KGS Kodiak Gas Services Inc

Kodiak Gas Services, Inc. (NYSE: KGS) (“Kodiak” or the “Company”), a leading provider of critical energy infrastructure and contract compression services, today reported financial and operating results for the quarter ended September 30, 2024, updated full-year 2024 guidance and provided an early outlook on 2025 Adjusted EBITDA(1).

Third Quarter 2024 and Recent Highlights

• Contract Services segment revenue and Adjusted Gross Margin Percentage(1) were $284.3 million and 66.0%, respectively
• Net loss of $6.2 million included a $9.9 million long-lived asset impairment, a $10.4 million loss on asset sales and a $20.3 million non-cash, mark-to-market loss on interest rate hedges
• Record quarterly Adjusted EBITDA of $168.4 million
• Record quarterly Free Cash Flow(1) of $52.5 million
• Deployed 50,000 horsepower of new large horsepower compression units
• Divested approximately 95,000 horsepower of small horsepower compression units both in the U.S and internationally
• Fleet utilization ended the third quarter at 96.4%, a sequential increase of 2.1%
• Repurchased one million shares for $25 million
• Raised full-year 2024 Adjusted EBITDA guidance to a range of $600 to $610 million, a $10 million increase to the low end of the range

2025 Early Outlook

• Providing full-year 2025 Adjusted EBITDA early outlook range of $675 to $725 million

"We delivered an outstanding third quarter with new quarterly records in revenue, adjusted EBITDA and free cash flow," stated Mickey McKee, Kodiak’s President and Chief Executive Officer. "I could not be more proud of the progress we have made improving margins through the realization of cost synergies, increased fleet utilization and favorable contract compression market pricing.

"During the quarter, we successfully completed the sale of over 2,000 small horsepower units and exited Canada, high-grading our fleet and simplifying our business. Our high-quality, large horsepower asset base continues to be in high demand and puts us in a position to drive further improvements in margins and cash flow. Our new unit deliveries are effectively fully contracted through 2025. The positive compression market outlook along with our solid execution gives us confidence to raise the low end of our 2024 Adjusted EBITDA guidance range and provide an early outlook on 2025 Adjusted EBITDA."

(1) Adjusted EBITDA, Adjusted Gross Margin Percentage and Free Cash Flow are Non-GAAP Financial Measures. Definitions and reconciliations to the most comparable GAAP financial measure are included herein.

Third Quarter 2024 Financial Results

Net loss for the third quarter of 2024 was $6.2 million, compared to net income of $21.8 million in the third quarter of 2023. Net loss for the third quarter of 2024 included a $9.9 million long-lived asset impairment, a $10.4 million loss on the sale of assets and a $20.3 million non-cash, mark-to-market loss on interest rate hedges. Adjusted EBITDA for the third quarter of 2024 was $168.4 million, compared to $110.1 million in the third quarter of 2023.

Segment Information

Contract Services segment revenue was $284.3 million in the third quarter of 2024, a 52% increase compared to $186.7 million in the third quarter of 2023. Contract Services segment gross margin was $114.2 million in the third quarter of 2024, compared to $75.1 million in the third quarter of 2023. Contract Services segment Adjusted Gross Margin was $187.7 million in the third quarter of 2024, a 55% increase compared to $121.2 million in the third quarter of 2023.

Other Services segment revenue was $40.3 million in the third quarter of 2024, compared to $44.3 million in the third quarter of 2023. Other Services segment gross margin and Adjusted Gross Margin were each $7.7 million in the third quarter of 2024, compared to $5.5 million in the third quarter of 2023.

Long-Term Debt and Liquidity

Total debt outstanding was $2.6 billion as of September 30, 2024, comprised primarily of borrowings on the ABL Facility and senior notes due 2029. At September 30, 2024, the Company had $305.9 million available on its ABL Facility, and our credit agreement leverage ratio was 3.9x.

Summary Financial Data

(in thousands, except percentages)

 

 

 

Three Months Ended

 

 

September 30, 2024

 

June 30, 2024

 

September 30, 2023

Total revenues

 

$

324,647

 

 

$

309,653

 

 

$

230,983

 

Net income (loss)

 

$

(6,211

)

 

$

6,713

 

 

$

21,766

 

Adjusted EBITDA (1)

 

$

168,374

 

 

$

154,342

 

 

$

110,067

 

Adjusted EBITDA percentage (1)

 

 

51.9

%

 

 

49.8

%

 

 

47.7

%

 

 

 

 

 

 

 

Contract Services revenue

 

$

284,313

 

 

$

276,250

 

 

$

186,673

 

Contract Services Adjusted Gross Margin (1)

 

$

187,696

 

 

$

176,917

 

 

$

121,203

 

Contract Services Adjusted Gross Margin Percentage (1)

 

 

66.0

%

 

 

64.0

%

 

 

64.9

%

 

 

 

 

 

 

 

Other Services revenue

 

$

40,334

 

 

$

33,403

 

 

$

44,310

 

Other Services Adjusted Gross Margin (1)

 

$

7,660

 

 

$

5,467

 

 

$

5,490

 

Other Services Adjusted Gross Margin Percentage (1)

 

 

19.0

%

 

 

16.4

%

 

 

12.4

%

 

 

 

 

 

 

 

Maintenance capital expenditures

 

$

21,553

 

 

$

19,147

 

 

$

12,312

 

Growth capital expenditures (2)

 

$

65,115

 

 

$

90,390

 

 

$

55,671

 

 

 

 

 

 

 

 

Discretionary Cash Flow (1)

 

$

103,049

 

 

$

90,617

 

 

$

63,044

 

Free Cash Flow (1)

 

$

52,500

 

 

$

638

 

 

$

7,373

 

(1)

Adjusted EBITDA, Adjusted EBITDA Percentage, Adjusted Gross Margin, Adjusted Gross Margin Percentage, Discretionary Cash Flow and Free Cash Flow are non-GAAP financial measures. For definitions and reconciliations to the most directly comparable financial measures calculated and presented in accordance with GAAP, see “Non-GAAP Financial Measures” below.

(2)

For the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, growth capital expenditures include a non-cash increase in the sales tax accrual on compression equipment purchases of $1.7 million, $19.8 million and $0.3 million, respectively. These accrual amounts are estimated based on the best-known information as it relates to open audit periods with the state of Texas.

Summary Operating Data

(as of the dates indicated)

 

 

 

September 30, 2024

 

June 30, 2024

 

September 30, 2023

Fleet horsepower (1)

 

4,417,687

 

 

4,481,900

 

 

3,213,096

 

Revenue-generating horsepower (2)

 

4,259,843

 

 

4,224,839

 

 

3,210,076

 

Fleet compression units

 

5,297

 

 

7,317

 

 

3,051

 

Revenue-generating compression units

 

4,757

 

 

5,753

 

 

3,034

 

Revenue-generating horsepower per revenue-generating compression unit (3)

 

895

 

 

734

 

 

1,058

 

Fleet utilization (4)

 

96.4

%

 

94.3

%

 

99.9

%

(1)

Fleet horsepower includes owned horsepower excluding 46,313, 27,663 and 31,520 of non-marketable or obsolete horsepower as of September 30, 2024, June 30, 2024, and September 30, 2023, respectively.

(2)

Revenue-generating horsepower includes fleet horsepower that is (x) under contract, operating and generating revenue or (y) under contract or subject to a firm commitment with a customer and available to be deployed.

(3)

Calculated as (i) revenue-generating horsepower divided by (ii) revenue-generating compression units at period end.

(4)

Fleet utilization is calculated as (i) revenue-generating horsepower divided by (ii) fleet horsepower

Full-Year 2024 Guidance

Kodiak is providing revised guidance for the full year 2024. The full-year 2024 guidance below incorporates three quarters of the financial impact of the CSI Acquisition that closed on April 1, 2024. Amounts below are in thousands except percentages.

 

 

Full-Year 2024 Guidance

 

 

Low

 

High

Adjusted EBITDA (1)

 

$

600,000

 

 

$

610,000

 

Discretionary Cash Flow (1)(2)

 

$

365,000

 

 

$

385,000

 

 

 

 

 

 

Segment Information

 

 

 

 

Contract Services revenues

 

$

1,020,000

 

 

$

1,040,000

 

Contract Services Adjusted Gross Margin Percentage (1)

 

 

64

%

 

 

66

%

Other Services revenues

 

$

125,000

 

 

$

135,000

 

Other Services Adjusted Gross Margin Percentage (1)

 

 

14

%

 

 

17

%

 

 

 

 

 

Capital Expenditures

 

 

 

 

Growth capital expenditures (3)

 

$

210,000

 

 

$

230,000

 

Maintenance capital expenditures

 

$

60,000

 

 

$

70,000

 

(1)

The Company is unable to reconcile projected Adjusted EBITDA to projected net income (loss) and Discretionary Cash Flow to projected net cash provided by operating activities, the most comparable financial measures calculated in accordance with GAAP, respectively, without unreasonable efforts because components of the calculations are inherently unpredictable, such as changes to current assets and liabilities, unknown future events, and estimating certain future GAAP measures. The inability to project certain components of the calculation would significantly affect the accuracy of the reconciliations.

(2)

Discretionary Cash Flow guidance assumes no change to Secured Overnight Financing Rate futures.

(3)

Growth capital expenditures guidance excludes (i) approximately $30 million in one-time capital expenditures related to the CSI Acquisition, (ii) a $20 million non-cash accrual for sales taxes on compression units purchased in prior years and (iii) proceeds from the sale of small horsepower compression units.

Conference Call

Kodiak will conduct a conference call on Thursday, November 7, 2024, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss financial and operating results for the quarter ended September 30, 2024. To listen to the call by phone, dial 877-407-4012 and ask for the Kodiak Gas Services call at least 10 minutes prior to the start time. To listen to the call via webcast, please visit the Investors tab of Kodiak’s website at www.kodiakgas.com.

About Kodiak

Kodiak is the largest contract compression services provider in the United States, serving as a critical link in the infrastructure that enables the safe and reliable production and transportation of natural gas and oil. Headquartered in The Woodlands, Texas, Kodiak provides contract compression and related services to oil and gas producers and midstream customers in high–volume gas gathering systems, processing facilities, multi-well gas lift applications and natural gas transmission systems. More information is available at www.kodiakgas.com.

Non-GAAP Financial Measures

Adjusted EBITDA is defined as net income (loss) before interest expense, net; income tax expense (benefit); and depreciation and amortization; plus (i) loss (gain) on derivatives; (ii) equity compensation expense; (iii) severance expenses; (iv) transaction expenses; and (v) loss (gain) on sale of assets. Adjusted EBITDA Percentage is defined as Adjusted EBITDA divided by total revenues. Adjusted EBITDA and Adjusted EBITDA Percentage are used as supplemental financial measures by our management and external users of our financial statements, such as investors, commercial banks and other financial institutions, to assess: (i) the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets; (ii) the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities; (iii) the ability of our assets to generate cash sufficient to make debt payments and pay dividends; and (iv) our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods and capital structure. We believe Adjusted EBITDA and Adjusted EBITDA Percentage provide useful information to investors because, when viewed with our GAAP results and the accompanying reconciliation, they provide a more complete understanding of our performance than GAAP results alone. We also believe that external users of our financial statements benefit from having access to the same financial measures that management uses in evaluating the results of our business. Reconciliations of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, and net cash provided by operating activities are presented below.

Adjusted Gross Margin is defined as revenue less cost of operations, exclusive of depreciation and amortization expense. Adjusted Gross Margin Percentage is defined as Adjusted Gross Margin divided by revenues. We believe Adjusted Gross Margin and Adjusted Gross Margin Percentage are useful as supplemental measures to investors of our operating profitability. Reconciliations of Adjusted Gross Margin to gross margin are presented below.

Discretionary Cash Flow is defined as net cash provided by operating activities less (i) maintenance capital expenditures;(ii) gain on sale of capital assets; (iii) certain changes in operating assets and liabilities; and (iv) certain other expenses; plus (x) cash loss on extinguishment of debt; and (y) transaction expenses. We believe Discretionary Cash Flow is a useful liquidity and performance measure and supplemental financial measure for us and our investors in assessing our ability to pay cash dividends to our stockholders, make growth capital expenditures and assess our operating performance. Reconciliations of Discretionary Cash Flow to net income (loss) and net cash provided by operating activities are presented below.

Free Cash Flow is defined as net cash provided by operating activities less (i) maintenance capital expenditures; (ii) gain on sale of capital assets; (iii) certain changes in operating assets and liabilities; (iv) certain other expenses; and (v) net growth capital expenditures; plus (x) transaction expenses; and (y) proceeds from sale of capital assets. We believe Free Cash Flow is a liquidity measure and useful supplemental financial measure for us and investors in assessing our ability to pursue business opportunities and investments to grow our business and to service our debt. Reconciliations of Free Cash Flow to net income (loss) and net cash provided by operating activities are presented below.

Cautionary Note Regarding Forward-Looking Statements

This news release contains, and our officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Examples of forward-looking statements include, among others, statements we make regarding: (i) expected operating results, such as revenue growth and earnings, including changes due to CSI Acquisition, and our ability to service our indebtedness; (ii) anticipated levels of capital expenditures and uses of capital; (iii) current or future volatility in the credit markets and future market conditions; (iv) potential and pending acquisition transactions or other strategic transactions, the timing thereof, the receipt of necessary approvals to close those transactions, our ability to finance such transactions and our ability to achieve the intended operational, financial and strategic benefits from any such transactions; (v) expected synergies and efficiencies to be achieved as a result of the CSI Acquisition; (vi) expectations regarding leverage and dividend profile as a result of the CSI Acquisition, including the amount and timing of future dividend payments; (vii) expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities and governmental and regulatory investigations and proceedings; (viii) production and capacity forecasts for the natural gas and oil industry; (ix) strategy for customer retention, growth, fleet maintenance, market position, and financial results; (x) our interest rate hedges; and (xi) strategy for risk management.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) a reduction in the demand for natural gas and oil; (ii) the loss of, or the deterioration of the financial condition of, any of our key customers; (iii) nonpayment and nonperformance by our customers, suppliers or vendors; (iv) competitive pressures that may cause us to lose market share; (v) the structure of our Contract Services contracts and the failure of our customers to continue to contract for services after expiration of the primary term; (vi) our ability to successfully integrate any acquired business, including CSI Compressco, and realize the expected benefits thereof; (vii) our ability to fund purchases of additional compression equipment; (viii) a deterioration in general economic, business, geopolitical or industry conditions, including as a result of the conflict between Russia and Ukraine, inflation, and slow economic growth in the United States; (ix) tax legislation and administrative initiatives or challenges to our tax positions; (x) the loss of key management, operational personnel or qualified technical personnel; (xi) our dependence on a limited number of suppliers; (xii) the cost of compliance with existing governmental regulations and proposed governmental regulations, including climate change legislation; (xiii) the cost of compliance with regulatory initiatives and stakeholder pressures, including environmental, social and governance scrutiny; (xiv) the inherent risks associated with our operations, such as equipment defects and malfunctions; (xv) our reliance on third-party components for use in our information technology systems; (xvi) legal and reputational risks and expenses relating to the privacy, use and security of employee and client information; (xvii) threats of cyber-attacks or terrorism; (xviii) agreements that govern our debt contain features that may limit our ability to operate our business and fund future growth and also increase our exposure to risk during adverse economic conditions; (xix) volatility in interest rates; (xx) our ability to access the capital and credit markets or borrow on affordable terms to obtain additional capital that we may require; (xxi) the effectiveness of our disclosure controls and procedures; and (xxii) such other factors as discussed throughout the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (“SEC”) and those risks disclosed in subsequent filings on Forms 10-Q and 8-K with the SEC, which can be obtained free of charge on the SEC’s website at http://www.sec.gov.

Any forward-looking statement made by us in this news release is based only on information currently available to us and speaks only as of the date on which it is made. Except as may be required by applicable law, we undertake no obligation to publicly update any forward-looking statement whether as a result of new information, future developments or otherwise.

KODIAK GAS SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

September 30, 2024

 

June 30, 2024

 

September 30, 2023

Revenues:

 

 

 

 

 

 

Contract Services

 

$

284,313

 

 

$

276,250

 

 

$

186,673

 

Other Services

 

 

40,334

 

 

 

33,403

 

 

 

44,310

 

Total revenues

 

 

324,647

 

 

 

309,653

 

 

 

230,983

 

Operating expenses:

 

 

 

 

 

 

Cost of operations (exclusive of depreciation and amortization shown below)

 

 

 

 

 

 

Contract Services

 

 

96,617

 

 

 

99,333

 

 

 

65,470

 

Other Services

 

 

32,674

 

 

 

27,936

 

 

 

38,820

 

Depreciation and amortization

 

 

73,452

 

 

 

69,463

 

 

 

46,087

 

Long-lived asset impairment

 

 

9,921

 

 

 

—

 

 

 

—

 

Selling, general and administrative

 

 

35,528

 

 

 

59,927

 

 

 

19,648

 

(Gain) loss on sale of property, plant and equipment

 

 

10,376

 

 

 

(1,173

)

 

 

—

 

Total operating expenses

 

 

258,568

 

 

 

255,486

 

 

 

170,025

 

Income from operations

 

 

66,079

 

 

 

54,167

 

 

 

60,958

 

Other income (expenses):

 

 

 

 

 

 

Interest expense, net

 

 

(53,991

)

 

 

(52,133

)

 

 

(39,710

)

Loss on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

(6,757

)

Gain (loss) on derivatives

 

 

(20,327

)

 

 

6,797

 

 

 

15,141

 

Other income (expense), net

 

 

(156

)

 

 

218

 

 

 

38

 

Total other expenses, net

 

 

(74,474

)

 

 

(45,118

)

 

 

(31,288

)

Income (loss) before income taxes

 

 

(8,395

)

 

 

9,049

 

 

 

29,670

 

Income tax expense (benefit)

 

 

(2,184

)

 

 

2,336

 

 

 

7,904

 

Net income (loss)

 

 

(6,211

)

 

 

6,713

 

 

 

21,766

 

Less: Net income (loss) attributable to noncontrolling interests

 

 

(563

)

 

 

485

 

 

 

—

 

Net income (loss) attributable to common shareholders

 

$

(5,648

)

 

$

6,228

 

 

$

21,766

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to common shareholders:

 

 

 

 

 

 

Basic net earnings (loss) per share

 

$

(0.07

)

 

$

0.07

 

 

$

0.28

 

Diluted net earnings (loss) per share

 

$

(0.07

)

 

$

0.06

 

 

$

0.28

 

Basic weighted average shares of common stock outstanding

 

 

84,292,083

 

 

 

84,202,352

 

 

 

76,731,868

 

Diluted weighted average shares of common stock outstanding

 

 

84,292,083

 

 

 

90,669,239

 

 

 

76,899,483

 

KODIAK GAS SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)

 

 

 

As of September 30, 2024

 

As of December 31, 2023

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

7,434

 

 

$

5,562

Accounts receivable, net

 

 

280,436

 

 

 

113,192

Inventories, net

 

 

118,085

 

 

 

76,238

Fair value of derivative instruments

 

 

4,110

 

 

 

8,194

Contract assets

 

 

13,491

 

 

 

17,424

Prepaid expenses and other current assets

 

 

19,801

 

 

 

10,353

Total current assets

 

 

443,357

 

 

 

230,963

Property, plant and equipment, net

 

 

3,406,325

 

 

 

2,536,091

Operating lease right-of-use assets, net

 

 

54,489

 

 

 

33,716

Finance lease right-of-use assets, net

 

 

4,702

 

 

 

—

Goodwill

 

 

413,532

 

 

 

305,553

Identifiable intangible assets, net

 

 

161,263

 

 

 

122,888

Fair value of derivative instruments

 

 

5,121

 

 

 

14,256

Deferred tax assets

 

 

17

 

 

 

—

Other assets

 

 

3,202

 

 

 

639

Total assets

 

$

4,492,008

 

 

$

3,244,106

Liabilities and Stockholders’ Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

85,848

 

 

$

49,842

Accrued liabilities

 

 

192,762

 

 

 

97,078

Contract liabilities

 

 

70,178

 

 

 

63,709

Total current liabilities

 

 

348,788

 

 

 

210,629

Long-term debt, net of unamortized debt issuance cost

 

 

2,595,398

 

 

 

1,791,460

Operating lease liabilities

 

 

50,491

 

 

 

34,468

Finance lease liabilities

 

 

2,737

 

 

 

—

Deferred tax liabilities

 

 

94,231

 

 

 

62,748

Other liabilities

 

 

3,971

 

 

 

2,148

Total liabilities

 

$

3,095,616

 

 

$

2,101,453

Commitments and contingencies (Note 14)

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, par value $0.01 per share; 50,000,000 shares of preferred stock authorized, 5,562,273 and zero issued and outstanding as of September 30, 2024, and December 31, 2023, respectively

 

 

56

 

 

 

—

Common stock, par value $0.01 per share; 750,000,000 shares of common stock authorized, 84,509,612 and 77,400,000 shares of common stock issued as of September 30, 2024, and December 31, 2023, respectively

 

 

845

 

 

 

774

Additional paid-in capital

 

 

1,159,431

 

 

 

963,760

Treasury stock, at cost; 1,000,000 and zero shares as of September 30, 2024, and December 31, 2023, respectively

 

 

(25,000

)

 

 

—

Noncontrolling interest

 

 

149,846

 

 

 

—

Retained earnings

 

 

111,214

 

 

 

178,119

Total stockholders’ equity

 

 

1,396,392

 

 

 

1,142,653

Total liabilities and stockholders’ equity

 

$

4,492,008

 

 

$

3,244,106

KODIAK GAS SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

Nine Months Ended September 30,

 

 

2024

 

 

 

2023

 

Cash flows from operating activities:

 

 

 

Net income

$

30,734

 

 

$

26,940

 

Adjustments to reconcile net income to net cash provided by operating activities

 

 

 

Depreciation and amortization

 

189,859

 

 

 

136,414

 

Long-lived asset impairment

 

9,921

 

 

 

—

 

Equity compensation expense

 

12,064

 

 

 

3,452

 

Amortization of debt issuance costs

 

8,079

 

 

 

11,260

 

Non-cash lease expense

 

3,164

 

 

 

3,132

 

Provision for credit losses

 

4,625

 

 

 

2,047

 

Inventory reserve

 

476

 

 

 

375

 

(Gain) loss on sale of property, plant and equipment

 

9,203

 

 

 

(721

)

Change in fair value of derivatives

 

13,219

 

 

 

13,551

 

Deferred tax provision

 

4,821

 

 

 

6,312

 

Loss on extinguishment of debt

 

—

 

 

 

4,359

 

Changes in operating assets and liabilities, exclusive of effects of business acquisition:

 

 

 

Accounts receivable

 

(126,941

)

 

 

(21,371

)

Inventories

 

(7,895

)

 

 

1,174

 

Contract assets

 

3,934

 

 

 

(6,053

)

Prepaid expenses and other current assets

 

(747

)

 

 

(3,733

)

Accounts payable

 

40,204

 

 

 

3,257

 

Accrued and other liabilities

 

9,593

 

 

 

8,497

 

Contract liabilities

 

5,068

 

 

 

14,807

 

Other assets

 

121

 

 

 

—

 

Net cash provided by operating activities

 

209,502

 

 

 

203,699

 

Cash flows from investing activities:

 

 

 

Net cash acquired in acquisition of CSI Compressco LP

 

9,458

 

 

 

—

 

Purchase of property, plant and equipment

 

(263,719

)

 

 

(145,573

)

Proceeds from sale of property, plant and equipment

 

14,977

 

 

 

1,055

 

Other

 

(35

)

 

 

(45

)

Net cash used in investing activities

 

(239,319

)

 

 

(144,563

)

Cash flows from financing activities:

 

 

 

Borrowings on debt instruments

 

2,297,435

 

 

 

756,418

 

Payments on debt instruments

 

(2,114,013

)

 

 

(1,021,556

)

Principal payments on other borrowings

 

(3,721

)

 

 

—

 

Payment of debt issuance cost

 

(16,346

)

 

 

(32,759

)

Principal payments on finance leases

 

(870

)

 

 

—

 

Proceeds from initial public offering, net of underwriter discounts

 

—

 

 

 

277,840

 

Offering costs

 

(1,162

)

 

 

(9,247

)

Loss on extinguishment of debt

 

—

 

 

 

(1,835

)

Dividends paid to stockholders

 

(97,506

)

 

 

—

 

Repurchase of common shares

 

(25,000

)

 

 

—

 

Cash paid for shares withheld to cover taxes

 

(2,665

)

 

 

—

 

Net effect on deferred taxes and taxes payable related to the vesting of restricted stock

 

418

 

 

 

—

 

Distribution to parent

 

—

 

 

 

(42,300

)

Distributions to noncontrolling interest

 

(4,881

)

 

 

—

 

Net cash provided by (used in) financing activities

 

31,689

 

 

 

(73,439

)

Net increase (decrease) in cash and cash equivalents

 

1,872

 

 

 

(14,303

)

Cash and cash equivalents - beginning of period

 

5,562

 

 

 

20,431

 

Cash and cash equivalents - end of period

$

7,434

 

 

$

6,128

 

Supplemental cash disclosures:

 

 

 

Cash paid for interest

$

106,463

 

 

$

173,006

 

Cash paid for taxes

$

10,333

 

 

$

5,946

 

Supplemental disclosure of non-cash investing activities:

 

 

 

(Increase) decrease in accrued capital expenditures

$

2,961

 

 

$

(6,498

)

Supplemental disclosure of non-cash financing activities:

 

 

 

Dividends equivalent

$

687

 

$

—

 

Issuance of common shares in acquisition of CSI Compressco LP

$

188,167

 

 

$

—

 

Issuance of preferred shares and noncontrolling interest in acquisition of CSI Compressco LP

$

154,118

 

 

$

—

 

Non-cash debt novation

$

—

 

 

$

(689,829

)

Non-cash loss on extinguishment of debt

$

—

 

 

$

(563

)

Non-cash offering costs

$

—

 

 

$

(792

)

KODIAK GAS SERVICES, INC.

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(in thousands, excluding percentages; unaudited)

 

 

 

Three Months Ended

 

 

September 30, 2024

 

June 30, 2024

 

September 30, 2023

Net income (loss)

 

$

(6,211

)

 

$

6,713

 

 

$

21,766

 

Interest expense, net

 

 

53,991

 

 

 

52,133

 

 

 

39,710

 

Income tax (benefit) expense

 

 

(2,184

)

 

 

2,336

 

 

 

7,904

 

Depreciation and amortization

 

 

73,452

 

 

 

69,463

 

 

 

46,087

 

Long-lived asset impairment

 

 

9,921

 

 

 

—

 

 

 

—

 

Loss on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

6,757

 

(Gain) loss on derivatives

 

 

20,327

 

 

 

(6,797

)

 

 

(15,141

)

Equity compensation expense (1)

 

 

3,905

 

 

 

5,311

 

 

 

2,544

 

Severance expense (2)

 

 

2,243

 

 

 

8,969

 

 

 

—

 

Transaction expenses (3)

 

 

2,554

 

 

 

17,387

 

 

 

440

 

(Gain) loss on sale of property, plant and equipment

 

 

10,376

 

 

 

(1,173

)

 

 

—

 

Adjusted EBITDA

 

$

168,374

 

 

$

154,342

 

 

$

110,067

 

Adjusted EBITDA Percentage

 

 

51.9

%

 

 

49.8

%

 

 

47.7

%

(1)

For the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, there were $3.9 million, $5.3 million and $2.5 million, respectively, of non-cash adjustments for equity compensation expense.

(2)

For the three months ended September 30, 2024 and June 30, 2024 there were $2.2 million and $9.0 million, respectively, of severance expenses related to the CSI Acquisition. There were no such expenses for the three months ended September 30, 2023.

(3)

Represents certain costs associated with non-recurring professional services, primarily related to the CSI Acquisition for the three months ended September 30, 2024 and June 30, 2024.

KODIAK GAS SERVICES, INC.

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED EBITDA

(in thousands; unaudited)

 

 

 

Three Months Ended

 

 

September 30, 2024

 

June 30, 2024

 

September 30, 2023

Net cash provided by operating activities

 

$

36,878

 

 

$

121,082

 

 

$

85,731

 

Interest expense, net

 

 

53,991

 

 

 

52,133

 

 

 

39,710

 

Income tax (benefit) expense

 

 

(2,184

)

 

 

2,336

 

 

 

7,904

 

Deferred tax provision

 

 

2,283

 

 

 

(843

)

 

 

(5,551

)

Cash received on derivatives

 

 

(7,185

)

 

 

(6,745

)

 

 

(7,163

)

Loss on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

2,398

 

Severance expense (1)

 

 

2,243

 

 

 

8,969

 

 

 

—

 

Transaction expenses (2)

 

 

2,554

 

 

 

17,387

 

 

 

440

 

Other (3)

 

 

(4,685

)

 

 

(7,605

)

 

 

(3,705

)

Change in operating assets and liabilities

 

 

84,479

 

 

 

(32,372

)

 

 

(9,697

)

Adjusted EBITDA

 

$

168,374

 

 

$

154,342

 

 

$

110,067

 

(1)

For the three months ended September 30, 2024 and June 30, 2024 there were $2.2 million and $9.0 million, respectively, of severance expenses related to the CSI Acquisition. There were no such expenses for the three months ended September 30, 2023.

(2)

Represents certain costs associated with non-recurring professional services, primarily related to the CSI Acquisition for the three months ended September 30, 2024 and June 30, 2024.

(3)

Includes amortization of debt issuance costs, non-cash lease expense, provision for credit losses and inventory reserve.

KODIAK GAS SERVICES, INC.

RECONCILIATION OF ADJUSTED GROSS MARGIN TO GROSS MARGIN FOR CONTRACT SERVICES

(in thousands, excluding percentages; unaudited)

 

 

 

Three Months Ended

 

 

September 30, 2024

 

June 30, 2024

 

September 30, 2023

Total revenues

 

$

284,313

 

 

$

276,250

 

 

$

186,673

 

Cost of sales (excluding depreciation and amortization)

 

 

(96,617

)

 

 

(99,333

)

 

 

(65,470

)

Depreciation and amortization

 

 

(73,452

)

 

 

(69,463

)

 

 

(46,087

)

Gross margin

 

$

114,244

 

 

$

107,454

 

 

$

75,116

 

Gross margin percentage

 

 

40.2

%

 

 

38.9

%

 

 

40.2

%

Depreciation and amortization

 

 

73,452

 

 

 

69,463

 

 

 

46,087

 

Adjusted Gross Margin

 

$

187,696

 

 

$

176,917

 

 

$

121,203

 

Adjusted Gross Margin Percentage (1)

 

 

66.0

%

 

 

64.0

%

 

 

64.9

%

(1)

Calculated using Adjusted Gross Margin for Contract Services as a percentage of total Contract Services revenues.

KODIAK GAS SERVICES, INC.

RECONCILIATION OF ADJUSTED GROSS MARGIN TO GROSS MARGIN FOR OTHER SERVICES

(in thousands, excluding percentages; unaudited)

 

 

 

Three Months Ended

 

 

September 30, 2024

 

June 30, 2024

 

September 30, 2023

Total revenues

 

$

40,334

 

 

$

33,403

 

 

$

44,310

 

Cost of sales (excluding depreciation and amortization)

 

 

(32,674

)

 

 

(27,936

)

 

 

(38,820

)

Depreciation and amortization

 

 

—

 

 

 

—

 

 

 

—

 

Gross margin

 

$

7,660

 

 

$

5,467

 

 

$

5,490

 

Gross margin percentage

 

 

19.0

%

 

 

16.4

%

 

 

12.4

%

Depreciation and amortization

 

 

—

 

 

 

—

 

 

 

—

 

Adjusted Gross Margin

 

$

7,660

 

 

$

5,467

 

 

$

5,490

 

Adjusted Gross Margin Percentage (1)

 

 

19.0

%

 

 

16.4

%

 

 

12.4

%

(1)

Calculated using Adjusted Gross Margin for Other Services as a percentage of total Other Services revenues.

KODIAK GAS SERVICES, INC.

RECONCILIATION OF NET INCOME (LOSS) TO DISCRETIONARY CASH FLOW AND FREE CASH FLOW

(in thousands; unaudited)

 

 

 

Three Months Ended

 

 

September 30, 2024

 

June 30, 2024

 

September 30, 2023

Net income (loss)

 

$

(6,211

)

 

$

6,713

 

 

$

21,766

 

Depreciation and amortization

 

 

73,452

 

 

 

69,463

 

 

 

46,087

 

Long-lived asset impairment

 

 

9,921

 

 

 

—

 

 

 

—

 

Change in fair value of derivatives

 

 

27,512

 

 

 

(52

)

 

 

(7,978

)

Loss on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

6,757

 

Deferred tax provision

 

 

(2,283

)

 

 

843

 

 

 

5,551

 

Amortization of debt issuance costs

 

 

3,133

 

 

 

2,303

 

 

 

189

 

Equity compensation expense (1)

 

 

3,905

 

 

 

5,311

 

 

 

2,544

 

Severance expense (2)

 

 

2,243

 

 

 

8,969

 

 

 

—

 

Transaction expenses (3)

 

 

2,554

 

 

 

17,387

 

 

 

440

 

(Gain) loss on sale of property, plant and equipment

 

 

10,376

 

 

 

(1,173

)

 

 

—

 

Maintenance capital expenditures

 

 

(21,553

)

 

 

(19,147

)

 

 

(12,312

)

Discretionary Cash Flow

 

$

103,049

 

 

$

90,617

 

 

$

63,044

 

Growth capital expenditures (4)(5)(6)

 

 

(65,115

)

 

 

(90,390

)

 

 

(55,671

)

Proceeds from sale of property, plant and equipment

 

 

14,566

 

 

 

411

 

 

 

—

 

Free Cash Flow

 

$

52,500

 

 

$

638

 

 

$

7,373

 

(1)

For the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, there were $3.9 million, $5.3 million and $2.5 million, respectively, of non-cash adjustments for equity compensation expense.

(2)

For the three months ended September 30, 2024 and June 30, 2024 there were $2.2 million and $9.0 million, respectively, of severance expenses related to the CSI Acquisition. There were no such expenses for the three months ended September 30, 2023.

(3)

Represents certain costs associated with non-recurring professional services, primarily related to the CSI Acquisition for the three months ended September 30, 2024 and June 30, 2024, and other costs.

(4)

For the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, growth capital expenditures include a $0.3 million decrease, a $12.6 million decrease and a $16.4 million increase in accrued capital expenditures, respectively.

(5)

For the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, there were $51.7 million, $75.3 million and $52.0 million of new unit growth capital expenditures, respectively.

(6)

For the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, growth capital expenditures include a non-cash increase in the sales tax accrual on compression equipment purchases of $1.7 million, $19.8 million and $0.3 million, respectively. These accrual amounts are estimated based on the best-known information as it relates to open audit periods with the state of Texas.

KODIAK GAS SERVICES, INC.

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO DISCRETIONARY CASH FLOW AND FREE CASH FLOW

(in thousands; unaudited)

 

 

 

Three Months Ended

 

 

September 30, 2024

 

June 30, 2024

 

September 30, 2023

Net cash provided by operating activities

 

$

36,878

 

 

$

121,082

 

 

$

85,731

 

Maintenance capital expenditures

 

 

(21,553

)

 

 

(19,147

)

 

 

(12,312

)

Loss on extinguishment of debt

 

 

—

 

 

 

—

 

 

 

2,398

 

Severance expense (1)

 

 

2,243

 

 

 

8,969

 

 

 

—

 

Transaction expenses (2)

 

 

2,554

 

 

 

17,387

 

 

 

440

 

(Gain) loss on sale of property, plant and equipment

 

 

10,376

 

 

 

(1,173

)

 

 

—

 

Change in operating assets and liabilities

 

 

84,479

 

 

 

(32,372

)

 

 

(9,697

)

Other (3)

 

 

(11,928

)

 

 

(4,129

)

 

 

(3,516

)

Discretionary Cash Flow

 

$

103,049

 

 

$

90,617

 

 

$

63,044

 

Growth capital expenditures (4)(5)(6)

 

 

(65,115

)

 

 

(90,390

)

 

 

(55,671

)

Proceeds from sale of property, plant and equipment

 

 

14,566

 

 

 

411

 

 

 

—

 

Free Cash Flow

 

$

52,500

 

 

$

638

 

 

$

7,373

 

(1)

For the three months ended September 30, 2024 and June 30, 2024 there were $2.2 million and $9.0 million, respectively, of severance expenses related to the CSI Acquisition. There were no such expenses for the three months ended September 30, 2023.

(2)

Represents certain costs associated with non-recurring professional services, primarily related to the CSI Acquisition for the three months ended September 30, 2024 and June 30, 2024, and other costs.

(3)

Includes non-cash lease expense, provision for credit losses and inventory reserve.

(4)

For the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, growth capital expenditures include a $0.3 million decrease, a $12.6 million decrease and a $16.4 million increase in accrued capital expenditures, respectively.

(5)

For the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, there were $51.7 million, $75.3 million and $52.0 million of new unit growth capital expenditures, respectively.

(6)

For the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, growth capital expenditures include a non-cash increase in the sales tax accrual on compression equipment purchases of $1.7 million, $19.8 million and $0.3 million, respectively. These accrual amounts are estimated based on the best-known information as it relates to open audit periods with the state of Texas.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241106306941/en/

Investor Contact Graham Sones, VP – Investor Relations ir@kodiakgas.com (936) 755-3529