USA pression Partners(USAC) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements 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 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 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] Unaudited Condensed Consolidated Statements of Cash Flows 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] Notes to Unaudited Condensed Consolidated Financial Statements 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][25] - 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] 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] - 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] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, highlighting increased revenue-generating horsepower and pricing, with Adjusted EBITDA growth but net income decline Operating Highlights 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 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] - Related-party revenue surged 165.5% to $15.2 million, primarily because existing customers were acquired by Energy Transfer[125][130] - 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] - 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][140] Liquidity and Capital Resources 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] 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] Non-GAAP Financial Measures 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] Quantitative and Qualitative Disclosures About Market Risk 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] - 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] - One major customer accounted for approximately 11% of total revenues for the three months ended March 31, 2025[98] Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Legal Proceedings 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] Risk Factors 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][198] - 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] Exhibits 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]