025, USAC had a net long-term debt of $2.5 billion [6] Guidance - For the full year 2025, USAC expects adjusted EBITDA to be between $590 million and $610 million, with distributable cash flow projected to range from $350 million to $370 million [7] - Expansion capital expenditures are anticipated to be between $120 million and $140 million, while maintenance capital expenditures are expected to total between $38 million and $42 million [7]

Financial Performance - For the quarter ended March 2025, USA Compression Partners (USAC) reported revenue of $245.23 million, which is a 7% increase compared to the same period last year [1] - The earnings per share (EPS) for the quarter was $0.18, up from $0.16 in the year-ago quarter [1] - The reported revenue exceeded the Zacks Consensus Estimate of $244.02 million, resulting in a surprise of +0.50% [1] - The company experienced an EPS surprise of -18.18%, with the consensus EPS estimate being $0.22 [1] Key Metrics - Revenue-generating horsepower at period end was 3.56 billion, matching the two-analyst average estimate [4] - Average revenue-generating horsepower was also 3.56 billion, slightly below the two-analyst average estimate of 3.6 billion [4] - Revenues from parts and service were reported at $5.09 million, which is lower than the estimated $6.22 million, representing a -6.7% change year over year [4] - Revenues from contract operations were $224.98 million, compared to the average estimate of $237.63 million, reflecting a +3.2% year-over-year change [4] Stock Performance - Shares of USA Compression have returned +4.7% over the past month, while the Zacks S&P 500 composite has changed by +10.6% [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance relative to the broader market in the near term [3]

Group 1 - USA Compression Partners (NYSE: USAC) plays a crucial role in the energy sector by facilitating the transportation of natural gas through pipelines from extraction points to end-users [1] - The company focuses on providing essential services that are often overlooked, particularly in the small- to mid-cap market, while also occasionally analyzing larger companies for a broader market perspective [1] Group 2 - The article emphasizes the importance of data-driven research in understanding investment opportunities, particularly in the context of companies like USA Compression Partners [1]

PART I. FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=ITEM%201.%20Financial%20Statements) Presents USA Compression Partners, LP's unaudited condensed consolidated financial statements, showing a **7.0%** revenue increase but a **13.0%** net income decrease [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased slightly to **$2.71 billion** as of March 31, 2025, while total liabilities increased to **$2.73 billion**, widening the partners' deficit Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total current assets** | $243,258 | $234,996 | | **Property and equipment, net** | $2,237,783 | $2,273,376 | | **Total assets** | **$2,713,120** | **$2,745,601** | | **Total current liabilities** | $166,006 | $190,678 | | **Long-term debt, net** | $2,536,147 | $2,502,557 | | **Total liabilities** | **$2,725,022** | **$2,717,843** | | **Partners' deficit** | $(180,711) | $(141,051) | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Total revenues increased **7.0%** to **$245.2 million** in Q1 2025, but net income decreased **13.0%** to **$20.5 million** due to higher costs Statement of Operations Summary (in thousands, except per unit data) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | **Total revenues** | $245,234 | $229,276 | +7.0% | | Operating income | $69,391 | $66,872 | +3.8% | | Interest expense, net | $(47,369) | $(46,666) | +1.5% | | **Net income** | **$20,512** | **$23,573** | **-13.0%** | | Net income attributable to common unitholders | $16,124 | $19,185 | -16.0% | | **Basic and diluted net income per common unit** | **$0.14** | **$0.19** | **-26.3%** | | Distributions declared per common unit | $0.525 | $0.525 | 0.0% | - The company recorded a **$3.6 million** asset impairment charge in Q1 2025, with no similar charge in Q1 2024[14](index=14&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to **$54.7 million** in Q1 2025, while net cash used in investing activities significantly reduced to **$18.0 million** Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | **$54,651** | **$65,917** | | **Net cash used in investing activities** | **$(18,041)** | **$(98,573)** | | **Net cash provided by (used in) financing activities** | **$(36,622)** | **$32,653** | | Decrease in cash and cash equivalents | $(12) | $(3) | - Capital expenditures dropped sharply to **$18.4 million** in Q1 2025 from **$98.6 million** in Q1 2024[19](index=19&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover natural gas compression services, debt structure, revenue recognition, related-party transactions, and a **$1.0 million** IRS tax charge - The company provides natural gas compression services under fixed-term contracts in major U.S. unconventional resource plays. Its general partner is wholly owned by Energy Transfer[24](index=24&type=chunk)[25](index=25&type=chunk) - In Q1 2025, the company retired **17** compression units, resulting in an asset impairment charge of **$3.6 million**. No impairment was recorded in Q1 2024[55](index=55&type=chunk) Total Long-Term Debt (in thousands) | Component | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total senior notes, net | $1,731,581 | $1,730,465 | | Revolving credit facility | $804,566 | $772,092 | | **Total long-term debt, net** | **$2,536,147** | **$2,502,557** | - As of March 31, 2025, the company had **$1.2 billion** in transaction price allocated to unsatisfied performance obligations, which it expects to recognize as revenue in future periods[93](index=93&type=chunk) - Related-party revenues from entities affiliated with Energy Transfer increased significantly to **$15.2 million** in Q1 2025 from **$5.7 million** in Q1 2024[94](index=94&type=chunk) - The company's U.S. federal income tax returns for 2019 and 2020 are under IRS examination. The company recognized a **$1.0 million** charge in Q1 2025 as an estimate of the potential loss[101](index=101&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 performance, highlighting increased revenue-generating horsepower and pricing, with Adjusted EBITDA growth but net income decline [Operating Highlights](index=24&type=section&id=Operating%20Highlights) Q1 2025 operating performance showed a **2.4%** increase in average revenue-generating horsepower and **5.5%** growth in average revenue per HP per month Key Operating Metrics Comparison | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Fleet horsepower (at period end) | 3,859,920 | 3,833,715 | +0.7% | | Average revenue-generating horsepower | 3,557,164 | 3,473,007 | +2.4% | | Average revenue per revenue-generating HP per month | $21.06 | $19.96 | +5.5% | | Horsepower utilization (at period end) | 94.4% | 94.8% | -0.4% | [Financial Results of Operations](index=25&type=section&id=Financial%20Results%20of%20Operations) Total revenues for Q1 2025 increased **7.0%** to **$245.2 million**, but operating income grew only **3.8%** due to rising costs and a **$3.6 million** asset impairment - Contract operations revenue increased by **$6.9 million** (**3.2%**) due to a **5.5%** increase in average revenue per HP and a **2.4%** increase in average revenue-generating horsepower[126](index=126&type=chunk) - Related-party revenue surged **165.5%** to **$15.2 million**, primarily because existing customers were acquired by Energy Transfer[125](index=125&type=chunk)[130](index=130&type=chunk) - Selling, general, and administrative (SG&A) expense decreased by **$4.0 million** (**17.4%**), mainly due to a **$4.2 million** decrease in unit-based compensation expense from mark-to-market changes[133](index=133&type=chunk) - Income tax expense increased by **$1.1 million**, primarily due to a **$1.0 million** charge related to a potential settlement with the IRS for the 2019 and 2020 tax years[139](index=139&type=chunk)[140](index=140&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Primary liquidity sources are cash from operations and the revolving credit facility, with **$739.8 million** available and planned 2025 capital expenditures - The company believes cash from operations and its credit facility will be sufficient to service debt, fund capex, and pay distributions for the next **12** months[148](index=148&type=chunk) 2025 Capital Expenditure Guidance | Capex Type | 2025 Plan (millions) | | :--- | :--- | | Expansion Capital | $120.0 - $140.0 | | Maintenance Capital | $38.0 - $42.0 | - As of March 31, 2025, the company had binding commitments to purchase **$44.7 million** of additional compression units and parts, expected to be settled within **12** months[153](index=153&type=chunk) [Non-GAAP Financial Measures](index=29&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA increased **7.3%** to **$149.5 million**, and DCF rose **2.4%** to **$88.7 million**, improving the DCF Coverage Ratio to **1.44x** Non-GAAP Financial Highlights (in thousands, except ratio) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Adjusted gross margin | $163,616 | $154,204 | +6.1% | | **Adjusted EBITDA** | **$149,514** | **$139,395** | **+7.3%** | | **DCF** | **$88,695** | **$86,589** | **+2.4%** | | **DCF Coverage Ratio** | **1.44x** | **1.41x** | **+2.1%** | - The increase in Adjusted EBITDA was primarily driven by higher Adjusted gross margin and lower SG&A expenses (excluding certain items)[144](index=144&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Main market risks include indirect commodity price exposure, direct interest rate fluctuations, and customer credit risk, with **$8.0 million** annual interest expense sensitivity - The company does not bear direct commodity price risk but acknowledges that sustained low prices could reduce demand for its compression services[189](index=189&type=chunk) - As of March 31, 2025, a **one percent** change in the effective interest rate on its **$804.6 million** of variable-rate debt would result in an approximate **$8.0 million** annual change in interest expense[190](index=190&type=chunk) - One major customer accounted for approximately **11%** of total revenues for the three months ended March 31, 2025[98](index=98&type=chunk) [Controls and Procedures](index=36&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of March 31, 2025[193](index=193&type=chunk) - No changes in internal control over financial reporting occurred during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[194](index=194&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=37&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in various ordinary course claims and litigation, not expected to materially affect its financial condition, referencing a tax contingency - Management believes that the resolution of ordinary course litigation is not expected to have a material adverse effect on the company's consolidated financial position, results of operations, or cash flows[196](index=196&type=chunk) [Risk Factors](index=37&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes to risk factors except for a new one concerning U.S. trade policy and tariffs, which could increase operating and capital costs - A new risk factor was added regarding changes in U.S. trade policy and tariffs[197](index=197&type=chunk)[198](index=198&type=chunk) - Tariffs on steel and other materials could increase the cost to build new compression units and maintain operations, which the company may not be able to pass on to customers[198](index=198&type=chunk) [Exhibits](index=38&type=section&id=ITEM%206.%20Exhibits) This section lists documents filed as exhibits, including governance documents, compensatory agreements, and CEO/CFO certifications - The exhibits filed with the report include certifications from the CEO and CFO, and agreements such as the Restrictive Covenant and Separation Agreement with a former executive[202](index=202&type=chunk)

Financial Data and Key Metrics Changes - In Q1 2025, the company reported a net income of $20.5 million and operating income of $69.4 million, with net cash provided by operating activities at $54.7 million [12] - The average revenue per horsepower reached an all-time high of $21.6, reflecting a 1% increase sequentially and a 6% increase year-over-year [12] - The adjusted gross margin for Q1 was nearly 67%, consistent with previous quarters [12][14] Business Line Data and Key Metrics Changes - The total fleet horsepower at the end of Q1 was approximately 3.9 million horsepower, unchanged from the prior quarter, while revenue-generating horsepower was flat sequentially but up 2% year-over-year [13] - Average utilization for the first quarter was 94.4%, slightly down from 94.5% in the prior quarter [13] Market Data and Key Metrics Changes - The company holds the largest contract compression fleet in the Northeast, totaling around 900,000 horsepower, benefiting from strong demand in the data center market [7][8] - Key upstream companies in the Permian and Northeast reaffirmed their full-year capital production targets despite softening commodity prices [7] Company Strategy and Development Direction - The company is focused on disciplined growth, particularly in acquiring large horsepower, while monitoring market conditions closely [6][10] - The transition of IT and HR functions has been completed, with an ERP implementation planned for Q1 2026 to improve business management [11] Management's Comments on Operating Environment and Future Outlook - Management noted that while commodity prices have softened, the compression business is sustained by long-term agreements, making it less susceptible to short-term price fluctuations [10] - The company anticipates maintaining adjusted operating margins around 67% and is committed to reducing its leverage ratio while funding new growth projects [14][15] Other Important Information - The company has completed its idle to active initiative, with large horsepower utilization remaining close to fully utilized [6] - A promotion of Chris Wasson to Chief Operating Officer was highlighted, recognizing his leadership in the Permian operations [10] Q&A Session Summary Question: Guidance for 2025 - Management confirmed maintaining the guidance range of $590 million to $610 million for adjusted EBITDA, with Q1 performance aligning with the midpoint of this range [20][21] Question: Growth Outlook Beyond 2025 - Management indicated strong interest in 2026 proposals, with ongoing discussions and RFPs being undertaken despite current macroeconomic uncertainties [22][24] Question: Operating Horsepower Growth - The addition of 40,000 horsepower in Q1 was noted as below the full-year forecast, but management expressed confidence in meeting year-end targets [27][28] Question: Contracting Environment - Management stated that there has not been a significant change in contract duration or terms, with a preference for longer-term agreements to mitigate risks [36][37] Question: Lead Times and Manufacturing - Lead times for equipment remain stable, with no significant changes expected unless tariffs impact the market [38][39] Question: Asset Sales and Portfolio Optimization - Management confirmed ongoing efforts to optimize the portfolio through modest asset sales and swaps, aiming to improve overall efficiency [42][43]

Financial Data and Key Metrics Changes - The company reported a net income of $20.5 million and operating income of $69.4 million for Q1 2025, with net cash provided by operating activities at $54.7 million [11] - Adjusted gross margins were nearly 67%, consistent with previous quarters [11] - Average revenue per horsepower reached an all-time high of $21.6, reflecting a 1% increase sequentially and a 6% increase year-over-year [11] Business Line Data and Key Metrics Changes - Total fleet horsepower remained approximately 3.9 million, unchanged from the prior quarter, while revenue-generating horsepower was flat sequentially but up 2% year-over-year [12] - Average utilization for the quarter was 94.4%, slightly down from 94.5% in the previous quarter [12] - Expansion capital expenditures were $22.2 million, while maintenance capital expenditures were $10.9 million, indicating a focus on reconfiguration and new horsepower [12] Market Data and Key Metrics Changes - The company holds the largest contract compression fleet in the Northeast, totaling around 900,000 horsepower, benefiting from strong demand in the data center market [7] - Key upstream companies in the Permian and Northeast reaffirmed their full-year capital production targets despite softening commodity prices [7] Company Strategy and Development Direction - The company is focused on disciplined growth, particularly in acquiring large horsepower, while monitoring market conditions closely [6][9] - A transition to new IT and HR functions is underway, with an ERP implementation planned for Q1 2026 to improve business management [10] Management's Comments on Operating Environment and Future Outlook - Management noted that while commodity prices have softened, the compression business is sustained by long-term agreements, making it less susceptible to short-term price fluctuations [9] - The company anticipates maintaining adjusted operating margins and is committed to reducing its leverage ratio while funding new growth projects [13][14] Other Important Information - The company has completed its idle to active initiative, with large horsepower utilization remaining close to full [6] - A promotion of Chris Wasson to Chief Operating Officer was highlighted, recognizing his leadership in the Permian operations [9] Q&A Session Summary Question: Guidance for 2025 - Management confirmed maintaining the guidance range of $590 million to $610 million for adjusted EBITDA, with Q1 performance aligning with the midpoint of this range [20][21] Question: Growth Outlook Beyond 2025 - Management indicated strong interest in 2026 proposals, with ongoing discussions and RFPs being undertaken despite current macroeconomic uncertainties [22][25] Question: Operating Horsepower Growth - The addition of 40,000 horsepower in Q1 is below the full-year forecast, but management is optimistic about fulfilling remaining orders by year-end [29] Question: Contracting Environment - Management noted no significant changes in contract duration or terms, with a preference for longer-term contracts to mitigate economic volatility [37][38] Question: Lead Times and Manufacturing Changes - Lead times for equipment remain stable, with no significant delays reported, although potential impacts from tariffs are being monitored [39][40] Question: Asset Sales and Portfolio Optimization - The company continues to look for ways to optimize its portfolio, with modest asset sales and swaps being part of the strategy [43][45]

Financial Data and Key Metrics Changes - In Q1 2025, the company reported a net income of $20.5 million and operating income of $69.4 million, with net cash provided by operating activities at $54.7 million [12][13] - The average revenue per horsepower reached an all-time high of $21.6, reflecting a 1% increase sequentially and a 6% increase year-over-year [12] - The adjusted gross margin for Q1 was nearly 67%, consistent with previous quarters [12][13] Business Line Data and Key Metrics Changes - The total fleet horsepower at the end of Q1 was approximately 3.9 million horsepower, unchanged from the prior quarter, while revenue-generating horsepower was flat sequentially but up 2% year-over-year [13] - Average utilization for the first quarter was 94.4%, slightly down from 94.5% in the prior quarter [13] Market Data and Key Metrics Changes - The company noted that commodity prices have softened considerably due to tariff-driven market uncertainty, but upstream companies in the Permian and Northeast reaffirmed their full-year capital production targets [7][10] - The Northeast market, where the company holds the largest contract compression fleet totaling around 900,000 horsepower, is seeing incremental power demand growth [7][10] Company Strategy and Development Direction - The company is focused on a disciplined growth strategy, particularly in acquiring large horsepower, while monitoring market conditions closely [6][10] - The transition of IT and HR functions has been completed, with an ERP implementation planned for Q1 2026 to improve business management [11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining adjusted operating margins around 67% and highlighted the importance of long-term agreements in the compression business, which are less susceptible to short-term commodity price fluctuations [10] - The company is actively monitoring tariff impacts and believes that current inventory management will mitigate potential disruptions [7][10] Other Important Information - The company has completed its idle to active initiative and is evaluating opportunities for additional horsepower deliveries before year-end [6] - The leverage ratio currently stands at 4.08 times, with a commitment to reducing it further in 2025 [14][15] Q&A Session Summary Question: Guidance for 2025 - Management confirmed maintaining the guidance range of $590 million to $610 million for adjusted EBITDA, with Q1 performance aligning with the midpoint of this range [20][21] Question: Growth Outlook Beyond 2025 - Management noted strong interest in 2026 proposals and indicated that the market is in better shape than during the last downturn, with major companies reaffirming growth targets [22][24] Question: Operating Horsepower Growth - The addition of 40,000 horsepower in Q1 is below the full-year forecast, but management is optimistic about meeting the remaining targets by year-end [27][28] Question: Contracting Environment - Management indicated no significant changes in contract duration or terms, but emphasized the importance of locking in economics during uncertain cycles [36] Question: Lead Times and Manufacturing Changes - Lead times for equipment remain stable, with no significant delays reported, although potential tariff impacts could affect future timelines [38] Question: Asset Sales and Portfolio Optimization - The company continues to look for ways to optimize its portfolio, including modest asset sales and swaps [42][43]

Earnings Presentation First Quarter 2025 Forward-Looking Statements and Disclaimer Forward Looking Statements This presentation contains forward-looking statements related to the operations of the Partnership that are based on management's current expectations, estimates, and projections about its operations. You can identify many of these forward-looking statements by words such as "believe," "expect," "intend," "project," "anticipate," "estimate," "continue," "if," "outlook," "will," "could," "should," or ...