Archrock(AROC) - 2024 Q1 - Quarterly Results

Q1 2024 Performance Overview First Quarter 2024 Highlights Archrock reported significant year-over-year growth in key metrics, raised its full-year guidance, and increased its dividend Q1 2024 vs Q1 2023 Key Metrics | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $268.5M | $229.8M | +16.8% | | Net Income | $40.5M | $16.5M | +145.5% | | Adjusted EBITDA | $131.0M | $97.2M | +34.8% | | Leverage Ratio | 3.2x | 4.1x | -0.9x | | Quarterly Dividend | $0.165/share | $0.150/share | +10.0% | - The company raised its 2024 Adjusted EBITDA guidance to a range of $510 million to $540 million, up from the previous range of $500 million to $530 million[2] Management Commentary and Outlook Management credits strong performance to operational execution and sees sustained high utilization driven by positive long-term natural gas demand - The company's earnings momentum is driven by excellent operating execution, a high-quality asset base, and innovative processes and technology[3] - Archrock expects to maintain historically high levels of utilization, pricing, and profitability throughout 2024[3] - Long-term demand for natural gas is supported by growing energy needs for LNG exports and domestic power generation, positioning Archrock as a crucial part of the value chain[4] Consolidated Financial Results Net income more than doubled year-over-year to $40.5 million, and Adjusted EBITDA grew substantially by 34.8% to $131.0 million Q1 Financial Performance Comparison | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income | $40.5M | $16.5M | | Adjusted EBITDA | $131.0M | $97.2M | - Q1 2024 net income included a non-cash long-lived and other asset impairment of $2.6 million, the same amount as in Q1 2023[5] Segment Performance Contract Operations The segment saw a 19% revenue increase and a significant gross margin expansion to 65%, maintaining high utilization at 95% Contract Operations Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $223.1M | $187.7M | | Gross Margin | $145.3M | $108.3M | | Gross Margin % | 65% | 58% | | Utilization (End of Qtr) | 95% | 94% | - Total operating horsepower increased to 3.6 million at the end of Q1 2024 from 3.5 million at the end of Q1 2023[6] - Exit utilization was slightly down sequentially because 19,500 horsepower of new units were delivered in March but did not begin generating revenue until April[7] Aftermarket Services This segment reported increased revenue and a 27% growth in gross margin, with the margin percentage improving from 19% to 23% Aftermarket Services Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $45.4M | $42.1M | | Gross Margin | $10.4M | $8.2M | | Gross Margin % | 23% | 19% | Financial Position and Shareholder Returns Balance Sheet and Liquidity The company maintained a strong balance sheet with $1.6 billion in debt, ample liquidity, and a significantly improved leverage ratio of 3.2x - Long-term debt stood at $1.6 billion as of March 31, 2024[9] - Total available liquidity was $477.7 million at the end of the first quarter[9] - The company's leverage ratio improved to 3.2x at the end of Q1 2024, compared to 4.1x at the end of Q1 2023[2][9] Shareholder Returns Commitment to shareholders was shown through a 10% dividend increase and the extension of its $50 million share repurchase program Quarterly Dividend The company declared a 10% year-over-year dividend increase to $0.165 per share, supported by a strong 3.2x coverage ratio - Declared a quarterly dividend of $0.165 per share, which is 10% higher than Q1 2023[2][10] - Dividend coverage for the first quarter of 2024 was strong at 3.2x[10] Share Repurchase Program Archrock repurchased $1.2 million in shares during the quarter and extended its $50 million repurchase authorization for 24 months - In Q1 2024, the company repurchased 82,972 common shares for approximately $1.2 million[11] - The Board of Directors extended the share repurchase program for another 24 months and replenished the available capacity to $50 million[11] 2024 Annual Guidance Updated 2024 Guidance The company raised its full-year 2024 guidance for Adjusted EBITDA and Net Income, reflecting confidence in continued strong performance Updated Full Year 2024 Guidance | Metric | Low | High | | :--- | :--- | :--- | | Net Income | $144.0M | $174.0M | | Adjusted EBITDA | $510.0M | $540.0M | | Cash available for dividend | $300.0M | $320.0M | | Contract operations revenue | $890.0M | $915.0M | | Aftermarket services revenue | $175.0M | $185.0M | | Growth capital expenditures | $190.0M | $190.0M | Financial Statements and Supplemental Information Summary Metrics This section presents a comparative overview of key financial and operational metrics for Q1 2024 versus prior periods Key Metrics Comparison | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | Net Income | $40.5M | $33.0M | $16.5M | | Adjusted EBITDA | $131.0M | $120.3M | $97.2M | | Cash available for dividend | $82.0M | $71.5M | $46.2M | | Cash available for dividend coverage | 3.2x | 2.8x | 2.0x | | Horsepower utilization (spot) | 95.0% | 96.0% | 94.0% | Unaudited Condensed Consolidated Statements of Operations The income statement shows a significant year-over-year increase in total revenue to $268.5 million and net income to $40.5 million Q1 2024 Income Statement Highlights | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenue | $268.5M | $229.8M | | Income before income taxes | $53.6M | $22.6M | | Net Income | $40.5M | $16.5M | | Diluted EPS | $0.26 | $0.10 | Non-GAAP Reconciliations This section provides detailed reconciliations of non-GAAP measures like Adjusted EBITDA and Free Cash Flow to their GAAP equivalents - Adjusted EBITDA is reconciled from Net Income by adding back items such as interest expense, taxes, depreciation & amortization, and stock-based compensation[16][30] - Cash Available for Dividend is derived from Adjusted EBITDA by subtracting maintenance and other capital expenditures, cash taxes, and cash interest expense[18][32] - Free Cash Flow is calculated as Net Cash Provided by Operating Activities plus Net Cash Used in Investing Activities[19][36]