Archrock(US:AROC)2023-11-01 16:00Part I. Financial Information This section presents Archrock, Inc.'s unaudited condensed consolidated financial statements for Q3 2023, covering balance sheets, operations, cash flows, and notes Financial Statements (unaudited) Presents Archrock, Inc.'s unaudited condensed consolidated financial statements for Q3 2023, including balance sheets, statements of operations, and cash flows, with detailed notes Condensed Consolidated Balance Sheets Total assets increased to $2.67 billion from $2.60 billion, driven by property, plant, and equipment, while liabilities rose to $1.81 billion Condensed Consolidated Balance Sheets (in thousands) | Assets & Liabilities | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $224,877 | $231,960 | | Property, plant and equipment, net | $2,302,417 | $2,199,253 | | Total assets | $2,672,110 | $2,598,750 | | Total current liabilities | $159,375 | $148,571 | | Long-term debt | $1,604,554 | $1,548,334 | | Total liabilities | $1,811,017 | $1,738,057 | | Total equity | $861,093 | $860,693 | | Total liabilities and equity | $2,672,110 | $2,598,750 | Condensed Consolidated Statements of Operations Q3 2023 total revenue rose to $253.4 million and net income doubled to $30.9 million, with nine-month revenue reaching $730.7 million Statement of Operations Highlights (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $253,367 | $213,668 | $730,744 | $626,697 | | Income before income taxes | $42,312 | $19,637 | $99,539 | $48,365 | | Net Income | $30,858 | $15,371 | $71,996 | $33,838 | | Diluted EPS | $0.20 | $0.10 | $0.46 | $0.21 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities increased to $238.5 million, while cash used in investing rose to $208.2 million and financing decreased to $31.4 million Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $238,468 | $166,332 | | Net cash used in investing activities | ($208,157) | ($66,546) | | Net cash used in financing activities | ($31,395) | ($99,313) | | Net (decrease) increase in cash | ($1,084) | $473 | Notes to Unaudited Condensed Consolidated Financial Statements Detailed notes explain business segments, accounting developments, financial items, and key events including credit facility amendment, share repurchase, and restructuring - Archrock operates as a pure-play midstream natural gas compression company with two segments: contract operations and aftermarket services35 - The Credit Facility was amended on May 16, 2023, extending maturity to May 2028, changing the reference rate to SOFR, and incurring $6.0 million in transaction costs4647 - A $50.0 million share repurchase program was authorized on April 27, 2023, with 576 thousand shares repurchased for $6.5 million as of September 30, 20235455 - A Q3 2023 dividend of $0.155 per share was declared, an increase from $0.145 per share in Q3 202259 Revenue by Segment (in thousands) | Segment | Q3 2023 | Q3 2022 | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Contract operations | $207,552 | $170,497 | $596,417 | $500,451 | | Aftermarket services | $45,815 | $43,171 | $134,327 | $126,246 | | Total revenue | $253,367 | $213,668 | $730,744 | $626,697 | - A Q1 2023 restructuring plan resulted in $1.6 million in charges for the nine months ended September 30, 2023, primarily for severance73138 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition and operational results, highlighting strong performance from increased revenue and gross margin in contract operations and aftermarket services, alongside liquidity, capital resources, and shareholder returns Operating Highlights (Horsepower) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Total available horsepower (thousands) | 3,773 | 3,747 | | Total operating horsepower (thousands) | 3,608 | 3,353 | | Horsepower utilization (Spot) | 96% | 89% | Results of Operations Q3 2023 saw revenue increases of 22% in Contract Operations and 6% in Aftermarket Services, driving gross margin growth, with overall net income rising due to higher gross margins Contract Operations Performance - Q3 2023 vs Q3 2022 (in thousands) | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $207,552 | $170,497 | 22% | | Gross Margin | $132,279 | $98,803 | 34% | | Gross Margin % | 64% | 58% | 6% | Aftermarket Services Performance - Q3 2023 vs Q3 2022 (in thousands) | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $45,815 | $43,171 | 6% | | Gross Margin | $9,127 | $7,338 | 24% | | Gross Margin % | 20% | 17% | 3% | - SG&A expense decreased in Q3 2023 primarily due to a $2.2 million accounting change for sales taxes, now recorded in cost of sales119 - Interest expense increased in Q3 2023 due to higher interest rates and a larger average outstanding debt balance123 Liquidity and Capital Resources Primary liquidity sources are cash from operations and a $750.0 million revolving credit facility, with planned $295 million in 2023 capital expenditures and continued shareholder returns - Projected 2023 capital expenditures are approximately $295 million, including $200 million for growth, with growth capex anticipated to reduce to $160 million in 2024147 - A quarterly dividend of $0.155 per share was declared on October 26, 2023148 Share Repurchase Summary - Q3 2023 | Metric | Value | | :--- | :--- | | Total cost of shares repurchased | $4.42 million | | Average price per share | $12.49 | | Total number of shares repurchased | 354 thousand | - Net cash from operating activities increased for the nine months ended September 30, 2023, primarily due to higher cash inflows from gross margin and accounts receivable154 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is variable interest rates on its Credit Facility, with a 1% increase potentially raising annual interest expense by $3.1 million - A 1% increase in the Credit Facility's effective interest rate would result in an approximate $3.1 million annual increase in interest expense158 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, ensuring timely and accurate information reporting - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of September 30, 2023, ensuring timely information recording, processing, and reporting161 Part II. Other Information This section provides other required information, including legal proceedings, risk factors, equity sales, and exhibits Legal Proceedings The company is involved in various legal actions, with management expecting no material adverse effect on financial position, operations, or cash flows - The company does not expect pending legal actions to have a material adverse effect on its consolidated financial position, results of operations, or cash flows162 Risk Factors No material changes or updates to previously disclosed risk factors have occurred since the last Annual Report on Form 10-K - No material changes or updates to risk factors have occurred since the last Form 10-K filing163 Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's equity security repurchases during Q3 2023 under the publicly announced 2023 Share Repurchase Program Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Approx. Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | July 2023 | 0 | $— | 0 | $47,927 thousand | | August 2023 | 164,089 | $12.66 | 163,372 | $45,858 thousand | | September 2023 | 190,640 | $12.34 | 190,640 | $43,505 thousand | | Total | 354,729 | $12.49 | 354,012 | — | Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - No defaults upon senior securities occurred during the period165 Mine Safety Disclosures This item is not applicable to the company - This disclosure item is not applicable165 Other Information No other information is reported under this item for the period - No additional information is reported under this item165 Exhibits This section lists exhibits filed with the Form 10-Q report, including officer certifications and interactive data files - Exhibits filed with the report include officer certifications (31.1, 31.2, 32.1, 32.2) and interactive data files (101.1, 104.1)168