Kodiak Gas Services(KGS) - 2025 Q1 - Quarterly Report

PART I Item 1. Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements for Q1 2025, detailing balance sheets, operations, equity, and cash flows, with key notes on accounting policies and the CSI Compressco acquisition Condensed Consolidated Balance Sheets Total assets remained stable at $4.436 billion as of March 31, 2025, with a slight increase in liabilities and decrease in equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $387,078 | $383,661 | | Property, plant and equipment, net | $3,400,154 | $3,395,022 | | Total assets | $4,436,122 | $4,435,123 | | Total current liabilities | $329,869 | $319,369 | | Long-term debt, net | $2,588,329 | $2,581,909 | | Total liabilities | $3,080,265 | $3,061,516 | | Total stockholders' equity | $1,355,857 | $1,373,607 | Condensed Consolidated Statements of Operations Total revenues rose 53.0% to $329.6 million in Q1 2025, but net income remained flat at $31.0 million due to increased expenses and absence of derivative gains Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total revenues | $329,642 | $215,492 | | Income from operations | $89,186 | $60,158 | | Interest expense | $(47,224) | $(39,740) | | Gain on derivatives | $— | $19,757 | | Net income | $31,036 | $30,232 | | Net income attributable to common shareholders | $30,411 | $30,232 | | Diluted EPS | $0.33 | $0.39 | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity decreased to $1.356 billion in Q1 2025, primarily due to $37.0 million in dividends and $10.0 million in share repurchases, partially offset by net income - Key activities affecting stockholders' equity in Q1 2025 included net income of $31.0 million, dividend payments of $37.0 million, and common share repurchases of $10.0 million[19] Condensed Consolidated Statements of Cash Flows Net cash from operations more than doubled to $114.3 million in Q1 2025, while investing and financing activities resulted in net cash outflows, leading to a $2.8 million decrease in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $114,328 | $51,542 | | Net cash used for investing activities | $(68,177) | $(60,150) | | Net cash provided by (used for) financing activities | $(48,951) | $12,352 | | Net (decrease) increase in cash | $(2,800) | $3,744 | Notes to Unaudited Condensed Consolidated Financial Statements Key notes detail the $342.3 million CSI Compressco acquisition, $1.5 billion in remaining performance obligations, a $72.5 million sales tax contingency, and $10.0 million in share repurchases - On April 1, 2024, the Company completed the acquisition of CSI Compressco LP for total consideration of $342.3 million, resulting in $109.9 million of goodwill[29][30] - As of March 31, 2025, the company had $1.5 billion of remaining performance obligations related to its Contract Services segment, with $631.0 million expected to be recognized in the remainder of 2025[39] - The company accrued an additional $1.6 million for a sales tax contingency during the quarter, bringing the total accrued liability to $72.5 million as of March 31, 2025[85] - In March 2025, the company repurchased 270,000 shares of common stock for approximately $10.0 million under its share repurchase program[72] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, highlighting 53% revenue growth and 34.4% fleet horsepower increase, driven by the CSI acquisition, alongside liquidity and non-GAAP measures Operational Highlights Operational capacity expanded significantly, with fleet horsepower increasing 34.4% to 4.4 million HP and revenue-generating horsepower growing 30.4% Operational Data Comparison (at period end) | Metric | March 31, 2025 | March 31, 2024 | % Change | | :--- | :--- | :--- | :--- | | Fleet horsepower | 4,422,914 | 3,290,971 | 34.4% | | Revenue-generating horsepower | 4,284,103 | 3,285,592 | 30.4% | | Fleet utilization | 96.9% | 99.8% | (3.0%) | - The increase in horsepower was primarily attributable to the 1.2 million horsepower acquired from the CSI Acquisition and organic growth through new compression unit purchases[107] Financial Results of Operations Total revenues surged 53.0% to $329.6 million in Q1 2025, but net income remained flat at $31.0 million due to higher interest expense and asset sale losses Financial Results Summary (in thousands) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $329,642 | $215,492 | 53.0% | | Income from operations | $89,186 | $60,158 | 48.3% | | Interest expense | $(47,224) | $(39,740) | 18.8% | | Net income | $31,036 | $30,232 | 2.7% | - The decrease in gain on derivatives was due to the designation of the interest rate swap as a cash flow hedge effective January 1, 2025, causing fair value changes to be recorded in other comprehensive income instead of earnings[117] Liquidity and Capital Resources Total liquidity stood at $321.2 million as of March 31, 2025, with Q1 2025 capital expenditures totaling $94.7 million and a $0.45 per share dividend declared - As of March 31, 2025, the company had approximately $321.2 million of liquidity, consisting of $2.0 million in cash and $319.3 million available under its ABL Facility[119] Capital Expenditures (in millions) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Growth Capital Expenditures | $56.0 | $52.2 | | Other Capital Expenditures | $22.3 | $7.2 | | Maintenance Capital Expenditures | $16.4 | $10.6 | - On April 23, 2025, the Board declared a cash dividend of $0.45 per share for Q1 2025[125] Non-GAAP Financial Measures Non-GAAP measures show strong performance, with Adjusted EBITDA increasing to $177.7 million and Free Cash Flow rising to $47.2 million in Q1 2025 Adjusted EBITDA Reconciliation (in thousands) | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income | $31,036 | $30,232 | | Interest expense | 47,224 | 39,740 | | Income tax expense | 10,524 | 9,875 | | Depreciation and amortization | 70,529 | 46,944 | | Gain on derivatives | — | (19,757) | | Equity compensation expense | 6,978 | 2,848 | | Transaction expenses | 1,786 | 7,880 | | Loss on sale of assets | 9,211 | — | | Adjusted EBITDA | $177,664 | $117,762 | Discretionary and Free Cash Flow (in thousands) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $114,328 | $51,542 | | Discretionary cash flow | $116,084 | $71,925 | | Free cash flow | $47,219 | $12,524 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risks include interest rate, counterparty, concentration, and commodity price risks, with a 1.0% interest rate increase potentially raising annual expense by $4.8 million - The company's primary interest rate risk is from its ABL Facility. A 1.0% increase in the average interest rate would have resulted in an estimated $4.8 million increase in ABL-related interest expense for Q1 2025[162][163] - For Q1 2025, the company's four largest customers accounted for approximately 31% of its recurring revenues[167] - The company has no direct exposure to commodity prices as it does not take title to natural gas or oil, but demand for its services is dependent on continued production, which is influenced by commodity prices[168] Item 4. Controls and Procedures Management, including CEO and CFO, concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025[169] - No changes occurred during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[170] PART II Item 1. Legal Proceedings The company does not expect ordinary course legal matters to materially affect its financial position, referencing the sales tax contingency - Management does not expect the resolution of ordinary course legal matters to have a material adverse effect on the company's financial statements[173] Item 1A. Risk Factors No material changes to previously disclosed risk factors from the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[174] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, the company repurchased 270,000 common shares for $10.0 million, with $25.0 million remaining under the repurchase program Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | Maximum Value Remaining (in thousands) | | :--- | :--- | :--- | :--- | | March 1-31, 2025 | 270,000 | $36.87 | $25,040 | Item 3. Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None[178] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements during Q1 2025 - During Q1 2025, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement[180] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, agreements, and CEO/CFO certifications - The report includes a list of exhibits filed, such as the Certificate of Incorporation, Bylaws, various agreements, and CEO/CFO certifications[181]