UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________

FORM 10-Q

____________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2023~~March 31, 2024


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File Number: 001-41732

____________________

Kodiak Gas Services, Inc.

(Exact Name of Registrant as Specified in its Charter)

____________________


Delaware						83-3013440
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

~~15320 Highway 105 W,~~9950 Woodloch Forest Drive, Suite ~~210~~1900 ~~Montgomery,~~The Woodlands, Texas						~~77356~~77380
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (936) 539-3300

____________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Common stock, par value $0.01 per share

KGS

New York Stock Exchange

____________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of ~~November~~May 9, ~~2023,~~2024, the registrant had ~~77,400,000~~84,294,141 shares of common stock, par value $0.01 per share, outstanding.

Table of Contents


		Page
Cautionary Note Regarding Forward-Looking Statements

PART I.	FINANCIAL INFORMATION	1

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	12
	Condensed Consolidated Statements of Operations	23
	Condensed Consolidated Statements of Stockholders’ Equity	34
	Condensed Consolidated Statements of Cash Flows	45
	Notes to Unaudited Condensed Consolidated Financial Statements	56
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2023
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36

PART II.	OTHER INFORMATION	3837

Item 1.	Legal Proceedings	3837
Item 1A.	Risk Factors	3837
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3837
Item 3.	Defaults Upon Senior Securities	3837
Item 4.	Mine Safety Disclosures	3837
Item 5.	Other Information	3837
Item 6.	Exhibits	3837

Signatures		4139

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) 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:

•Expected operating results, such as revenue growth and ~~earnings;~~earnings, and our ability to service our indebtedness;

•Anticipated levels of capital expenditures and uses of capital;

•Current or future volatility in the credit markets and future market conditions;

•Potential or pending acquisition transactions or other strategic transactions, the timing thereof, the receipt of necessary approvals to close such transactions, our ability to finance such transactions, and our ability to achieve the intended operational, financial and strategic benefits from any such transactions;

•Expected synergies and efficiencies to be achieved as a result of the CSI Acquisition;

•Expectations regarding leverage and dividend profile as a result of the CSI Acquisition, including the amount and timing of future dividend payments;

•Expectations of the effect on our financial condition of claims, litigation, environmental costs, contingent liabilities, and governmental and regulatory investigations and proceedings;

•Production and capacity forecasts for the natural gas and oil industry;

•Strategy for customer retention, growth, fleet maintenance, market position and financial results;

•~~The amount and timing of future dividend payments;~~

•Our interest rate hedges; and

•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:

•A reduction in the demand for natural gas and oil;

•The loss of, or the deterioration of the financial condition of, any of our key customers;

•Nonpayment and nonperformance by our customers, suppliers or vendors;

•Competitive pressures that may cause us to lose market share;

•The structure of our Compression Operations contracts and the failure of our customers to continue to contract for services after expiration of the primary term;

•Our ability to ~~make acquisitions on economically acceptable terms;~~successfully integrate any acquired businesses, including CSI Compressco, and realize the expected benefits thereof;

•Our ability to fund purchases of additional compression equipment;

•A deterioration in general economic, business, geopolitical or industry conditions, including as a result of the conflict between Russia and Ukraine and the Israel-Hamas War, inflation and slow economic growth in the United States;

•A downturn in the economic environment, as well as inflationary pressures;

•Tax legislation and administrative initiatives or challenges to our tax positions;

•The loss of key management, operational personnel or qualified technical personnel;

•Our dependence on a limited number of suppliers;

Table of Contents

•The cost of compliance with existing ~~governmental regulations~~ and ~~proposed~~new governmental regulations, including climate change ~~legislation and~~legislation;

•The cost of compliance with regulatory initiatives and ~~stakeholder~~stakeholders’ pressures, including ~~ESG~~environmental, social and governance scrutiny;

•The inherent risks associated with our operations, such as equipment defects and malfunctions;

•Our reliance on third-party components for use in our ITinformation technology systems;

•Legal and reputational risks and expenses relating to the privacy, use and security of employee and client information;

•Threats of cyber-attacks or terrorism;

~~Table of Contents~~

•~~Our credit agreement contains~~Agreements that govern our debt contain features that may limit our ability to operate our business and fund future growth and also ~~increases~~increase our exposure to risk during adverse economic conditions;

•Volatility in interest rates;

•Our ability to access the capital and credit markets or borrow on affordable terms to obtain additional capital that we may require;

•The effectiveness of our disclosure controls and procedures; and

•Such other factors ~~as discussed throughout~~set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the ~~“Risk Factors”~~fiscal year ended December 31, 2023, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our final prospectus filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 30, 2023 pursuant to Rule 424(b)(4) and throughout Part I, Item 2. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 1A. "Risk Factors" sections of this ~~Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023.~~Report.

Any forward-looking statement made by us in this Report 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.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Table of Contents

KODIAK GAS SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share and per share data)


		As of September 30, 2023		As of December 31, 2022
	As of March 31, 2024						As of March 31, 2024	As of December 31, 2023
Assets	Assets
Current assets:	Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	6,128	$	20,431
Accounts receivable, net	Accounts receivable, net	116,875		97,551
Inventories, net	Inventories, net	70,606		72,155
Fair value of derivative instruments	Fair value of derivative instruments	—		823
Contract assets	Contract assets	9,608		3,555
Prepaid expenses and other current assets	Prepaid expenses and other current assets	13,253		9,520
Total current assets	Total current assets	216,470		204,035
Property, plant and equipment, net	Property, plant and equipment, net	2,511,110		2,488,682
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	33,453		9,827
Goodwill	Goodwill	305,553		305,553
Identifiable intangible assets, net	Identifiable intangible assets, net	125,257		132,362
Fair value of derivative instruments	Fair value of derivative instruments	51,790		64,517
Other assets	Other assets	607		564
Total assets	Total assets	$	3,244,240	$	3,205,540
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity
Current liabilities:	Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable
Accounts payable
Accounts payable	Accounts payable	$	48,835	$	37,992
Accrued liabilities	Accrued liabilities	102,448		93,873
Contract liabilities	Contract liabilities	71,917		57,109
Total current liabilities	Total current liabilities	223,200		188,974
Long-term debt, net of unamortized debt issuance cost	Long-term debt, net of unamortized debt issuance cost	1,747,912		2,720,019
Operating lease liabilities	Operating lease liabilities	34,026		6,754
Deferred tax liabilities	Deferred tax liabilities	65,258		57,155
Other liabilities	Other liabilities	2,052		3,545
Total liabilities	Total liabilities	$	2,072,448	$	2,976,447
Commitments and contingencies (Note 13)	Commitments and contingencies (Note 13)					Commitments and contingencies (Note 13)
Stockholders’ Equity:
Common stock, par value $0.01 per share; 750,000,000 shares of common stock authorized, 77,400,000 and 59,000,000 shares of common stock issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		774		590
Stockholders’ equity:
Preferred stock, par value $0.01 par value; 50,000,000 shares of preferred stock authorized, zero issued as of March 31, 2024, and December 31, 2023, respectively
Preferred stock, par value $0.01 par value; 50,000,000 shares of preferred stock authorized, zero issued as of March 31, 2024, and December 31, 2023, respectively
Preferred stock, par value $0.01 par value; 50,000,000 shares of preferred stock authorized, zero issued as of March 31, 2024, and December 31, 2023, respectively
Common stock, par value $0.01 per share; 750,000,000 shares of common stock authorized, 77,434,577 and 77,400,000 shares of common stock issued and outstanding as of March 31, 2024, and December 31, 2023, respectively
Additional paid-in capital	Additional paid-in capital	956,465		33,189
Retained earnings	Retained earnings	214,553		195,314
Total stockholders’ equity	Total stockholders’ equity	1,171,792		229,093
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,244,240	$	3,205,540

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

KODIAK GAS SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share data)

For the Three Months Ended
September 30, For the Nine Months Ended
September 30,
2023 2022 2023 2022
Revenues:
Compression Operations $ 186,673 $ 163,662 $ 545,989 $ 483,965
Other Services 44,310 18,983 78,412 44,172
Total revenues 230,983 182,645 624,401 528,137
Operating expenses:
Cost of operations (exclusive of depreciation and amortization shown below):
Compression Operations 65,470 55,872 193,257 167,145
Other Services 38,820 14,037 65,907 34,638
Depreciation and amortization 46,087 44,111 136,414 129,913
Selling, general and administrative expenses 19,648 11,190 46,171 32,760
Gain on sale of capital assets — (818) (721) (825)
Total operating expenses 170,025 124,392 441,028 363,631
Income from operations 60,958 58,253 183,373 164,506
Other income (expenses):
Interest expense, net (39,710) (49,859) (182,030) (104,616)
Loss on extinguishment of debt (6,757) — (6,757) —
Gain on derivatives 15,141 51,862 42,080 76,972
Other income (expense) 38 (19) 39 (10)
Total other income (expenses) (31,288) 1,984 (146,668) (27,654)
Income before income taxes 29,670 60,237 36,705 136,852
Income tax expense 7,904 14,337 9,765 32,496
Net income $ 21,766 $ 45,900 $ 26,940 $ 104,356
Basic and diluted earnings per share
Basic net earnings per share $ 0.28 $ 0.78 $ 0.41 $ 1.77
Diluted net earnings per share $ 0.28 $ 0.78 $ 0.41 $ 1.77
Basic weighted average shares of common stock outstanding 76,731,868 59,000,000 64,954,244 59,000,000
Diluted weighted average shares of common stock outstanding 76,899,483 59,000,000 65,121,859 59,000,000

~~See accompanying notes to the unaudited condensed consolidated financial statements.~~

~~Table of Contents~~

~~KODIAK GAS SERVICES, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~

~~(UNAUDITED)~~

~~(in thousands, except share data)~~

Common Stock
Shares Amount Additional Paid-In
Capital Retained
Earnings Total
Stockholders’
Equity
Balance, January 1, 2022 59,000,000 $ 590 $ 871,403 $ 88,078 $ 960,071
Equity compensation - profits interests — — (136) 619 483
Net income, as restated — — — 49,555 49,555
Balance, March 31, 2022, as restated 59,000,000 $ 590 $ 871,267 $ 138,252 $ 1,010,109
Distribution to parent — — (838,000) — (838,000)
Net income — — — 8,901 8,901
Balance, June 30, 2022 59,000,000 $ 590 $ 33,267 $ 147,153 $ 181,010
Net income — — — 45,900 45,900
Balance, September 30, 2022 59,000,000 $ 590 $ 33,267 $ 193,053 $ 226,910
Balance, January 1, 2023 59,000,000 $ 590 $ 33,189 $ 195,314 $ 229,093
Equity compensation - profits interests — — (193) 879 686
Net loss — — — (12,343) (12,343)
Balance, March 31, 2023 59,000,000 $ 590 $ 32,996 $ 183,850 $ 217,436
Equity compensation - profits interests — — 193 29 222
Distribution to parent — — (33,189) (9,111) (42,300)
Net income — — — 17,517 17,517
Balance, June 30, 2023 59,000,000 $ 590 $ — $ 192,285 $ 192,875
Proceeds from initial public offering, net of underwriter discount 18,400,000 184 277,656 — 277,840
Offering costs — — (10,823) — (10,823)
Debt novation — — 687,590 — 687,590
Equity compensation - profits interests — — — 502 502
Equity compensation - Omnibus Plan — — 2,042 — 2,042
Net income — — — 21,766 21,766
Balance, September 30, 2023 77,400,000 $ 774 $ 956,465 $ 214,553 $ 1,171,792


	For the Three Months Ended March 31,
	2024		2023
Revenues:
Compression Operations	$	193,399	$	177,697
Other Services	22,093		12,415
Total revenues	215,492		190,112
Operating expenses:
Cost of operations (exclusive of depreciation and amortization shown below):
Compression Operations	65,882		62,770
Other Services	17,684		8,988
Depreciation and amortization	46,944		44,897
Selling, general and administrative	24,824		13,085
Loss on sale of property, plant and equipment	—		17
Total operating expenses	155,334		129,757
Income from operations	60,158		60,355
Other income (expenses):
Interest expense, net	(39,740)		(68,662)
Gain (loss) on derivatives	19,757		(7,995)
Other expense	(68)		(31)
Total other expenses, net	(20,051)		(76,688)
Income (loss) before income taxes	40,107		(16,333)
Income tax expense (benefit)	9,875		(3,990)
Net income (loss)	$	30,232	$	(12,343)
Basic and diluted earnings per share
Basic net earnings (loss) per share	$	0.39	$	(0.21)
Diluted net earnings (loss) per share	$	0.39	$	(0.21)
Basic weighted average shares of common stock outstanding	77,432,283		59,000,000
Diluted weighted average shares of common stock outstanding	78,102,450		59,000,000

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

KODIAK GAS SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in ~~thousands)~~thousands, except share data)


	Common Shares
	Shares	Amount		Additional Paid- In Capital		Retained Earnings		Total Stockholders’ Equity
Balance, January 1, 2023	59,000,000	$	590	$	33,189	$	195,314	$	229,093
Equity compensation - profits interests	—	—		(193)		879		686
Net loss	—	—		—		(12,343)		(12,343)
Balance, March 31, 2023	59,000,000	$	590	$	32,996	$	183,850	$	217,436

Balance, January 1, 2024	77,400,000	$	774	$	963,760	$	178,119	$	1,142,653
Equity compensation - profits interests, net of forfeitures	—	—		—		161		161
Equity compensation - Omnibus Plan, net of forfeitures	—	—		2,687		—		2,687
Offering costs	—	—		(421)		—		(421)
Dividends and dividend equivalents paid to stockholders ($0.38 per common share)	—	—		—		(30,052)		(30,052)
Restricted Stock Units vested under the Omnibus Plan, net of 14,698 shares withheld for taxes	34,577	—		(294)		—		(294)
Net income	—	—		—		30,232		30,232
Other	—	—		—		7		7
Balance, March 31, 2024	77,434,577	$	774	$	965,732	$	178,467	$	1,144,973

For the Nine Months Ended
September 30,
2023 2022
Cash flows from operating activities:
Net income $ 26,940 $ 104,356
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 136,414 129,913
Stock-based compensation expense 3,452 619
Amortization of debt issuance costs 11,260 9,453
Non-cash lease expense 3,132 2,066
Provision for credit losses 2,047 85
Inventory reserve 375 375
Gain on sale of capital assets (721) (825)
Change in fair value of derivatives 13,551 (86,676)
Deferred tax provision 6,312 26,807
Loss on extinguishment of debt 4,359 —
Changes in operating assets and liabilities:
Accounts receivable (21,371) 5,048
Inventories 1,174 (9,904)
Contract assets (6,053) (8,111)
Prepaid expenses and other current assets (3,733) 598
Accounts payable 3,257 403
Accrued and other liabilities 8,497 8,673
Contract liabilities 14,807 3,974
Net cash provided by operating activities 203,699 186,854
Cash flows from investing activities:
Purchase of capital assets (145,573) (199,707)
Proceeds from sale of capital assets 1,055 8,023
Other (45) (86)
Net cash used in investing activities (144,563) (191,770)
Cash flows from financing activities:
Borrowings on debt instruments 756,418 1,409,006
Payments on debt instruments (1,021,556) (545,730)
Payment of debt issuance cost (32,759) (27,819)
Proceeds from initial public offering, net of underwriter discounts 277,840 —
Offering costs (9,247) —
Loss on extinguishment of debt (1,835) —
Distribution to parent (42,300) (838,000)
Net cash used in financing activities (73,439) (2,543)
Net decrease in cash and cash equivalents (14,303) (7,459)
Cash and cash equivalents - beginning of period 20,431 28,795
Cash and cash equivalents - end of period $ 6,128 $ 21,336
Supplemental cash disclosures:
Cash paid for interest $ 173,006 $ 88,569
Cash paid for taxes $ 5,946 $ 1,836
Supplemental disclosure of non-cash investing activities:
(Increase) decrease in accrued capital expenditures $ (6,498) $ 8,773
Supplemental disclosure of non-cash financing activities:
Non-cash debt novation $ (689,829) $ —
Non-cash loss on extinguishment of debt $ (563) $ —
Non-cash offering costs $ (792) $ —

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

KODIAK GAS SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Three Months Ended March 31,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	30,232	$	(12,343)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	46,944		44,897
Stock-based compensation expense	2,848		879
Amortization of debt issuance costs	2,643		5,445
Non-cash lease expense	1,200		774
Provision for credit losses	85		2
Inventory reserve	126		125
Loss on sale of property, plant and equipment	—		17
Change in fair value of derivatives	(14,241)		17,934
Deferred tax provision (benefit)	6,261		(2,521)
Changes in operating assets and liabilities:
Accounts receivable	(30,130)		(20,935)
Inventories	(6,794)		(2,993)
Contract assets	(906)		2,504
Prepaid expenses and other current assets	5,103		(7,522)
Accounts payable	(2,324)		(839)
Accrued and other liabilities	5,872		(9,741)
Contract liabilities	4,623		7,607
Net cash provided by operating activities	51,542		23,290
Cash flows from investing activities:
Purchase of property, plant and equipment	(60,153)		(48,581)
Proceeds from sale of property, plant and equipment	—		32
Other	3		(25)
Net cash used in investing activities	(60,150)		(48,574)
Cash flows from financing activities:
Borrowings on debt instruments	1,008,476		248,300
Payments on debt instruments	(957,975)		(197,569)
Payment of debt issuance cost	(7,594)		(31,878)
Offering costs	(446)		—
Cash paid for shares withheld to cover taxes	(294)		—
Dividends paid to stockholders	(29,815)		—
Net cash provided by financing activities	12,352		18,853
Net increase (decrease) in cash and cash equivalents	3,744		(6,431)
Cash and cash equivalents - beginning of period	5,562		20,431
Cash and cash equivalents - end of period	$	9,306	$	14,000
Supplemental cash disclosures:
Cash paid for interest	$	32,023	$	67,419
Cash paid for taxes	$	—	$	—
Supplemental disclosure of non-cash investing activities:
(Increase) decrease in accrued capital expenditures	$	(9,890)	$	7,962
Supplemental disclosure of non-cash financing activities:
Dividends equivalent	$	(237)	$	—
Accrued debt issuance cost	$	(8,752)	$	—

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

KODIAK GAS SERVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Organization and Description of Business

Kodiak Gas Services, Inc. ~~(together with its subsidiaries, referred to as~~(the “Company” or “Kodiak” ~~or the “Company”~~) began its operations in 2011. On February 8, 2019, Kodiak was acquired by entities affiliated with EQT AB (publ). On October 24, 2019, the Company acquired Pegasus Optimization Managers, LLC, a provider of natural gas compression operations.

~~The Company~~ is an operator of contract compression infrastructure and related services in the U.S., primarily in the Permian Basin and Eagle Ford Shale with additional operations in the Powder River Basin, Mid-Continent Region, DJ Basin, Appalachian Basin, Barnett Shale / East Texas Region and Black Warrior Basin. The Company operates ~~its~~ compression units under fixed-revenue contracts with upstream and midstream customers. The Company manages its business through two operating segments: Compression Operations and Other Services. Compression Operations consists of operating Company-owned and customer-owned compression infrastructure ~~for its customers~~ to enable the production, gathering and transportation of natural gas and oil. Other Services consists of station construction, maintenance and overhaul, ~~and~~plus other ancillary time and material-based offerings.

See Note 18 (“Segments”). to the Company’s condensed consolidated financial statements.

~~Stock Split~~Merger with CSI Compressco

On ~~June 20, 2023, Kodiak’s board of directors approved a 590,000-for-1 split~~April 1, 2024 (the ~~“Stock Split”) of the Company’s common stock. Prior to the consummation of the initial public offering of the Company’s common stock (the “IPO”~~“Closing Date”), the Company ~~was 100%~~completed its acquisition of CSI Compressco LP (“CSI Compressco” and such acquisition, the “CSI Acquisition”), pursuant to the terms of that certain Agreement and Plan of Merger, dated as of December 19, 2023, by and among the Company; Kodiak Gas Services, LLC (“Kodiak Services”), a Delaware limited liability company and then wholly owned ~~by its parent, Frontier TopCo Partnership, L.P.~~subsidiary of Kodiak; Kick Stock Merger Sub, LLC, a Delaware limited liability company and indirect, wholly owned subsidiary of Kodiak; Kick GP Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of Kodiak Services; Kick LP Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of Kodiak Services; CSI Compressco LP, a Delaware limited partnership; and CSI Compressco GP LLC (“~~Kodiak Holdings”~~CSI Compressco GP”)~~. The Stock Split became effective upon filing~~, a Delaware limited liability company and the general partner of CSI Compressco (the “Merger Agreement”), See Note 20 (“Subsequent Events”) to the Company’s Amended and Restated Certificate of Incorporation on June 28, 2023 in connection with the IPO. The par value of the Company’s common stock was not adjusted as a result of the Stock Split, however, the number of shares that the Company is authorized to issue increased to 750,000,000. As a result of the Stock Split, 59,000,000 shares of common stock were outstanding. All share and per share data shown in the accompanying condensed consolidated financial statements ~~and related notes has been retroactively revised to give effect to the Stock Split~~ for ~~all periods presented.~~

~~IPO~~

On June 28, 2023, Kodiak’s Registration Statement on Form S-1 relating to the IPO was declared effective by the U.S. Securities and Exchange Commission (“SEC”) and the shares of its common stock began trading on the New York Stock Exchange on June 29, 2023. On July 3, 2023, Kodiak issued and sold 16,000,000 shares of common stock at a price to the public of $16.00 per share. Kodiak received net proceeds of approximately $230.8 million, after deducting expenses and underwriting discounts and commissions payable by the Company. On July 13, 2023, the Company issued and sold an additional 2,400,000 shares of common stock at a price to the public of $16.00 per share (referred to herein as the “overallotment”). The Company received net proceeds of approximately $36.2 million, after deducting underwriting discounts. The net proceeds were used for repayment of existing indebtedness, as described further in Note 9 (“Debt and Credit Facilities”), and general corporate purposes. After giving effect to these transactions, Kodiak had 77,400,000 shares of common stock issued and outstanding.more information.

2. Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared ~~on the accrual basis using~~in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and ~~pursuant~~with the instructions to ~~the rules~~Form 10-Q and ~~regulations~~Article 10 of ~~the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these~~Regulation S-X for interim financial statements and have been condensed or omitted. Management believes that the information furnished reflects all normal recurring adjustments necessary to fairly present the Company’s consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in Kodiak’s latest annual financial statements included in Kodiak’s final prospectus filed with the SEC on June 30, 2023 pursuant to Rule 424(b)(4) (the “IPO Prospectus”), which contain a more comprehensive summary of the Company’s accounting policies. The interim results reported herein are not necessarily indicative of results for a full year.

information. These unaudited condensed consolidated financial statements include the accounts of Kodiak and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation.

~~Table~~It is the Company’s opinion that all adjustments (consisting of ~~Contents~~

normal recurring adjustments) considered necessary for a fair presentation have been included. The Company’s results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. For further information, refer to the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Certain prior period amounts have been reclassified to conform to the current period presentation.

Recently ~~Adopted~~Issued Accounting Pronouncements

In ~~June 2016,~~November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2016-13,~~ ~~Financial Instruments—Credit Losses~~ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“~~Topic 326”~~ASU 2023-07”)~~: Measurement of Credit Losses~~, which improves reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The amendments in this update are effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is to be applied on ~~Financial Instruments~~ which changes the impairment model for financial assets measured at amortized cost and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a ~~new current expected credit loss model that will result in earlier recognition of allowance for losses.~~retrospective basis. The Company ~~adopted this Topic 326 on January 1, 2023. The adoption~~is currently evaluating the impact of this ~~amendment did not have a material impact~~standard on its disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 require the annual financial statements to include consistent categories, greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s ~~consolidated financial statements.~~annual reporting periods beginning after December 15, 2024, with early adoption permitted, and should be applied on a prospective basis, with a retrospective option. The Company is currently evaluating the impact of this standard on its disclosures.

Table of Contents

3. Revenue Recognition

The following table disaggregates the Company’s revenue by type and timing of provision of services or transfer of goods (in thousands):

Three Months Ended September 30,
2023 2022
Services provided over time:
Compression Operations $ 184,959 $ 162,063
Other Services 41,268 16,987
Total services provided over time 226,227 179,050
Services provided or goods transferred at a point in time:
Compression Operations 1,714 1,599
Other Services 3,042 1,996
Total services provided or goods transferred at a point in time 4,756 3,595
Total revenue $ 230,983 $ 182,645


		Nine Months Ended September 30,
		2023		2022
	Three Months Ended March 31,						Three Months Ended March 31,
	2024					2024		2023
Services provided over time:	Services provided over time:
Compression Operations
Compression Operations
Compression Operations	Compression Operations	$	539,576	$	477,430
Other Services	Other Services	69,543		39,757
Total services provided over time	Total services provided over time	609,119		517,187
Services provided or goods transferred at a point in time:	Services provided or goods transferred at a point in time:
Compression Operations	Compression Operations	6,413		6,535
Compression Operations
Compression Operations
Other Services	Other Services	8,869		4,415
Total services provided or goods transferred at a point in time	Total services provided or goods transferred at a point in time	15,282		10,950
Total revenue	Total revenue	$	624,401	$	528,137

The Company derives its revenue from contracts with customers, which comprise the following revenue streams:

Compression Operations

Compression Operations consists of operating Company-owned and customer-owned compression infrastructure for the Company’s customers, pursuant to fixed-revenue contracts, enabling the production, gathering and transportation of natural gas and oil.

Compression Operations for ~~Company-owned,~~Kodiak-owned, as well as customer-owned, compressors are generally satisfied over time, as services are rendered for selected customer locations on a monthly basis and based upon specific performance criteria ~~identified~~set forth in the applicable contract. Terms are typically one to seven years, and at the end of the term, transition to a month-to-month term if not cancelled by either party. The monthly service ~~performed~~for a location is substantially the same ~~during each period~~service month to month and is promised consecutively over the contract term. The progress and performance of the ~~contract, and revenues~~service are ~~therefore recognized on~~measured consistently using a straight-line, time-based ~~method~~method; the performance obligations are satisfied evenly over the contract term as the customer simultaneously receives and consumes the benefits provided by the service.

~~Table~~ Consistent with Kodiak's satisfaction of ~~Contents~~its performance obligations, the customer renders payment for services over time in accordance with the terms of the contract.

If variable consideration exists, it is allocated to the distinct monthly service within the series to which such variable consideration relates. The Company has elected to apply the ~~invoicing~~right to invoice practical expedient to recognize revenue for such variable consideration, as the invoice corresponds to the value transferred to the customer based on the Company’s performance completed to date.

Service revenue earned primarily on freight and crane charges that are directly reimbursable by the Company’s customers is recognized at the point in time the service is provided, and control is transferred to the customer. At such time, the customer has the ability to direct the use of the benefits of such service after the performance obligation is satisfied. The amount of consideration the Company receives and the amount of revenue the Company recognizes is based upon the invoice amount.

There are typically no material obligations for returns, refunds or warranties. The Company’s standard contracts do not usually include non-cash consideration.

Other Services

~~This revenue stream primarily relates to~~Other Services consists of compressor station construction services provided to certain customers and services provided based on time, parts and/or materials with customers.

For most of the Company’s construction contracts, the customer contracts with the Company ~~integrates~~to provide a service of integrating a significant set of tasks and components into a single ~~contract for its customers.~~contract. Hence, the entire contract is accounted for as one performance obligation. The Company recognizes revenue over time as the ~~Company~~Company’s performance creates or enhances an asset that the customer, ~~controls.~~

in turn, controls as the asset is created or enhanced. For construction ~~services,~~ contracts,

Table of Contents

revenue is recognized using an input method. Measure of the progress towards satisfaction of the performance obligation is based on the actual amount of labor and material costs incurred. The amount of the transaction price recognized as revenue each reporting period is determined by multiplying the transaction price by the ratio of actual costs incurred to date to total estimated costs expected for the construction services. Payment terms and conditions vary by contract, but contract terms generally include a requirement of payment upon completion of a milestone. Judgment is involved in the estimation of the progress ~~toward~~to completion. Any adjustments to the measure of the progress ~~toward~~to completion is accounted for on a prospective basis. Changes to the scope of service are recognized as an adjustment to the transaction price in the period in which the change ~~occurs.~~order is agreed upon and executed. Losses on construction contracts, if any, are recognized in the period when the estimated loss is determined. There have been no losses recognized in the three months ended March 31, 2024 and 2023.

Services provided based on time spent, parts and/or materials isare generally short-term in nature and labor rates and parts pricing isare agreed upon prior to commencing the service. AsThe Company applies an estimated gross margin percentage, which is fixed based on historical time and materials-based service, to actual costs incurred. Since revenue is recognized when time ~~passes,~~is incurred, this revenue is recognized at ~~the~~a point inand time when the service is rendered.

Contract Assets and Liabilities

The Company recognizes a contract asset when the Company has the right to consideration in exchange for goods or services transferred to a customer. Contract assets are transferred to trade receivables when the ~~rights become unconditional.~~Company has right to bill. The Company had contract assets of ~~$9.6~~$18.3 million and ~~$3.6~~$17.4 million as of ~~September 30, 2023,~~March 31, 2024, and December 31, ~~2022,~~2023, respectively. There was noa $3.6 million contract asset balance as of January 1, ~~2022.~~ 2023.

The Company records contract liabilities when cash payments are received or due in advance of performance. The Company’s contract liabilities were ~~$71.9~~$68.3 million and $63.7 million as of ~~September 30,~~March 31, 2024, and December 31, 2023. As of January 1, ~~2023~~2024, and ~~2022,~~January 1, 2023, the beginning balances for contract liabilities were ~~$57.1~~$63.7 million and ~~$51.2~~$57.1 million, ~~respectively,~~ all of which was recognized as revenue in the ~~nine months ended September 30, 2023 and 2022, respectively. No revenue was recognized from beginning balances in the~~ three months ended ~~September 30,~~March 31, 2024, and March 31, 2023, ~~and 2022.~~respectively.

Performance Obligations

As of ~~September 30, 2023,~~March 31, 2024, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to the Company’s revenue for the Compression Operations segment is ~~$1.1~~$1.0 billion.

The Company expects to recognize these remaining performance obligations as follows (in thousands):

Remainder of
2023 2024 2025 2026 2027 and
thereafter Total
Remaining performance obligations $ 162,915 $ 504,092 $ 241,526 $ 101,568 $ 54,906 $ 1,065,007


	Remainder of 2024		2025		2026		2027		2028 and thereafter		Total
Remaining performance obligations	$	469,869	$	344,515	$	151,988	$	52,650	$	10,535	$	1,029,556

As of March 31, 2024, the aggregate amount of transaction price allocated to unsatisfied performance obligations related to the Company’s revenue for the Other Services segment is $20.4 million, of which $19.2 million is expected to be recognized by December 31, 2024.

~~Table of Contents~~

4. Accounts Receivable, net

Accounts receivable, net consist of the following (in thousands):


		As of September 30, 2023		As of December 31, 2022		As of December 31, 2021
	As of March 31, 2024							As of March 31, 2024	As of December 31, 2023
Accounts receivable	Accounts receivable	$	119,869	$	98,500	$	81,708
Allowance for credit losses	Allowance for credit losses	2,994		949		959
Accounts receivable, net	Accounts receivable, net	$	116,875	$	97,551	$	80,749

~~For~~

Table of Contents

The allowances for credit losses were $8.1 million and $8.1 million as of March 31, 2024, and December 31, 2023, respectively, which represents the ~~three and nine months ended September 30, 2023,~~Company’s best estimate of the ~~Company recorded a $2.0 million increase~~amount of probable credit losses included within the Company’s existing accounts receivable balance.

The changes in the Company’s allowance for credit losses ~~related to expected credit losses from a customer~~ are as follows (in bankruptcy experiencing financial distress. For the three and nine months ended September 30, 2022, the Company had immaterial movements related to direct write-downs charged against the allowance for credit losses.thousands):


	Allowances for Credit Losses
Balance at January 1, 2023	$	949
Current-period provision for expected credit losses	7,101
Write-offs charged against allowance	—
Balance at December 31, 2023	$	8,050
Current-period provision for expected credit losses	85
Write-offs charged against allowance	(85)
Balance at March 31, 2024	$	8,050

5. Inventories, net

Inventories consist of the following (in thousands):


		As of September 30, 2023		As of December 31, 2022
	As of March 31, 2024					As of March 31, 2024	As of December 31, 2023
Non-serialized parts	Non-serialized parts	$	59,093	$	61,082
Serialized parts	Serialized parts	11,513		11,073
Total inventories		$	70,606	$	72,155
Total inventories, net

6. Property, Plant and Equipment, net

Property, plant and equipment, net consist of the following (in thousands):


		As of September 30, 2023		As of December 31, 2022
	As of March 31, 2024					As of March 31, 2024	As of December 31, 2023
Compression equipment	Compression equipment	$	3,113,641	$	2,973,599
Field equipment
Buildings and shipping containers
Technology hardware and software
Trailers and vehicles	Trailers and vehicles	9,239		7,193
Field equipment		18,385		15,501
Technology hardware and software		10,330		6,698
Leasehold improvements	Leasehold improvements	4,209		1,947
Shipping containers		3,349		3,137
Furniture and fixtures	Furniture and fixtures	1,570		1,519
Finance lease		530		981
Land	Land	20		—
Total property and equipment, gross		3,161,273		3,010,575
Other
Total property, plant and equipment, gross
Less: accumulated depreciation	Less: accumulated depreciation	(650,163)		(521,893)
Property, plant and equipment, net	Property, plant and equipment, net	$	2,511,110	$	2,488,682

Depreciation expense was ~~$43.7~~$44.6 million and ~~$129.3~~$42.5 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and March 31, 2023, respectively, and is recorded within depreciation and amortization on the accompanying condensed consolidated statements of operations. ~~Depreciation expense was $41.7 million and $122.8 million for the three and nine months ended September 30, 2022, respectively.~~

Table of Contents

7. Goodwill and Identifiable Intangible Assets, net

There were no changes in the carrying amount of goodwill ~~during~~for the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024. All ~~of the~~ goodwill was allocated to the Company’s Compression Operations reporting unit.

The Company’s identifiable intangible assets consist of the following as of ~~September 30, 2023~~March 31, 2024, and December 31, ~~2022~~2023 (in thousands):


		As of September 30, 2023
		Original Cost		Accumulated Amortization		Net Amount		Remaining Weighted Average Amortization Period (years)
	As of March 31, 2024																					As of March 31, 2024
	Original Cost												Original Cost				Accumulated Amortization					Net Amount				Remaining Weighted Average Amortization Period (years)
Trade name	Trade name	$	13,000	$	(3,018)	$	9,982	15.4	Trade name	$	13,000	$		$	(3,343)	$		$	9,657		14.9			14.9
Customer relationships	Customer relationships	150,000		(34,725)		115,275		13.1	Customer relationships	150,000		(39,137)			(39,137)		110,863			110,863			12.6		12.6
Total identifiable intangible assets	Total identifiable intangible assets	$	163,000	$	(37,743)	$	125,257		Total identifiable intangible assets	$	163,000	$		$	(42,480)	$		$	120,520


		As of December 31, 2022
		Original Cost		Accumulated Amortization		Net Amount		Remaining Weighted Average Amortization Period (years)
	As of December 31, 2023																					As of December 31, 2023
	Original Cost												Original Cost				Accumulated Amortization					Net Amount				Remaining Weighted Average Amortization Period (years)
Trade name	Trade name	$	13,000	$	(2,531)	$	10,469	16.1	Trade name	$	13,000	$		$	(3,181)	$		$	9,819		15.1			15.1
Customer relationships	Customer relationships	150,000		(28,107)		121,893		13.8	Customer relationships	150,000		(36,931)			(36,931)		113,069			113,069			12.8		12.8
Total identifiable intangible assets	Total identifiable intangible assets	$	163,000	$	(30,638)	$	132,362		Total identifiable intangible assets	$	163,000	$		$	(40,112)	$		$	122,888

Amortization expense was $2.4 million and ~~$7.1~~$2.4 million for ~~each of~~ the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and March 31, 2023, ~~and 2022~~respectively, and is recorded within depreciation and amortization on the condensed consolidated statements of operations.

As of ~~September 30, 2023,~~March 31, 2024, the following is a summary of future minimum amortization expense for identified intangible assets (in thousands):


		Amount		Amount
Years ending December 31,	Years ending December 31,
Remainder of 2023		$	2,368
2024		9,474
Remainder of 2024
Remainder of 2024
Remainder of 2024
2025	2025	9,474
2026	2026	9,474
2027	2027	9,474
2028
Thereafter	Thereafter	84,993
Total	Total	$	125,257

8. Long-Lived and Other Asset Impairment

Long-lived assets, including property, plant and equipment and other finite-lived identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances, including the removal of compressors from the active fleet, indicate that the carrying amount of an asset may not be recoverable. Such events ~~and changes~~ may include significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in the Company’s business strategy, among others. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to estimated future undiscounted net cash flows expected to be generated by the asset. Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its estimated future discounted net cash flows. No impairment was recorded, ~~nor~~and no triggering events were identified for the ~~three and nine month~~three-month periods ended ~~September 30, 2023~~March 31, 2024, and ~~2022.~~March 31, 2023.

910

Table of Contents

9. Debt and Credit Facilities

Debt consists of the following (in thousands):


		As of September 30, 2023		As of December 31, 2022
	As of March 31, 2024					As of March 31, 2024	As of December 31, 2023
ABL Facility	ABL Facility	$	1,789,086	$	1,754,224
Term Loan		—		1,000,000
2029 Senior Notes
Total debt outstanding	Total debt outstanding	1,789,086		2,754,224
Less: unamortized debt issuance cost		(41,174)		(34,205)
Less: unamortized deferred financing costs
Long-term debt, net of unamortized debt issuance cost	Long-term debt, net of unamortized debt issuance cost	$	1,747,912	$	2,720,019

ABL Facility

As of January 1, 2022, a wholly-owned subsidiary of Kodiak had a revolving asset-based loan credit facility (the “ABL Facility”) with unaffiliated secured lenders and JPMorgan Chase Bank, N.A., as administrative agent.

On May 19, 2022, wholly-owned subsidiaries of Kodiak entered into the Third Amendment to the Third Amended and Restated Credit Agreement which mainly served to amend the applicable rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and allow for the return of capital to the parent of Kodiak in the amount of $838 million by increasing borrowings on the ABL Facility by $225 million, increasing the Term Loan by $600 million and utilizing $13 million of cash on hand. In addition, the ABL Facility size was increased from $1.9 billion to $2.1 billion to increase available liquidity under the facility. New lender fees and costs totaling $13.2 million were incurred as a result of the amendment and will be amortized over the life of the loan to interest expense.

On March 22, 2023, ~~wholly-owned~~wholly owned subsidiaries of Kodiak entered into the Fourth Amended and Restated Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (as amended or restated from time to time, the “ABL Credit Agreement” or “ABL Facility”), which mainly served to extend the maturity date from June 2024 to March 2028. The total facility size was increased from $2.1 billion to $2.2 billion to increase available liquidity under the facility. New lender fees and costs totaling $31.8 million were incurred and will be amortized over the life of the loan to interest expense. An additional $4.2 million in accrued interest related to exiting lenders was expensed and paid in the period. The remaining unamortized debt issuance costs of $1.2 million associated with the exiting lenders was ~~written-off~~written off in interest expense, net in the period. On May 31, 2023, the ABL Credit Agreement was amended to, among other things, permit distributions of overallotment proceeds from the ~~IPO~~Initial Public Offering (“IPO”) and revise the terms related to the payment and prepayment of the Term ~~Loan.~~Loan (as defined below). On June 27, 2023, the ABL Credit Agreement was further amended to remove the ability to make distributions related to overallotment proceeds from the IPO and to instead require prepayment of the obligations upon the issuance of any equity interests by Kodiak pursuant to the overallotment in the IPO. In connection with the IPO, the Company became a borrower under the ABL Facility. As of ~~September 30, 2023,~~March 31, 2024, there ~~was $14.7~~were $1.0 million in letters of credit outstanding under the ABL Facility.

Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum interest coverage ratio of 2.5x and a maximum Leverage Ratio (calculated based on the ratio of Consolidated Total Debt to Consolidated EBITDA, each as defined in the ABL Credit Agreement). The maximum Leverage Ratio is (i) 5.25 to 1.00 for the fiscal quarters ending September 30, 2023, and December 31, 2023, (ii) 5.00 to 1.00 for the fiscal quarter ending March 31, 2024, (iii) 4.75 to 1.00 for the fiscal quarter ending June 30, 2024, and (iv) 4.50 to 1.00 for each fiscal quarter ending on or after September 30, 2024. All loan amounts are collateralized by essentially all the assets of the Company. The Company was in compliance with all covenants as of ~~September 30, 2023~~March 31, 2024, and December 31, ~~2022.~~2023.

The ABL Credit Agreement also restricts the Company’s ability to: incur additional indebtedness and guarantee indebtedness; pay certain dividends or make other distributions or repurchase or redeem equity interests; prepay, redeem or repurchase certain debt; issue certain preferred units or similar equity securities; make loans and investments; sell, transfer or otherwise dispose of assets; incur liens; enter into transactions with affiliates; enter into agreements restricting the Company’s restricted subsidiaries’ ability to pay dividends; enter into certain swap agreements; amend certain organizational documents; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of the Company’s assets.

The ~~applicable~~weighted average interest ~~rates~~rate as of ~~September 30, 2023 were 10.25% (prime rate plus 2.00%)~~March 31, 2024, and ~~8.34% (Term SOFR rate plus 0.10% plus 2.75%). The applicable interest rates as of~~ December 31, ~~2022 were 9.50% (prime~~2023, was 7.68% and 8.08%, respectively, excluding the effect of interest rate ~~plus 2.00%) and~~

~~Table of Contents~~

~~7.60% (Term SOFR rate plus 0.10% plus 3.00%).~~ ~~We pay~~swaps. The Company pays an annualized commitment fee of 0.25% on the unused portion of ~~our~~its ABL Facility if borrowings are greater than 50% of total commitments and 0.50% on the unused portion onof the ABL Facility if borrowings are less than 50% of total ~~commitments.~~commitments.

The ABL Facility is a “revolving credit facility” that includes a lock box arrangement whereby, under certain events, remittances from customers are forwarded to a bank account controlled by the administrative agent and are applied to reduce borrowings under the facility. One such event occurs ~~when~~if availability under the ABL Credit Agreement falls below a specified threshold (i.e., the greater of $200 million or 10% of the aggregate commitments at the time of measurement). As of ~~September 30, 2023~~March 31, 2024, and December 31, ~~2022,~~2023, availability under the ABL Facility was in excess of the specified threshold, and, as such, the entire balance was classified as ~~long-term~~long term in accordance with its maturity.

Table of Contents

Third Amendment to Fourth Amended and Restated Credit Agreement

On January 22, 2024, Kodiak entered into the Third Amendment to the ABL Credit Agreement (the “Third Amendment”). The Third Amendment, among other things, amended certain provisions of the ABL Facility (i) to accommodate the consummation of the transactions contemplated by the Merger Agreement and (ii) to account for the Company’s organizational structure after giving effect to the transactions contemplated by the Merger Agreement. Fees and costs totaling $2.9 million were incurred related to the Third Amendment and will be amortized over the life of the loan to interest expense. During the three months ended March 31, 2024, $2.0 million of the total amount was paid, with the remaining amount included in the accrued liabilities in the Company’s unaudited condensed consolidated balance sheet.

In addition, the Third Amendment amended the ABL Facility to (i) include a maximum secured leverage ratio, which will begin to be tested after the Company issues any unsecured indebtedness, to (x) 3.75 to 1.00 for the first four fiscal quarters after the Company issues any unsecured indebtedness and (y) 3.25 to 1.00 for each fiscal quarter thereafter, (ii) modify the triggers for commencing a “cash dominion” period (i.e., a period when the Administrative Agent applies proceeds in the deposit accounts to reduce borrowings under the ABL Credit Agreement), such that a “cash dominion” period will commence if availability under the ABL Credit Agreement is less than $125 million for five consecutive business days or if certain types of events of default occur, (iii) include customary provisions relating to the designation of “unrestricted subsidiaries” (i.e., subsidiaries that are not required to become loan parties or be bound by the covenants contained in the ABL Credit Agreement), (iv) provide that only material domestic restricted subsidiaries are required to become guarantors and collateral grantors under the ABL Facility, and (v) permit the Company and its restricted subsidiaries to incur additional indebtedness and liens and to make additional investments, dividends, distributions, redemptions and dispositions.

Term Loan

~~As of January 1, 2022, a wholly-owned~~A wholly owned subsidiary of Kodiak had a term loan (the “Term Loan”), pursuant to a credit agreement with unaffiliated unsecured lenders and Wells Fargo Bank, N.A., as administrative agent.

In May 2022, the Company completed a recapitalization and distribution of $838 million to the parent of Kodiak, primarily by increasing the borrowings from the ABL Facility by ~~$225~~$225.0 million and the Term Loan by $600 million, ~~per~~pursuant to the Amended and Restated Term Loan Credit Agreement entered into by the Company on May 19, 2022 (as amended from time to time, the “Term Loan Credit Agreement”) and utilizing $13 million of cash on hand. New lender fees and costs totaling $14.6 million were incurred for this amendment and ~~will be~~were amortized over the life of the loan to interest expense.

On March 31, 2023, the Company’s ~~wholly-owned~~wholly owned subsidiary entered into the First Amendment to the Amended and Restated Term Loan Credit Agreement pursuant to which the maturity date was extended to September 22, 2028. Lender fees and costs totaling ~~$0.75~~$0.8 million were incurred for this amendment and were amortized over the life of the loan to interest expense.

On June 29, 2023, the Company terminated all interest rate swaps and collars attributable to the Term Loan, ~~and~~ recognized a gain on derivatives and received cash of $25.8 million during the period ended June 30, 2023 (the “Term Loan Derivative Settlement”). On July 3, 2023, in connection with the IPO, the Company used the net proceeds from the IPO, together with the proceeds resulting from the Term Loan Derivative Settlement and borrowings under the ABL Facility, to repay $300 million of borrowings outstanding under the Term Loan. Additionally, a subsidiary of Kodiak entered into a Novation, Assignment and Assumption Agreement ("(“Novation ~~Agreement"~~Agreement”) with Frontier TopCo Partnership, L.P., an affiliate of EQT AB and holder of record of Kodiak ~~Holdings,~~Gas Services, Inc. common stock (“Kodiak Holdings”), pursuant to which all of the Company’s remaining obligations under the Term Loan were assumed by Kodiak Holdings, and the Company’s obligations thereunder were terminated. The Company is no longer a borrower or guarantor under ~~nor~~and is not otherwise obligated with respect to the debt outstanding under the Term Loan. As part of the $300 million repayment of the Term Loan, unamortized debt issuance costs of $4.4 million and fees of $2.4 million were recorded to loss on extinguishment for the ~~three and nine months~~year ended ~~September 30,~~December 31, 2023. The carrying value of the ~~term debt~~Term Loan novated under the Novation Agreement of $689.8 million (comprised of $700.0 million of principal balance less $10.2 million of unamortized debt issuance costs) was considered an equity transaction with the ~~Parent~~parent and recorded to additional paid-in capital in the statement of stockholder's ~~equity.~~equity for the year ended December 31, 2023.

2029 Senior Notes

On February 2, 2024, Kodiak Services issued $750,000,000 aggregate principal amount of 7.25% senior notes due 2029 (the “2029 Senior Notes”), pursuant to an indenture, dated February 2, 2024, by and among the Company, and certain other subsidiary guarantors party thereto, and U.S. Bank Trust Company, National Association, as trustee. The Company’s 2029

Table of Contents

Senior Notes are not subject to any mandatory redemption or sinking fund requirements. The 2029 Senior Notes are subject to redemption at a make-whole redemption price, inclusive of accrued and unpaid interest. This make-whole redemption price is determined as the higher of 100% of the principal amount of the notes or the present value of remaining principal and interest payments discounted semi-annually to the redemption date using the applicable treasury rate plus 0.50%. Before February 15, 2026, the Company has the option to redeem up to 40% of the aggregate principal amount of the Notes issued under this Indenture, limited to the net cash proceeds of one or more equity offerings. Following February 15, 2026, the Company retains the right to redeem all or a portion of the 2029 Senior Notes, with redemption prices expressed as percentages of the principal amount, along with accrued and unpaid interest.

The optional redemption percentages for the 2029 Senior Notes are as follows:


						Percentage
2026						103.625%
2027						101.813%
2028 and thereafter						100.000%

The indenture governing the Company’s 2029 Senior Notes contain covenants that, among other things, limit the Company’s ability to create liens securing certain indebtedness, enter into certain sale-leaseback transactions, or consolidate, merge or transfer certain assets. The covenants are subject to a number of important exceptions and qualifications. The Company was in compliance with these covenants at March 31, 2024. Fees and costs totaling $13.4 million were incurred related to the 2029 Senior Notes and will be amortized over the life of the loan to interest expense. During the three months ended March 31, 2024, $5.6 million of the total amount was paid, with the remaining amount included in the accrued liabilities in the Company’s unaudited condensed consolidated balance sheet.

The proceeds from the 2029 Senior Notes were used to repay a portion of the outstanding indebtedness under the ABL Facility and to pay related fees and expenses in connection with the 2029 Senior Notes offering. In connection with the close of the CSI Acquisition on April 1, 2024, the Company used proceeds from additional draws on the ABL Facility to repay, terminate and/or redeem all of the CSI Compressco’s existing long-term indebtedness and pay fees, costs, premiums and expenses related to the prepayment, notes offering and acquisition. See Note 20 (“Subsequent Events”) to the Company’s condensed consolidated financial statements for more details.

As of ~~September 30, 2023,~~March 31, 2024, the scheduled maturities, without consideration of potential mandatory prepayments, of the Company’s long-term debt were as follows (in thousands):


	~~Amount~~
~~Years ended December 31,~~
~~Remainder of 2023~~	$	—
~~2024~~	—
~~2025~~	—
~~2026~~	—
~~2027~~	—
~~Thereafter~~	~~1,789,086~~
~~Total~~	$	~~1,789,086~~

~~Table of Contents~~


	Amount
Years ended December 31,
2024	$	—
2025	—
2026	—
2027	—
2028	1,130,846
Thereafter	750,000
Total	$	1,880,846

Debt Issuance Costs

Debt issuance costs of ~~$41.2~~$52.6 million, as of ~~September 30,~~March 31, 2024, are being amortized over the respective terms of the ABL Facility and 2029 Senior Notes. As of December 31, 2023, ~~are being~~$38.9 million was amortized over the term of the ABL Facility. ~~As of December 31, 2022, $34.2 million were being amortized over the terms of the ABL Facility and Term Loan.~~ Amortization expense related to these costs of ~~$0.2~~$2.6 million and ~~$11.3~~$5.4 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023, respectively, are included in interest expense in the accompanying condensed consolidated statements of operations. ~~Amortization expense was $4.3 million and $9.5 million for the three and nine months ended September 30, 2022.~~

10. Derivative Instruments

The Company has entered into interest rate swaps, exchanging variable interest rates for fixed interest ~~rates and in~~rates. In prior periods, the Company entered into interest rate collars that ~~fix~~fixed interest rates within a range through the simultaneous

Table of Contents

purchase of an interest rate cap and sale of an interest rate floor. The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative or trading purposes. The Company’s derivative instruments are recognized on the unaudited condensed consolidated balance sheets at fair value and classified as current or long-term depending on the maturity date of the derivative instrument and whether the net carrying value is in a net asset or net liability position.Realized and unrealized gains and losses associated with the derivative instruments are recognized in gain (loss) on ~~derivative instrument~~derivatives within the unaudited condensed consolidated statements of operations.

On June 29, 2023, the Company terminated $750.0 million of notional amounts related to interest rate swaps and collars attributable to the Term Loan and recognized a gain on derivatives of $25.8 million during the nine months ended September 30, 2023.

The table below summarizes information related to the notional amount and maturity dates for interest rate swaps at ~~September 30, 2023:~~March 31, 2024:

Notional Amount

~~Maturities~~

~~$125,000,000~~Effective date

~~12/4/2024~~Maturities

$225,000,000

12/14/2022

12/5/2024

$200,000,000

6/16/2022

6/14/2025

$125,000,000

5/2/2024

9/2/2025

$125,000,000

12/6/2024

12/6/2025

$~~175,000,000~~75,000,000

6/15/2022

6/14/2026

$125,000,000

6/22/2022

6/22/2026

$125,000,000

12/6/2024

12/6/2026

$100,000,000

5/2/2024

3/2/2027

$75,000,000

6/14/2022

5/18/2027

$100,000,000

6/21/2022

5/19/2027

$200,000,000

7/8/2022

5/19/2027

$125,000,000

12/6/2024

12/6/2027

~~Of the total notional amount of $1.6 billion, $375 million is related to forward dated interest rate swaps with an effective date after September 30, 2023.~~

~~Table of Contents~~

The following tables set forth the Company’s assets that were measured at fair value on a recurring basis during the period, by level, within the fair value hierarchy and classification of the Company’s derivative instruments not designated as hedging instruments on the accompanying condensed consolidated balance sheets (~~in thousands~~):

As of September 30, 2023
Level 1 Level 2 Level 3 Total
Current assets:
Interest rate swaps $ — $ — $ — $ —
Total current assets $ — $ — $ — $ —
Non-current assets:
Interest rate swaps $ — $ 51,790 $ — $ 51,790
Total non-current assets $ — $ 51,790 $ — $ 51,790
Total $ — $ 51,790 $ — $ 51,790

As of December 31, 2022
Level 1 Level 2 Level 3 Total
Current assets:
Interest rate swaps $ — $ 823 $ — $ 823
Total current assets $ — $ 823 $ — $ 823
Non-current assets:
Interest rate swaps $ — $ 48,955 $ — $ 48,955
Interest rate collars — 15,562 — 15,562
Total non-current assets $ — $ 64,517 $ — $ 64,517
Total $ — $ 65,340 $ — $ 65,340

The following table summarizes the effects of the Company’s derivative instruments in the condensed consolidated statements of operations (in thousands):

Derivative Instruments Not
Designated as
Hedging Instrument Location of Gain Recognized Three Months Ended September 30,
2023 2022
Interest rate swaps Gain on derivatives $ 15,141 $ 44,809
Interest rate collars Gain on derivatives — 7,053
Total gain on derivative $ 15,141 $ 51,862

Derivative Instruments Not
Designated as
Hedging Instrument Location of Gain (Loss) Recognized Nine Months Ended September 30,
2023 2022
Interest rate swaps Gain on derivatives $ 42,649 $ 54,796
Interest rate collars Gain (loss) on derivatives (569) 22,176
Total gain on derivative $ 42,080 $ 76,972

We record derivative instruments at fair value using level 2 inputs of the fair value hierarchy. The interest rate swaps and interest rate collars are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs from actively quoted public markets. including interest rate curves and credit spreads.


	Location	March 31,
		2024		2023
Interest rate collars	Gain (loss) on derivatives	$	—	$	(6,292)
Interest rate swaps	Gain (loss) on derivatives	19,757		(1,703)
Total gain (loss) on derivatives		$	19,757	$	(7,995)

11. Fair Value Measurements

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, derivative instruments and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable ~~accrued liabilities,~~ and accounts payable are representative of their respective Level 1 fair values due to the short-term maturity of these instruments.

The Company’s ABL Facility applies floating interest rates to outstanding amounts; therefore, the carrying amount of the ABL Facility approximates its Level 3 fair value. The fair value of ~~debt and contingent consideration are considered~~the 2029 Senior Notes is determined using Level 32 inputs, relying on quoted prices in less active markets.

~~Table of Contents~~

~~measurements. These~~The Company records derivative instruments at fair value ~~measurements~~using Level 2 inputs of the fair value hierarchy. The interest rate swaps are valued using a discounted cash flow analysis based on ~~unobservable inputs. The fair value~~available market data on the expected cash flows of ~~variable~~each derivative using observable inputs, including interest rate ~~long-term debt is based upon the current market rates~~curves and credit spreads. See Note 10 (“Derivative Instruments”) for ~~debt with similar credit risk and maturity which approximates fair value. Debt includes the ABL Facility and is shown net of unamortized debt issuance cost in the tables below.~~ more details.

The contingent consideration liability from a prior year acquisition is measured at fair value each reporting period, using Level 3 unobservable inputs (such as probability assessments of future cash flows), and changes in estimates of fair value are recognized in earnings.

Table of Contents

The fair value estimate reflects the contractual terms of the purchase agreement (e.g., potential payment amounts, length of measurement periods, manner of calculating any amounts due) and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows and a discount rate. Depending on the contractual terms of the purchase agreement, the probability of achieving future cash flows generally represents the only significant unobservable input. There was no change infollowing table summarizes the fair value of the Company’s interest rate swaps and contingent consideration ~~during the three and nine months ended September 30, 2023. See fair value tables below~~ (in thousands):

As on September 30, 2023
Level 1 Level 2 Level 3 Total
Debt $ — $ — $ 1,747,912 $ 1,747,912
Contingent Consideration — — 3,673 3,673
Total $ — $ — $ 1,751,585 $ 1,751,585


	Carrying Value		As of March 31, 2024
			Level 1		Level 2		Level 3		Total
Interest rate swap- current	$	4,226	$	—	$	4,226	$	—	$	4,226
Interest rate swap- non-current	32,465		—		32,465		—		32,465
Contingent consideration	—		—		—		3,673		3,673
2029 Senior Notes(1)	750,000		—		764,048		—		764,048

As of December 31, 2022
Level 1 Level 2 Level 3 Total
Debt $ — $ — $ 2,720,019 $ 2,720,019
Contingent Consideration — — 3,673 3,673
Total $ — $ — $ 2,723,692 $ 2,723,692


	Carrying Value		As of December 31, 2023
			Level 1		Level 2		Level 3		Total
Interest rate swap- current	$	8,194	$	—	$	8,194	$	—	$	8,194
Interest rate swap- non-current	14,256		—		14,256		—		14,256
Contingent consideration	3,673		—		—		3,673		3,673

(1) Carrying value and fair value exclude the deduction for the unamortized debt issuance costs, see Note 9 (“Debt and Credit Facility”) for details.

12. Stockholders’ Equity

Holders of the Company’s common stock are entitled to one vote for each share. As of ~~September 30, 2023~~March 31, 2024, and December 31, ~~2022,~~2023, there were ~~77,400,000~~77,434,577 and ~~59,000,000~~77,400,000 shares of common stock issued and outstanding, respectively. ~~Holders of common stock are entitled to receive, in~~In the event of a liquidation, dissolution or winding up, holders of common stock are entitled to receive, ratably, the assets available for distribution to the stockholders after payment of all liabilities.

On July 3, 2023, 16,000,000 shares of common stock were issued and sold as part of the closing of the IPO, resulting in net proceeds of $230.8 million, after deducting expenses and underwriting discounts and commissions payable by ~~us.~~the Company. On July 13, 2023, the underwriters exercised in full their option to purchase additional shares of common stock, pursuant to the underwriting agreement relating to the IPO. On July 13, 2023, the Company issued and sold an additional 2,400,000 shares of common ~~stock at a price to the public of $16.00 per share.~~stock. The Company received net proceeds of approximately $36.2 million, after deducting underwriting discounts and commissions payable. The net proceeds of each issuance and sale were used for repayment of existing indebtedness and general corporate purposes. After giving effect to these transactions, Kodiak had 77,400,000 shares of common stock issued and outstanding.

Class B and C Profits Interests

Prior to the IPO, Kodiak Holdings issued incentive awards to certain employees of Kodiak ~~Gas~~ Services ~~LLC (a wholly-owned subsidiary of the Company)~~ in the form of Class B incentive units (“Class B Units”). The Company records stock-based compensation expense associated with the Class B Units because of the employment relationship of the grantees with Kodiak ~~Gas Services, LLC.~~Services.

On March 6,16, 2019, 61,098.4 Class B Units were authorized under the Kodiak Holdings 2019 Class B Unit Incentive Plan for grants to certain employees and non-employee board members. These Class B Units are intended to constitute “profits interests” for federal income tax purposes, but they constitute a substantive class of equity under GAAP. As of ~~September 30,~~March 31, 2024, and December 31, 2023, , there were 60,406.9 authorized Class B Units, and 57,058.5 were outstanding. ~~As of December 31, 2022, there were 61,068.0 authorized Class B Units and 60,363.4 were outstanding.~~ There were no Class B Units granted in the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024, or ~~2022.~~in 2023. Twenty-five percent (25%) of the Class B Units are subject to time vesting (the “Time-Vesting Units”), and the remaining ~~75%~~seventy-five percent (75%) of the Class B Units are subject to ~~performance-vesting~~performance vesting (the “Performance-Vesting Units”). Time-Vesting Units vest in equal annual installments on each of the ~~first~~ five anniversaries of the applicable vesting commencement ~~date,~~dates, subject to the Class B Unit holder’s continuous service through each of the applicable vesting ~~date.~~dates. Performance-Vesting Units vest based on the achievement of certain investor return metrics, subject to the Class B Unit holder’s continuous service through the applicable vesting ~~date.~~dates. Holders of Class B Units are entitled to distributions on

~~Table of Contents~~

vested awards in accordance with the Kodiak Holdings distribution waterfall. Class B Units are not subject to any conversion rights other than an automatic conversion to Class C incentive units (“Class C Units”) in connection with certain terminations of employment. Each Class C Unit holder is eligible to receive distributions up to an amount equal to the fair market value of the corresponding converted Class B Unit on the date of conversion. As of ~~September 30, 2023~~March 31, 2024, no material conversions had occurred.

Table of Contents

There are no performance hurdles associated with the Time-Vesting Units. The fair value of each incentive award was estimated on its applicable grant date using an option pricing model.

Stock compensation expense is recognized ratably over the vesting period of the awards. During the ~~nine~~three months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022,~~ approximately ~~$1.4~~$0.2 million and ~~$0.6~~$0.9 million, respectively, in stock compensation expense was recognized in selling, general and administrative expenses. As of ~~September 30, 2023,~~March 31, 2024, there were ~~3,079.1~~319.4 unvested Time-Vesting Units, representing ~~$0.5~~$0.1 million in unrecognized stock compensation expense.

Preferred stock

Preferred stock consists of 50,000,000 authorized shares as of March 31, 2024, of which none were issued.

2023 Omnibus Incentive Plan

On June 20, 2023, Kodiak’s ~~board~~Board of ~~directors~~Directors authorized and adopted the Kodiak Gas Services, Inc. Omnibus Incentive Plan (the “Omnibus Plan”) for employees, consultants and directors. The Omnibus Plan enables Kodiak’s ~~board~~Board of ~~directors~~Directors (or a committee authorized by Kodiak’s ~~board~~Board of ~~directors)~~Directors) to award incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards ~~intended~~ to align the interests of service providers, including the Company’s named executive officers, with those of the Company’s stockholders. A total of 6,375,000 shares of common stock have been reserved for issuance pursuant to awards under the Omnibus Plan.

On June 29, 2023, Kodiak granted 1,297,188 shares of common stock equity awards to certain employees, including Kodiak’s named executive officers, pursuant to awards under the Omnibus Plan. Additionally, on March 8, 2024, Kodiak granted 718,820 shares of common stock equity awards to certain employees, including Kodiak's named executive officers, pursuant to awards under the Omnibus Plan.

Restricted Stock Units

Of the total shares of common stock equity awards granted on June 29, 2023, and March 8, 2024, 985,313 ~~of the~~and 457,053 shares, respectively, were granted pursuant to awards of time-based restricted stock units (“RSUs”) that vest ratably over a three-year period, subject to continuous service through each vesting ~~date.~~date and other conditions precedent.

On December 8, 2023, the Company provided employees who were eligible to receive cash payments of long-term incentive awards granted in January 2023 under the Company’s 2020 Long-Term Incentive Plan (the “LTIP Plan”) the opportunity to make an election to receive a grant of RSUs that vest ratably over a three-year period in lieu of cash payments. Upon exercising the employees’ elections to convert the cash payments into RSUs, 138,430 RSUs were granted.

Performance Stock Units

Of the total shares of common stock equity awards granted on June 29, 2023, and March 8, 2024, 311,875 ~~of the~~and 261,767 shares, respectively, were granted pursuant to awards of performance stock units (“PSUs”) that cliff vest at the end of a three-year performance period, with the ultimate number of shares earned and issued ranging from ~~0-190%~~0 - 190% of the number of shares subject to the PSU award, subject to continuous service through the end of the performance ~~period.~~period and other conditions precedent. The performance criteria for the PSUs are a combination of: (1) Discretionary Cash Flow (“DCF”) (30% weight); (2) Consolidated Net Leverage Ratio (“CNLR”) (30% weight); (3) Absolute Total Shareholders' Return (“ATSR”) (30% weight); and (4) and ESG Scorecard (10% weight) (each as defined below), in each case, during the Performance Period.

DCF is calculated based on the three-year cumulative Adjusted EBITDA less net cash taxes, less net cash interest, less maintenance capital expenditures, all as reported in the financial statement reconciliations provided in the Company’s public filings, measured over the performance period; CNLR is calculated as of the last day of the fiscal quarter at the end of the performance period, as the ratio of (a) Total Indebtedness (as defined in the ABL Credit Agreement) minus Cash, in each case, as of such date to (b) LQA Adjusted EBITDA (defined as EBITDA (as defined in the ABL Credit Agreement) for the fiscal quarter ending at the end of the performance period, multiplied by four). ATSR is determined on an annualized basis over the relevant performance period for the beginning and ending 20-day volume-weighted average price, as adjusted for dividends paid.

•The vesting of the PSUs based on DCF, CNLR, and ATSR will each be (i) 200% if the Company achieves performance at maximum; (ii) 100% if the Company achieves performance at target; (iii) 50% if the Company achieves performance at threshold level; and (iv) 0% if the Company achieves performance below threshold; and

Table of Contents

•The vesting of the PSUs based on ESG Scorecard will be (i) 100% if the Company achieves ESG targets and (ii) 0% if the Company does not achieve ESG Scorecard.

With respect to each PSU, each PSU holder is granted associated dividend equivalents rights. In the event that the Company declares and pays a regular cash dividend, and on the record date for such dividend, the Company will accrue a dividend equivalent based on the number of PSUs expected to vest.

The following table summarizes award activity under the Omnibus Plan for the ~~nine-month~~three-month period ending ~~September 30, 2023:~~March 31, 2024:

RSUs PSUs
Number of
RSUs Weighted-Average Price Number of
PSUs Weighted-Average Price
Outstanding at December 31, 2022 — — — —
Granted 985,313 $ 16.00 311,875 $ 16.99
Vested or exercised — — — —
Forfeited (20,679) — — —
Outstanding at September 30, 2023 964,634 $ 16.00 311,875 $ 16.99
Restricted stock awards expected to vest 964,634 $ 16.00 311,875 $ 16.99


	RSUs			PSUs
	Number of RSUs	Weighted- Average Price		Number of PSUs	Weighted- Average Price
Outstanding at January 1, 2024	1,079,603	$	16.29	311,875	$	16.99
Granted	457,053	25.13		261,767	28.88
Vested or exercised	(34,577)	18.20		—	—
Forfeited or cancelled	(28,307)	17.14		—	—
Outstanding at March 31, 2024	1,473,772	$	18.97	573,642	$	22.42
Stock awards expected to vest	1,473,772	$	18.97	573,642	$	22.42

As of ~~September 30, 2023,~~March 31, 2024, the total future compensation cost related to non-vested equity awards was approximately ~~$18.7~~$33.2 million, assuming the performance-based restricted stock units vest at 100% ~~per~~, pursuant to the terms of the applicable award. During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, approximately ~~$2.0~~$2.7 million in stock compensation expense was recognized in selling, general and administrative expenses. There was no such expense recorded for the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

Dividends

The following table summarizes the Company’s dividends declared and paid in each of the quarterly periods of 2024 and 2023:


	Dividends per Common Share		Dividends Paid
			(in thousands)
2024
Q1	$	0.38	$	29,815
2023
Q4	$	0.38	$	29,793

On May 2, 2024, the Company’s Board of Directors declared a cash dividend of $0.38 per share for the quarterly period ended March 31, 2024, which is payable on May 20, 2024, to shareholders of record as of the close of business on May 13, 2024 (the “Common Stock Dividend”) and, in conjunction with the Common Stock Dividend, Kodiak Gas Services declared a distribution on its units of $0.38 per unit payable on May 20, 2024 to all unitholders of record of Kodiak Services as of the close of business on May 16, 2024.

13. Commitments and Contingencies

Accrued Capital Expenditures

As of March 31, 2024, and December 31, 2023, the Company has accrued capital expenditures of $40.4 million and $30.5 million, respectively. These amounts were included in accounts payable or accrued liabilities on the consolidated balance sheets.

Table of Contents

Purchase Commitments

Purchase commitments primarily consist of future commitments to purchase new compression units that have been ordered but not yet received. ~~The~~As of March 31, 2024, these commitments ~~as of September 30, 2023, were $215.7~~amounted to $106.6 million, all of which ~~$182.9 million~~ is expected to be settled within the next twelve months.

~~Table of Contents~~

Contingent Consideration

The Company agreed to pay, as contingent consideration, up to $3.7 million of certain past due accounts receivable acquired in connection with a prior acquisition in 2019, if collected, to the ~~seller.~~seller in that transaction. The Company records contingent consideration at the acquisition and end of reporting periods at fair value in accrued liabilities. As of ~~September 30, 2023~~March 31, 2024, and December 31, ~~2022,~~2023, none of the outstanding receivables had been collected.

Sales Tax Contingency

Between October 2019 and April 2023, the Company received notices from the Texas Comptroller’s office in regards to audits for periods ranging from December 2015 through December ~~2022.~~2023. The audits pertain to whether the Company may owe sales tax on certain of its compression equipment that it had purchased during that time period. As of December 31, ~~2022,~~2023, the Company had accrued a total amount of ~~$27.8~~$28.8 million for this contingent liability. During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, based on current information, the Company accrued an additional ~~$0.9 million and as~~$0.4 million. As of ~~September 30, 2023,~~March 31, 2024, the Company had ~~accrued~~ a total of ~~$28.7~~$29.2 million ~~for this contingent liability.~~included as accrued liabilities on the condensed consolidated balance sheets.

Legal Matters

From time to time, the Company may become involved in various legal matters. Management believes that as of March 31, 2024, there are no legal matters ~~as of September 30, 2023~~ whose resolution could have a material adverse effect on the unaudited condensed consolidated financial statements.

14. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):


		As of September 30, 2023		As of December 31, 2022
	As of March 31, 2024					As of March 31, 2024	As of December 31, 2023
Prepaid insurance	Prepaid insurance	$	3,733	$	3,997
Interest rate swap receivable
Prepaid vehicle allowance
Deferred project costs
Prepaid rent	Prepaid rent	799		589
Deferred IPO issuance costs		—		3,047
Deferred project costs		3,538		—
Interest rate swap receivable		1,559		—
Other	Other	3,624		1,887
Total prepaid expenses and other current assets	Total prepaid expenses and other current assets	$	13,253	$	9,520

1618

Table of Contents

15. Accrued Liabilities

Accrued liabilities consist of the following (in thousands):


		As of September 30, 2023		As of December 31, 2022
	As of March 31, 2024					As of March 31, 2024	As of December 31, 2023
Sales tax liability	Sales tax liability	$	28,688	$	27,820
Accrued bonus
Accrued accounts payable
Accrued interest	Accrued interest	11,746		16,347
Accrued bonus		10,475		7,764
Station project accrual
Accrued taxes	Accrued taxes	14,675		9,667
Accrued professional fees
Contingent consideration
Accrued payroll	Accrued payroll	1,036		2,744
Accrued legal fee		1,823		1,906
Accrued insurance
Lease liabilities - current portion	Lease liabilities - current portion	—		3,090
Contingent consideration		3,673		3,673
Accrued accounts payable		16,629		14,080
Accrued insurance		109		2,231
Station construction accrual		12,361		—
Other	Other	1,233		4,551
Total accrued liabilities	Total accrued liabilities	$	102,448	$	93,873

16. Income Taxes

For the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, the Company recorded income tax expense of ~~$7.9~~$9.9 million, and ~~$9.8 million, respectively. Income tax expense~~ for the three ~~and nine~~ months ended ~~September 30, 2022 was $14.3 million and $32.5 million, respectively.~~March 31, 2023, the Company recorded income tax benefit of $4.0 million. The effective tax rate was approximately ~~26.6% and 26.6%~~24.6% for the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~23.8% and 23.7%~~24.4% for the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. The difference between the Company’s effective tax rates for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023 ~~and 2022~~ and the U.S. statutory tax rate of 21% was primarily due to state income taxes.

In August 2022, the U.S. Inflation Reduction Act of 2022 and the CHIPS and Science Act of 2022 were signed into law. These acts include, among other provisions, a corporate alternative minimum tax of 15%, an excise tax on the repurchase of corporate stock, various climate and energy provisions and incentives for investment in semiconductor manufacturing. These provisions are not expected to have a material impact on the Company’s results of operations or financial position.

The Company did not have any uncertain tax benefits as of ~~September 30, 2023~~March 31, 2024, and December 31, ~~2022.~~2023. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the Company had no accrued interest or penalties related to uncertain tax positions, and no amounts had been recognized in the condensed consolidated ~~statement~~statements of operations.

17. Defined Contribution Plan

The Company maintains a defined contribution savings plan for its employees. The Company contributed ~~$0.7~~$0.9 million and ~~$2.3~~$0.8 million to the plan for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023, ~~respectively. The Company contributed $0.7 million and $2.1 million to the plan for the three and nine months ended September 30, 2022,~~ respectively.

18. Segments

The Company manages its business through two operating segments: Compression Operations and Other Services. Compression Operations consists of operating Company-owned and customer-owned compression infrastructure, ~~for its customers,~~ pursuant to fixed-revenue contracts to enable the production, gathering and transportation of natural gas and oil. Other Services consists of a full range of contract services to support the needs of customers, including station construction, maintenance and overhaul, and other ancillary time and ~~material based~~material-based offerings.

The Company evaluates performance and allocates resources based on the gross margin of each segment, which ~~includes~~consists of revenues directly attributable to the specific segment ~~and~~(less all costs of service directly attributable to the specific segment, which includes cost of operations and depreciation and ~~amortization.~~amortization). Depreciation and amortization for the Compression Operations segment was ~~$46.1~~$46.9 million and ~~$136.4~~$44.9 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023,

1719

Table of Contents

~~respectively. Depreciation and amortization for the Compression Operations segment was $44.1 million and $129.9 million for the three and nine months ended September 30, 2022~~

respectively. Revenue includes only sales to external customers. The following table represents financial metrics by segment (in thousands):

Compression
Operations Other
Services Total
Three Months Ended September 30, 2023
Revenue $ 186,673 $ 44,310 $ 230,983
Gross margin 75,116 5,490 80,606
Total assets 3,213,764 30,476 3,244,240
Capital expenditures 51,539 — 51,539
Three Months Ended September 30, 2022
Revenue $ 163,662 $ 18,983 $ 182,645
Gross margin 63,679 4,946 68,625
Total assets 3,133,249 3,715 3,136,964
Capital expenditures 53,755 — 53,755


		Compression Operations		Other Services		Total
Nine Months Ended September 30, 2023
	Compression Operations							Compression Operations	Other Services	Total
Three Months Ended March 31, 2024
Revenue
Revenue
Revenue	Revenue	$	545,989	$	78,412	$	624,401
Gross margin	Gross margin	216,318		12,505		228,823
Total assets	Total assets	3,213,764		30,476		3,244,240
Capital expenditures	Capital expenditures	145,573		—		145,573
Nine Months Ended September 30, 2022
Three Months Ended March 31, 2023
Revenue
Revenue
Revenue	Revenue	$	483,965	$	44,172	$	528,137
Gross margin	Gross margin	186,907		9,534		196,441
Total assets	Total assets	3,133,249		3,715		3,136,964
Capital expenditures	Capital expenditures	199,707		—		199,707

The following table reconciles total gross margin to income before income taxes (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Total gross margin $ 80,606 $ 68,625 $ 228,823 $ 196,441
Selling, general and administrative expenses (19,648) (11,190) (46,171) (32,760)
Gain on sale of capital assets — 818 721 825
Interest expense, net (39,710) (49,859) (182,030) (104,616)
Loss on extinguishment of debt (6,757) — (6,757) —
Gain on derivatives 15,141 51,862 42,080 76,972
Other (expense) income 38 (19) 39 (10)
Income before income taxes $ 29,670 $ 60,237 $ 36,705 $ 136,852


	Three Months Ended March 31,
	2024		2023
Total gross margin	$	84,982	$	73,457
Selling, general and administrative expenses	(24,824)		(13,085)
Loss on sale of property, plant and equipment	—		(17)
Interest expense, net	(39,740)		(68,662)
Gain (loss) on derivatives	19,757		(7,995)
Other expense	(68)		(31)
Income (loss) before income taxes	$	40,107	$	(16,333)

19. Earnings Per Share of Common Stock

Basic earnings per share is computed using the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share of common stock is computed by using the weighted average shares of common stock outstanding, including the dilutive effect of restricted shares based on an average share price during the period. For

~~Table of Contents~~

the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, 99,015 unvested performance stock units were not included in the calculation of the potential dilutive common shares for the period because to do so would be anti-dilutive. For the three months ended March 31, 2023, ~~and September 30, 2022,~~ there were no anti-dilutive ~~shares, respectively.~~shares. The computations of basic and diluted earnings per share for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024, and 2023 ~~and September 30, 2022~~ are as follows:

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except share and per share data) 2023 2022 2023 2022
Net income $ 21,766 $ 45,900 $ 26,940 $ 104,356
Basic weighted average shares of common stock 76,731,868 59,000,000 64,954,244 59,000,000
Effect of dilutive securities 167,615 — 167,615 —
Diluted weighted average shares of common stock 76,899,483 59,000,000 65,121,859 59,000,000
Basic earnings per share of common stock $ 0.28 $ 0.78 $ 0.41 $ 1.77
Diluted earnings per share of common stock $ 0.28 $ 0.78 $ 0.41 $ 1.77

~~20. Subsequent Events~~

~~The following event occurred subsequent to the date the condensed financial statements were available to be issued:~~

On October 24, 2023 the Company's board of directors declared an initial cash dividend of $0.38 per share of common stock, or $1.52 per share of common stock on an annualized basis, for the third quarter of 2023. The cash dividend of approximately $29 million will be paid on November 10, 2023 to all stockholders of record as of the close of business on November 3, 2023.


	Three Months Ended March 31,
(in thousands, except share and per share data)	2024		2023
Net income (loss)	$	30,232	$	(12,343)

Basic weighted average shares of common stock	77,432,283		59,000,000
Effect of dilutive securities	670,167		—
Diluted weighted average shares of common stock	78,102,450		59,000,000

Basic earnings (loss) per share of common stock	$	0.39	$	(0.21)
Diluted earnings (loss) per share of common stock	$	0.39	$	(0.21)

1920

Table of Contents

20. Subsequent Events

On April 1, 2024 (the “Closing Date”), the Company completed the acquisition of 100% of the issued and outstanding partnership interests of CSI Compressco pursuant to the terms of the Merger Agreement for a total aggregated purchase price of $994.1 million, including the issuance of the equity shares described below and the repayment of $651.8 million of debt assumed in the acquisition using proceeds from the Company’s ABL Facility. Under the Merger Agreement, CSI Compressco unitholders received 0.086 shares of Kodiak common stock for each CSI Compressco common unit owned and certain CSI Compressco unitholders meeting specified requirements (the “Electing Unitholders”) elected to receive limited liability company units representing economic interests in Kodiak Services (“OpCo Units”) (along with an equal number of shares of Kodiak’s non-economic voting preferred stock), for each CSI Compressco common unit they held. Each OpCo Unit will be redeemable at the option of the holder for (i) one share of Kodiak common stock (along with cancellation of a corresponding share of preferred stock) or (ii) cash at Kodiak Services’ election, following a six-month post-closing lock-up and subject to certain conditions. On or after April 1, 2029, Kodiak shall have the right to effect redemption of OpCo Units. The OpCo Units represent and will be accounted for as noncontrolling interests in Kodiak Services. Each share of preferred stock entitles the holder to one vote per share, voting proportionally with holders of Common Stock. The preferred stock lacks economic benefits beyond its par value of $0.01 per share (with a maximum value of $50,000), as it does not participate in earnings or cash dividends of Kodiak. Rather, it solely represents a voting share. Pursuant to the Merger Agreement, the Company issued 6,785,673 shares of common stock and 5,562,273 shares of preferred stock with an equal number of OpCo Units with an estimated fair value of $342.3 million based on the Company’s stock price on April 1, 2024. Transaction costs of $7.9 million associated with the acquisition are included within selling, general and administrative expenses for the three months ended March 31, 2024. The Company will apply the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations to account for the transaction and expect to record any purchase price accounting adjustments in the second quarter of 2024. The Company will record the assets acquired and liabilities assumed at their fair values as of the acquisition date. Due to the limited time since the closing of the acquisition, the valuation efforts and related acquisition accounting is incomplete at the time of the filing of these unaudited condensed consolidated financial statements. As a result, the Company is unable to provide amounts recognized as of the acquisition date for major classes of assets and liabilities acquired, including goodwill and other intangible assets. In addition, because the acquisition accounting is incomplete, the Company is unable to provide the supplemental pro forma revenue and earnings for the combined entity, as the pro forma adjustments are expected to primarily consist of estimates for the depreciation of property, plant and equipment acquired, amortization of identifiable intangible assets acquired and related income tax effects, which will result from the purchase price allocation and determination of the fair values for the assets acquired and liabilities assumed.

The Company entered into the following agreements concurrently with the closing of the acquisition.

Registration Rights Agreement

On the Closing Date, the Company entered into a registration rights agreement with the Electing Unitholders (the “Registration Rights Agreement”), pursuant to which, among other things, the Electing Unitholders were granted customary rights to require us to file and maintain the effectiveness of a shelf registration statement with respect to the resale of the Kodiak common stock received by the Electing Unitholders, and under certain circumstances, to require us to undertake underwritten offerings of such Kodiak common stock.

OpCo LLC Agreement

On the Closing Date, the Company entered into the Sixth Amended and Restated Limited Liability Company Agreement of Kodiak Services (the “OpCo LLC Agreement”) with Kodiak Services and the Electing Unitholders. The Company will continue to operate its’ business through Kodiak Services, which will continue to directly or indirectly hold all of the assets and operations of Kodiak and CSI Compressco. The Company is the sole managing member of Kodiak Services and are responsible for all operational, management and administrative decisions relating to Kodiak Services’ business and will consolidate financial results of Kodiak Services and its subsidiaries. Kodiak Services is governed by the OpCo LLC Agreement.

Certificate of Designation

On March 28, 2024, the Company filed the Certificate of Designation of Series A Preferred Stock (the “Certificate of Designation”) with the Delaware Secretary of State. On the Closing Date of the CSI Acquisition, the Company issued 5,562,273 shares of Series A Preferred Stock to the Electing Unitholders. The rights of holders of Series A Preferred Stock will be governed by the Company’s charter and bylaws, the Certificate of Designation and Delaware law.

Supplemental Indenture

Table of Contents

In connection with the CSI Acquisition, on April 2, 2024, the Company, Kodiak Services, the existing subsidiary guarantors and certain subsidiaries of Kodiak Services acquired in connection with the CSI Acquisition (the “New Subsidiary Guarantors”) entered into a supplemental indenture with U.S. Bank Trust Company, National Association, as trustee under the Indenture (as defined below), pursuant to which the New Subsidiary Guarantors agreed to guarantee the obligations under the Indenture.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Report. The following discussion includes forward-looking statements that involve certain risks and uncertainties. For further information on items that could impact our future operating performance or financial condition, see the sections entitled “Risk Factors” insection of our Annual Report on Form 10-K for the ~~IPO Prospectus~~fiscal year ended December 31, 2023, and “Cautionary ~~Statement~~Note Regarding Forward-Looking Statements” ~~elsewhere~~ in this Report. We assume no obligation to update any of these forward-looking statements, except as required by law. Unless otherwise indicated or the context otherwise requires, the historical financial information in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” reflects only the historical financial results of Kodiak Gas Services, Inc. and its consolidated subsidiaries and references to the “Company,” “we,” “our,” or “us” are to Kodiak Gas Services, Inc. and its consolidated subsidiaries.

Overview

We are a leading operator of contract compression infrastructure in the U.S. Our compression operations (“Compression

Operations”) and related services are critical to our customers’ ability to reliably produce, gather and transport natural gas and ~~oil to support growing global energy demand.~~oil. We are a market leader in the Permian Basin, which is the largest producing natural gas and oil basin in the U.S. We operate our large horsepower compression units under stable, fixed-revenue contracts with ~~blue-chip~~many upstream and midstream customers. Our compression assets have long useful lives consistent with the expected production lives of the key regions where we operate. We believe our ~~partnership-focused~~customer-centric business model positions us as the preferred contract compression operator for our customers and creates long-standing relationships. We strategically invest in the training, development and retention of our highly skilled and dedicated employees and believe their expertise and commitment to excellence enhances and differentiates our business model. Furthermore, we maintain an intense focus on being one of the most sustainable and responsible operators of contract compression infrastructure.

We manage our business through two operating segments: Compression Operations and Other Services. Compression Operations consists of operating Company-owned and customer-owned compression infrastructure ~~for our customers, pursuant to fixed-revenue contracts~~ to enable the production, gathering and transportation of natural gas and oil. Other Services consists of ~~a full range of contract services to support the needs of our customers, including~~ station construction, maintenance and overhaul, ~~and~~plus other ancillary time and ~~material based~~material-based offerings. Our Other Services offerings are often ~~cross-sold~~cross sold with Compression Operations.

Recent Developments

CSI Acquisition

On April 1, 2024, we completed the acquisition of CSI Compressco, pursuant to the terms of the definitive merger agreement executed on December 19, 2023, creating the industry’s largest contract compression fleet with revenue-generating horsepower of approximately 4.3 million. CSI Compressco unitholders received 0.086 shares of Kodiak common stock for each CSI Compressco common unit owned. The Electing Unitholders elected to receive 0.086 limited liability company units representing economic interests in Kodiak Services (along with an equal number of shares of non-economic voting preferred stock of Kodiak) for each CSI Compressco common unit they held. At the option of the holder, each such unit will be redeemable for one share of Kodiak common stock (along with cancellation of a corresponding share of preferred stock), following a six-month post-closing lock-up and subject to certain conditions. See Note 20 (“Subsequent Events”) to our condensed consolidated financial statements for more information.

Enhancement and Standardization of Climate-Related Disclosures

In March 2024, the SEC adopted rules to enhance and standardize climate-related disclosures. The final rules require disclosure of the following information in the footnotes to financial statements, subject to certain materiality thresholds:

•Financial statement effects of severe weather events and other natural conditions;

•Impacts to estimates and assumptions used to produce financial statements associated with severe weather events and other natural conditions or any disclosed climate-related targets or transition plans; and

•Financial statement effects related to carbon offsets or renewable energy credits/certificates used as part of plans to achieve climate-related goals.

In addition, registrants will be required to disclose outside of financial statements information about the material impact of climate-related risks on strategy, business model and outlook; risk management processes for, and governance and oversight activities of those risks; and material climate-related targets or goals. Information related to material greenhouse gas emissions will be required for certain registrants but will not be required for us based on our current filer status.

Table of Contents

The final rules include a phased-in compliance period for all registrants, with the compliance date dependent on the registrant’s filer status and the content of the disclosure. Based on our current filer status, we will be required to comply with the final rules beginning with our annual report for the fiscal year beginning January 1, 2027. We are assessing the new climate-related disclosure rules, awaiting decisions on their legal status and determining an implementation plan to comply with the disclosure requirements in accordance with the prescribed timeline.

Operational Highlights

The following table summarizes certain horsepower, unit count and horsepower utilization percentages for our fleet for the periods presented.


		As of September 30,				Percentage Change
		2023		2022
	As of March 31,												As of March 31,				Percentage Change
	2024
Operating Data (at period end):	Operating Data (at period end):
Operating Data (at period end):
Operating Data (at period end):
Fleet horsepower (1)
Fleet horsepower (1)
Fleet horsepower (1)	Fleet horsepower (1)	3,213,096		3,106,316		3.4	%	3,291			3,175			3.7	%
Revenue-generating horsepower (2)	Revenue-generating horsepower (2)	3,210,076		3,098,545		3.6	%	Revenue-generating horsepower (2)	3,286			3,169			3.7	%
Fleet compression units	Fleet compression units	3,051		3,011		1.3	%	Fleet compression units	3,091			3,041			1.6	%
Revenue-generating compression units	Revenue-generating compression units	3,034		3,004		1.0	%	Revenue-generating compression units	3,064			3,033			1.0	%
Revenue-generating horsepower per revenue-generating compression unit (3)	Revenue-generating horsepower per revenue-generating compression unit (3)	1,058		1,031		2.6	%	Revenue-generating horsepower per revenue-generating compression unit (3)	1,072			1,045			2.6	%
Horsepower utilization (4)	Horsepower utilization (4)	99.9	%	99.7	%	0.2	%	Horsepower utilization (4)	99.8	%		99.8	%		—	%

(1)Fleet horsepower includes revenue-generating horsepower and idle horsepower, which is comprised of compression units that do not have a signed contract or are not subject to a firm commitment from our ~~customer~~customer(s) and are no longer generating revenue. Fleet horsepower excludes ~~31,520~~27,663 and ~~60,025~~58,645 of non-marketable or obsolete horsepower as of ~~September 30,~~March 31, 2024, and 2023, ~~and 2022,~~ respectively.

(2)Revenue-generating horsepower includes (x) compression units that are operating under contract and generating revenue and (y) compression units which are available to be deployed, ~~and for which we have~~pursuant to a signed contract, or are subject to a firm commitment from our customer.

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

(4)Horsepower utilization is calculated as (i) revenue-generating horsepower divided by (ii) fleet horsepower.

~~Table of Contents~~

Horsepower

The ~~3.4% and 3.6%~~3.7% increase in fleet horsepower and revenue-generating horsepower, respectively, were primarily attributable to the purchase and deployment of new compression units through organic growth with our existing customer base, as well as select new customers in the key regions in which we operate. The 2.6% increase in revenue-generating horsepower per revenue-generating compression unit was due to the purchase and deployment of new, large horsepower units.

Table of Contents

Financial Results of Operations

Three Months Ended ~~September 30, 2023~~March 31, 2024, Compared to the Three Months Ended ~~September 30, 2022~~March 31, 2023

The following table presents selected financial and operating information for the periods presented ((in ~~thousands~~thousands)):

For the Three Months Ended
September 30,
% Change
2023 2022
Revenues:
Compression operations $ 186,673 $ 163,662 14.1 %
Other services 44,310 18,983 133.4 %
Total revenues 230,983 182,645 26.5 %
Operating expenses:
Cost of operations (exclusive of depreciation and amortization shown below):
Compression operations 65,470 55,872 17.2 %
Other services 38,820 14,037 176.6 %
Depreciation and amortization 46,087 44,111 4.5 %
Selling, general and administrative expenses 19,648 11,190 75.6 %
Gain on sale of capital assets — (818) nm
Total operating expenses 170,025 124,392 36.7 %
Income from operations 60,958 58,253 4.6 %
Other income (expenses):
Interest expense, net (39,710) (49,859) (20.4) %
Loss on extinguishment of debt (6,757) — nm
Gain on derivatives 15,141 51,862 (70.8) %
Other income (expense) 38 (19) (300.0) %
Total other income (expenses) (31,288) 1,984 (1,677.0) %
Income before income taxes 29,670 60,237
Income tax expense 7,904 14,337 (44.9) %
Net income $ 21,766 $ 45,900 (52.6) %


	For the Three Months Ended March 31,				% Change
	2024		2023
Revenues:
Compression Operations	$	193,399	$	177,697	8.8	%
Other Services	22,093		12,415		78.0	%
Total revenues	215,492		190,112		13.4	%
Operating expenses:
Cost of operations (exclusive of depreciation and amortization shown below):
Compression Operations	65,882		62,770		5.0	%
Other Services	17,684		8,988		96.8	%
Depreciation and amortization	46,944		44,897		4.6	%
Selling, general and administrative expenses	24,824		13,085		89.7	%
Loss on sale of property, plant and equipment	—		17		(100.0)	%
Total operating expenses	155,334		129,757		19.7	%
Income from operations	60,158		60,355		(0.3)	%
Other income (expenses):
Interest expense, net	(39,740)		(68,662)		(42.1)	%
Gain (loss) on derivatives	19,757		(7,995)		(347.1)	%
Other expense	(68)		(31)		119.4	%
Total other expenses	(20,051)		(76,688)		(73.9)	%
Income (loss) before income taxes	40,107		(16,333)		(345.6)	%
Income tax (benefit) expense	9,875		(3,990)		(347.5)	%
Net income (loss)	$	30,232	$	(12,343)	(344.9)	%

Revenues and Sources of Income

Compression Operations

Compression Operations revenue increased ~~$23.0~~$15.7 million ~~(14.1%~~(8.8%) for the three months ended ~~September 30, 2023~~March 31, 2024, compared to the three months ended ~~September 30, 2022. Substantially all, or $22.9~~March 31, 2023, of which $16.8 million of the increase was the result of an increase in average revenue-generating horsepower ~~as a result of~~due to increased demand for our ~~compression operations~~Compression Operations (consistent with increased operating activity in the oil and ~~due to~~gas industry) and an increase in average monthly revenue per revenue-generating ~~horsepower per month.~~horsepower; partially offset by a $1.1 million decrease in freight and crane charges that are directly reimbursable by our customers.

Other Services

Other Services revenue increased ~~$25.3~~$9.7 million ~~(133.4%~~(78.0%) for the three months ended ~~September 30, 2023~~March 31, 2024, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. This increase was primarily due to a ~~$24.3~~$9.5 million increase in ~~revenue~~revenues from station construction services, mostly due to an increase in demand for and scope of station projects. Revenue also increased by $0.2 million from parts and service sales.

2125

Table of Contents

~~station construction services driven primarily by increases in demand and scope of station projects, and a $1.0 million increase in revenue from parts and service, driven by increased customer demand.~~

Operating Costs and Other Expenses

Compression Operations

Compression Operations expenses increased ~~$9.6~~$3.1 million ~~(17.2%~~(5.0%) for the three months ended ~~September 30, 2023~~March 31, 2024, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. This was primarily due to a ~~$4.6~~$1.9 million increase in direct labor expenses related to increased headcount and salaries, a $1.4 million increase in indirect expenses and a $0.7 million increase in direct expenses, driven by increases in pricing and volume of lubricant oil and coolant and parts to support increased ~~activity,~~activity; partially offset by a ~~$3.0~~$0.9 million ~~increase in direct labor expenses related to increased headcount and salaries, a $1.9 million increase in indirect expenses, and a $0.1 million increase~~decrease in freight and crane charges that are directly reimbursable by our customers.

Other Services

Other Services ~~expense~~expenses increased ~~$24.8~~$8.7 million ~~(176.6%~~(96.8%) for the three months ended ~~September 30, 2023~~March 31, 2024, compared to the three months ended ~~September 30, 2022 This~~March 31, 2023. Substantially all, or $8.7 million of the increase, was ~~primarily~~ due to ~~a $23.7 million~~an increase in expenses from station construction services, ~~driven primarily by increases~~mostly due to an increase in demand for and scope of station ~~projects, and $1.1 million from parts and service, driven by increased customer demand.~~projects.

Depreciation and Amortization

Depreciation and Amortization increased $2.0 million ~~(4.5%~~(4.6%) for the three months ended ~~September 30, 2023~~March 31, 2024, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. This increase was primarily due to an increase in compression equipment purchased, which resulted in increased depreciation associated with that equipment.

Selling, General and Administrative ~~Expense~~Expenses

Selling, General and Administrative ~~expenses~~Expenses increased ~~$8.5~~$11.7 million ~~(75.6%~~(89.7%) for the three months ended ~~September 30, 2023~~March 31, 2024, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. This increase was ~~primarily~~ due to a ~~$2.5~~$8.5 million increase in professional fees, primarily related to transactions costs associated with the CSI Acquisition, a $2.0 million increase in stock compensation expense ~~mainly~~ related to ~~share-based~~equity compensation ~~awards granted as part of the IPO,~~plans, a ~~$2.0~~$1.0 million increase in ~~bad debt expense related to expected credit losses from~~other overhead expenses, mostly consisting of insurance, entertainment and office expenses, a ~~customer in bankruptcy experiencing financial distress, a $1.1~~$0.1 million increase in labor and benefits ~~mainly related to increased headcount~~ and ~~salaries,~~ a ~~$1.1~~$0.1 million increase in professional fees mainly related to transaction costs and a $0.6 million increase in other overhead expenses, primarily as a result of higher insurance, office expenses, and other general administrative expenses.bad debt expense.

Interest Expense, Net

Interest ~~expense, net~~Expense, Net decreased ~~$10.1~~$28.9 million ~~(20.4%~~(42.1%) for the three months ended ~~September 30, 2023~~March 31, 2024, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. This decrease iswas primarily due to the extinguishment of the Term Loan (as defined below) in July ~~2023;~~2023, partially offset by an increase in the effective interest rate on the ABL ~~Facility.~~

~~Loss~~Facility, as well as interest on ~~Extinguishment of Debt~~

~~Loss on extinguishment of debt increased $6.8 million related to~~ the write off of debt issuance costs and other fees as a result of the extinguishment of the Term Loan during the three months ended September 30, 2023. No such loss was recognized in the three months ended September 30, 2022.2029 Senior Notes.

Gain (Loss) on Derivatives

Gain (Loss) on ~~derivatives decreased $36.7~~Derivatives increased $27.8 million ~~(70.8%~~(347.1%) for the three months ended ~~September 30, 2023~~March 31, 2024, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. This isincrease was primarily related to ~~an $8.0~~a $14.3 million increase in the fair value of derivatives and an increase in cash received on derivatives of $5.5 million for the three months ended March 31, 2024, due to an increase in the long-term ~~SOFR~~Secured Overnight Financing Rate (“SOFR”) yield curve, as compared to a $17.9 million decrease in the fair value of derivatives and cash received on derivatives of ~~$7.2~~$9.9 million ~~as compared~~for the three months ended March 31, 2023, due to a ~~$53.9 million increase in the fair value of derivatives due to an increase~~decrease in the long-term SOFR yield ~~curve and cash paid on derivatives of $2.0 during the three months ended September 30, 2023 and 2022, respectively.~~curve.

Income ~~tax expense~~Tax (Benefit) Expense

Income ~~tax expense decreased~~Tax Expense increased by ~~$6.4~~$13.9 million ~~(44.9%~~(347.5%) for the three months ended ~~September 30, 2023~~March 31, 2024, compared to the three months ended ~~September 30, 2022.~~March 31, 2023. This ~~was primarily due to a decrease in pre-tax income of $45.0 million for the three months ended September 30, 2023 compared to pre-tax income for the three months ended September 30, 2022.~~

~~Table of Contents~~

~~Financial Results of Operations~~

~~Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022~~

~~The following table presents selected financial and operating information for the periods presented~~ ~~(in thousands)~~:

For the Nine Months Ended September 30, % Change
2023 2022
Revenues:
Compression operations $ 545,989 $ 483,965 12.8 %
Other services 78,412 44,172 77.5 %
Total revenues 624,401 528,137 18.2 %
Operating expenses:
Cost of operations (exclusive of depreciation and amortization shown below):
Compression operations 193,257 167,145 15.6 %
Other services 65,907 34,638 90.3 %
Depreciation and amortization 136,414 129,913 5.0 %
Selling, general and administrative expenses 46,171 32,760 40.9 %
Gain on sale of capital assets (721) (825) (12.6) %
Total operating expenses 441,028 363,631 21.3 %
Income from operations 183,373 164,506 11.5 %
Other income (expenses):
Interest expense, net (182,030) (104,616) 74.0 %
Loss on extinguishment of debt (6,757) — nm
Gain on derivatives 42,080 76,972 (45.3) %
Other income (expense) 39 (10) (490.0) %
Total other expenses (146,668) (27,654) 430.4 %
Income before income taxes 36,705 136,852 (73.2) %
Income tax expense 9,765 32,496 (70.0) %
Net income $ 26,940 $ 104,356 (74.2) %

~~Revenues and Sources of Income~~

~~Compression Operations~~

~~Compression Operations revenue increased $62.0 million (12.8%) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The $62.0 million~~ increase was the result of an increase in average revenue-generating horsepower as a result of increased demand for our compression operations and due to an increase in average revenue per revenue-generating horsepower per month.

~~Other Services~~

Other Services revenue increased $34.2 million (77.5%) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This increase was primarily due to a $29.8 million increase in revenues from station construction services driven primarily by increases in demand and scope of station projects, and $4.4 million from parts and service, driven by increased customer demand.

~~Table of Contents~~

~~Operating Costs and Other Expenses~~

~~Compression Operations~~

Compression Operations expenses increased $26.1 million (15.6%) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This was primarily due to a $11.6 million increase in direct expenses, driven by increases in pricing and volume of lubricant oil and coolant and parts to support increased activity, a $9.9 million increase in direct labor expenses related to increased headcount and salaries, a $4.7 million increase in indirect expenses; partially offset by a $0.1 million decrease in freight and crane charges that are directly reimbursable by our customers.

~~Other Services~~

Other Services expense increased $31.3 million (90.3%) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This was primarily due to a $27.6 million increase in expenses from station construction services driven primarily by increases in demand and scope of station projects and $3.7 million from parts and service, driven by increased customer demand.

~~Depreciation and Amortization~~

~~Depreciation and Amortization increased $6.5 million (5.0%) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This~~ was primarily due to an increase in ~~compression equipment purchased, which resulted in increased depreciation associated with that equipment.~~

~~Selling, General and Administrative Expense~~

Selling, General and Administrative expenses increased $13.4 million (40.9%) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This was primarily due to a $3.1 million increase in labor and benefits, mainly related to increased headcount and salaries, a $2.8 million increase in stock compensation expense related to equity compensation plans, a $2.0 million increase in bad debt expense related to expected credit losses from a customer in bankruptcy experiencing financial distress, a $2.5 million increase in professional fees mainly related to transactions costs, and a $2.5 million increase in other overhead expenses, primarily as a result of higher insurance, entertainment and office expenses.

~~Interest Expense, Net~~

Interest expense, net increased $77.4 million (74.0%) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This is primarily due to (i) an increase in borrowings under the ABL Facility and Term Loan, of which $825 million was related to the May 2022 recapitalization (as discussed in Note 9 (“Debt and Credit Facilities”) to the Condensed Consolidated Financial Statements included elsewhere in this Report) and (ii) increased effective interest rates on the ABL Facility and Term Loan. This was partially offset by the extinguishment of the Term Loan in July 2023.

~~Loss on Extinguishment of Debt~~

Loss on extinguishment of debt increased $6.8 million related to the write off debt issuance costs and other fees as a result of the extinguishment of the Term Loan during the nine months ended September 30, 2023. No such loss was recognized in the nine months ended September 30, 2022.

~~Gain on Derivatives~~

Gain on derivatives decreased $34.9 million (45.3%) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This is primarily related to a $25.8 million settlement on the termination of derivatives attributable to the Term Loan and $29.8 million cash received on derivative settlements on our interest rate swaps and collars, offset by a decrease in the change in fair value of the derivatives of $13.5 million during the nine months ended September 30, 2023, as compared to a $9.7 million cash paid on derivatives on our interest rate swaps and collars, offset by an increase in the change in fair value of derivatives of $86.7 million during the nine months ended September 30, 2022 due to an increase in the long-term SOFR and LIBOR yield curves.

~~Table of Contents~~

~~Income tax expense~~

~~Income tax expense decreased by $22.7 million (70.0%) for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. This was primarily due to a decrease in~~ pre-tax income of ~~$114.5~~$56.4 million for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024, compared to pre-tax ~~income~~loss for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

Liquidity and Capital Resources

Overview

Our ability to fund operations, finance capital expenditures, service our debt and pay dividends depends on ~~the levels of~~ our operating cash flows and access to the capital and credit markets. Our primary sources of liquidity are cash flows generated from our operations and our borrowing availability under the ABL Facility. Our cash flow is affected by numerous factors, including prices and demand for our compression infrastructure assets and services, conditions in the financial markets and various other factors. We believe cash generated by operating activities will be sufficient to service our debt, fund working capital,

Table of Contents

fund our estimated capital expenditures and, as our ~~board~~Board of ~~directors~~Directors may determine from time to time in its discretion, pay dividends.

Cash Requirements

Capital Expenditures

The compression infrastructure business is capital intensive, requiring significant investment to expand, maintain and upgrade existing operations. Our capital requirements have consisted primarily of, and we anticipate that our capital requirements will continue to consist primarily of, the following:

•Growth Capital Expenditures: (1) capital expenditures made to expand the operating capacity or operating income capacity of assets by acquisition of additional compression units, (2) capital expenditures made to maintain the operating capacity or operating income capacity of assets by acquisition of replacement compression units and (3) capital expenditures on assets other than compression units required to operate the ~~business but not including compression units—~~business—such as trucks, wash trailers, crane trucks, leasehold improvements, technology hardware and software and related implementation expenditures, furniture and fixtures, and other general items that are typically capitalized and ~~that~~ have a useful life beyond one year. We make capital expenditures ~~not related~~unrelated to our compression units (as described in clause (3) above) if and when necessary to support the operations of our revenue-generating horsepower.

•Maintenance Capital Expenditures: periodic capital expenditures incurred at predetermined operating intervals to maintain consistent and reliable operating capacity of our assets over the near term. Such maintenance capital expenditures typically involve overhauls of significant components of our compression units, such as the engine and compressor, pistons, rings, heads and bearings. These maintenance capital expenditures are predictable, and the majority of these expenditures are tied to a detailed, unit-by-unit schedule based on hours of operation or age. We utilize a disciplined and systematic asset management program whereby we perform major unit overhauls and engine replacements on a defined schedule based on hours of operation. As a result, our maintenance capital expenditures may vary considerably from year to year based on when such assets were added to the fleet. Maintenance capital expenditures, along with regularly scheduled preventive maintenance expenses, are typically sufficient to sustain the operating capacity of our assets over the full expected useful life of the compression units. Maintenance capital expenditures do not include expenditures to replace compression units when they reach the end of their useful lives.

The majority of our growth capital expenditures are related to the acquisition cost of new compression units. Maintenance capital expenditures are related to overhauls of significant components of our compression equipment, such as the engine and compressor, which return the components to a like-new condition ~~but do not modify~~without modifying the application for which the compression equipment was designed.

For the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, growth capital expenditures were ~~$124.0~~$59.4 million and maintenance capital expenditures were ~~$28.1~~$10.6 million. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, growth capital expenditures were ~~$163.2~~$35.8 million and maintenance capital expenditures were ~~$27.8~~$4.8 million. The ~~decrease~~increase in growth capital expenditures was primarily related to ~~an adjustment~~the timing of compression unit purchases necessary to ~~our capital allocation framework in conjunction with the Company's IPO and subsequent desire to pay a regular dividend.~~support operating capacity demand. The ~~decrease~~increase in maintenance capital expenditures was primarily ~~a result of a decrease~~due to an increase in ~~scheduled~~ unit overhauls ~~that occurred~~scheduled based on the age and operating hours of such units.

~~Table of Contents~~

Dividends

Our ~~board~~Board of ~~directors~~Directors may elect to declare cash dividends on our common stock, subject to our compliance with applicable law, and depending on, among other things, economic conditions, our financial condition, results of operations, projections, liquidity, earnings, legal requirements and restrictions in the agreements governing our indebtedness (as further discussed herein). ~~If and to the extent our board of directors were to declare a cash dividend to our stockholders, we expect the dividend to be paid from our Discretionary Cash Flow.~~ The timing, amount and financing of dividends, if any, ~~will be~~are subject to the discretion of our ~~board~~Board of ~~directors~~Directors from time to time.

On ~~October 24, 2023,~~May 2, 2024, our ~~board~~Board of ~~directors~~Directors declared a quarterly cash dividend, ~~to be~~which was paid on ~~November 10, 2023~~May 20, 2024, to stockholders of record, determined as of close of business on May 13, 2024 (the “Common Stock Dividend”) and, in conjunction with the Common Stock Dividend, Kodiak Gas Services declared a distribution on its units of $0.38 per unit, payable on May 20, 2024, to all ~~stockholders~~unitholders of record of Kodiak Services as of the close of business on ~~November 3, 2023. See Note 20 (“Subsequent Events”) to the Condensed Consolidated Financial Statements included elsewhere in this Report.~~May 16, 2024.

Over the long-term, we expect to fund any dividends and our budgeted growth capital expenditures using our Discretionary Cash Flow. In the event our Discretionary Cash Flow is insufficient for the purpose of funding any such dividends and our budgeted growth capital expenditures for such period, we may fund such shortfall (i) with additional borrowings under our ABL Facility, which, as of ~~September 30, 2023~~March 31, 2024, had ~~$396.2~~$1,068.1 million available (subject to the requirement that our availability,

Table of Contents

in the case of dividends, under the ABL Facility exceeds the greater of (x) 10% of the total commitments under the facility of $2.2 billion or (y) $200 million) or (ii) reduce our growth capital expenditures for such period. Any such additional borrowings under our ABL Facility will result in an increase in our interest expense for such period. Any such reduction in our growth capital expenditures may result in lower growth in our revenue-generating horsepower in future periods.

Contractual Obligations

Our material contractual obligations as of ~~September 30, 2023~~March 31, 2024, consisted of the following:

•Long-term debt of ~~$1.8~~$1.9 billion, of which $1.1 billion is due in ~~2028.~~2028 and $750.0 million is due in 2029.

•Purchase commitments of ~~$215.7~~$106.6 million, all of which ~~$182.9 million~~ is expected to be settled within the next twelve months; primarily consisting of future commitments to purchase new compression units that have been ordered but not yet received. See Note 13 (“Commitments and Contingencies”) to the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements included elsewhere in this Report.

Other Commitments

As of ~~September 30,~~March 31, 2024, other commitments include operating lease payments totaling $33.9 million.

As of December 31, 2023, other commitments include operating lease payments totaling ~~$52.6~~$34.5 million.

Sources of Cash

Cash Flows

The following table summarizes our cash flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2024, and 2023 ~~and 2022~~ (in thousands):


		Nine Months Ended September 30,
		2023		2022		$ Variance
	Three months ended March 31,
		2024
		2024
		2024						2023	$ Variance
Net cash provided by operating activities	Net cash provided by operating activities	$	203,699	$	186,854	$	16,845
Net cash used in investing activities	Net cash used in investing activities	(144,563)		(191,770)		47,207
Net cash used in financing activities		(73,439)		(2,543)		(70,896)
Net decrease in cash and cash equivalents		$	(14,303)	$	(7,459)	$	(6,844)
Net cash provided by financing activities
Net increase (decrease) in cash and cash equivalents

Operating Activities

The ~~$16.8~~$28.3 million increase in net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, was primarily due to a ~~$38.9~~$26.1 million decrease in interest expense, net of debt issuance cost amortization, and a $6.6 million increase in ~~Adjusted Gross Margin~~income from operations adjusted for non-cash operating activity and anworking capital changes. This increase was partially offset by a $4.4 million decrease in cash received on derivatives of $65.3 million, partially offset by an increase of interest expense, net of $77.4 million; further impacted by changes in working capital such as a decrease in inventory purchases of $10.1 million, an increase in contract liability of $10.8 million, an increase in accounts receivable, net of $26.4 million, and an increase in prepaid expenses and other current assets of $4.3 million.

~~Table of Contents~~

derivatives.

Investing Activities

The ~~$47.2~~$11.6 million ~~decrease~~increase in net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, was primarily due to a ~~$54.4~~$5.8 million ~~decrease~~increase in maintenance capital expenditures and a $5.8 million increase in growth capital expenditures, ~~offset by a $7.0 million decrease in proceeds from sale~~net of ~~assets and a $0.3 million increase in maintenance~~accrued capital expenditures.

Financing Activities

The ~~$70.9~~$6.5 million ~~increase~~decrease in net cash ~~used in~~provided by financing activities for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024, compared to the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023, was primarily due to ~~a decrease~~an increase in dividends paid to stockholders of $29.8 million, $0.4 million increase in cash payments related to offering cost, an increase in net payments over borrowings on debt instruments of ~~$652.6~~$0.3 million ~~an increase in payments on debt instruments~~and cash paid for shares withheld to cover taxes of ~~$475.9 million, an increase in offering costs of $9.2 million, an increase~~$0.3 million. This was offset by a decrease in payments of debt issuance ~~cost~~costs of ~~$5.0 million, and an increase in payment related to loss on extinguishment~~$24.3 million.

Table of ~~debt of $1.8 million. This was offset by an increase in net proceeds from the IPO of $277.9 million and a decrease in equity distribution of $795.7 million.~~Contents

Description of Indebtedness

ABL Facility

As of January 1, 2022, a ~~wholly-owned~~wholly owned subsidiary of Kodiak had ~~an ABL Facility~~a revolving asset-based loan credit facility (the “ABL Facility”) with unaffiliated secured lenders and JPMorgan Chase Bank, N.A., as administrative agent. On March 22, 2023, ~~wholly-owned~~wholly owned subsidiaries of Kodiak entered into the Fourth Amended and Restated ABL Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (as amended or restated from time to time, the “ABL Credit Agreement”), whereby the total facility (among other things) was increased to $2.2 billion and certain changes were made to our financial covenants and maturity date. On May 31, 2023, the ABL Credit Agreement was amended to, among other things, permit distributions of overallotment proceeds from the IPO and revise the terms related to the payment and prepayment of that certain Amended and Restated Credit Agreement, dated as of May 19, 2022, as amended by that certain First Amendment, dated March 31, 2023, among Kodiak Services, Frontier Intermediate Holding, LLC, Wells Fargo Bank, N.A., as Administrative Agent, and the ~~Term Loan.~~lenders party thereto (the “Term Loan”). On June 27, 2023, the ABL Credit Agreement was further amended to remove the ability to make distributions related to overallotment proceeds from the IPO and to instead require prepayment of the obligations and cash collateralization of any letter of credit exposure upon the issuance of any equity interests by Kodiak pursuant to the overallotment in the IPO. In connection with the IPO, the Company became a borrower under the ABL Facility. ~~In connection with the IPO, the Company became a borrower under the ABL Facility.~~ As of ~~September 30, 2023,~~March 31, 2024, there was ~~$14.7~~$1.0 million in letters of credit outstanding under the ABL Facility. The maturity date of the ABL Facility is March 22, 2028. See Note 9 (“Debt and Credit Facilities”) to the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements included elsewhere in this Report. The ABL Credit Agreement requires that we meet certain financial ratios.

Commencing with the first fiscal quarter ended ~~September 30, 2023,~~March 31, 2024, we must maintain an interest coverage ratio (as defined in the ABL Credit Agreement) of not less than 2.50 to 1.00, determined as of the last day of each fiscal quarter.

Additionally, commencing with the first fiscal quarter ending after the completion of the IPO but prior to the occurrence of certain issuances of unsecured debt (for purposes of this description, an “Unsecured Debt Issuance”), our Leverage Ratio (as defined in the ABL Credit Agreement), determined quarterly as of the last day of each fiscal quarter, may not exceed (i) 5.25 to 1.00 for the fiscal quarters ending September 30, 2023, and December 31, 2023, (ii) 5.00 to 1.00 for the fiscal quarter ending March 31, 2024, (iii) 4.75 to 1.00 for the fiscal quarter ending June 30, 2024, and (iv) 4.50 to 1.00 for each fiscal quarter ending on or after September 30, 2024.

All obligations under the ABL Facility are collateralized by essentially all the assets of the Company. We were in compliance with all covenants as of ~~September 30, 2023~~March 31, 2024, and December 31, ~~2022.~~2023.

The applicable interest rate under the ABL Facility is (i) in the case of SOFR-based borrowings, the Term SOFR or Daily Simple SOFR rate then in effect (subject to a floor of 0%) plus 0.10% plus a spread that depends on our Leverage Ratio as of the most recent determination date, ranging from 2.00% if our Leverage Ratio is less than or equal to 3.00:1.00 to 3.00% if our Leverage Ratio is greater than 5.50:1.00 and (ii) in the case of prime rate-based borrowings, the prime rate (subject to

~~Table of Contents~~

a floor of 2.5%) plus a spread that depends on our Leverage Ratio as of the most recent determination date, ranging from 1.00% if our Leverage Ratio is less than or equal to 3.00:1.00 to 2.00% if our Leverage Ratio is greater than 5.50:1.00.

The ~~applicable~~weighted average interest ~~rates~~rate as of ~~September 30, 2023 were 10.25% (prime rate plus 1.75%)~~March 31, 2024 and ~~8.28% (Term SOFR rate plus 0.10% plus 2.75%). The applicable interest rates as of~~ December 31, ~~2022 were 9.50% (prime~~2023, was 7.68% and 8.08%, respectively, excluding the effect of interest rate ~~plus 2.00%) and 7.60% (Term SOFR rate plus 0.10% plus 3.00%).~~ ~~We pay~~swaps. The Company pays an annualized commitment fee of 0.25% on the unused portion of ~~our~~its ABL Facility if borrowings are greater than 50% of total commitments and 0.50% on the unused portion onof the ABL Facility if borrowings are less than 50% of total ~~commitments.~~commitments.

~~Term Loan~~Third Amendment to ABL Credit Agreement

~~As of~~On January ~~1, 2022, a wholly-owned subsidiary~~22, 2024, Kodiak, Kodiak Services and certain other subsidiaries of Kodiak ~~had a term loan (the “Term Loan”) pursuant to a credit agreement with unaffiliated unsecured lenders and Wells Fargo Bank, N.A., as administrative agent. On May 19, 2022, we~~ entered into the ~~Term Loan Credit Agreement (as amended from time to time, the “Term Loan Credit Agreement”) whereby we increased the aggregate commitments under the Term Loan from $400 million to $1 billion.~~

~~On March 31, 2023, our wholly-owned subsidiary entered into the First~~Third Amendment to the ~~Term Loan~~ABL Credit Agreement (the “Third Amendment”), which ~~extended~~amends the ~~maturity date~~Existing ABL Credit Agreement. The Third Amendment, among other things, amended certain provisions of the Existing ABL Credit Agreement (i) to ~~September 22, 2028.~~accommodate the consummation of the transactions contemplated by the Merger Agreement, (ii) to account for Kodiak’s organizational structure after giving effect to the transactions contemplated by the Merger Agreement and (iii) include a maximum

Table of Contents

secured leverage ratio of (x) 3.75 to 1.00 for the first four fiscal quarters after the Company issues any unsecured indebtedness and (y) 3.25 to 1.00 for each fiscal quarter thereafter,.

2029 Senior Notes

On ~~July 3, 2023, we~~February 2, 2024, Kodiak Services issued $750,000,000 aggregate principal amount of Kodiak Services’ 7.250% senior notes due 2029 (the “2029 Senior Notes”), pursuant to an indenture, dated February 2, 2024, by and among the Company, and certain other subsidiary guarantors party thereto, and U.S. Bank Trust Company, National Association, as trustee.

The proceeds from the 2029 Senior Notes were used to repay a portion of the ~~net proceeds of our IPO, together~~outstanding indebtedness under the ABL Facility and to pay related fees and expenses in connection with the notes offering. In connection with the close of the CSI Acquisition on April 1, 2024, the Company used proceeds ~~resulting~~ from additional draws on the ~~Term Loan Derivative Settlement and borrowings under our~~ ABL Facility to repay ~~$300~~$651.8 million of ~~borrowings outstanding under~~existing long-term indebtedness assumed in the Term Loan. In connection with the IPO, all of the Company’s and its subsidiaries’ remaining obligations under the Term Loan were assumed by a parent entity of Kodiak Holdings, and the Company’s obligations thereunder were terminated. As a result, the Company is no longer a borrower or guarantor under, nor otherwise obligated with respect to the debt outstanding under the Term Loan.

We were in compliance with all financial covenants as of December 31, 2022 and through the date of termination. The applicable interest rates were 12.16% and 10.67% as of June 30, 2023 and December 31, 2022, respectively.CSI Acquisition.

Derivatives and Hedging Activities

To mitigate a portion of the exposure to fluctuations in the variable interest rate of the ABL Facility and the Term Loan, we have entered into various derivative instruments.

Our interest rate swaps exchange variable interest rates for fixed interest rates. We have not designated any derivative instruments as hedges for accounting purposes and do not enter into such instruments for speculative or trading purposes. See Note 10 (“Derivative Instruments”) to the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements included elsewhere in this Report.

~~Parent Entity Distribution~~

On June 27, 2023, we made a cash distribution of $42.3 million to a parent entity of Kodiak Holdings prior to the consummation of the IPO, of which $11.0 million was funded with cash on hand and $31.3 million was funded with borrowings under the ABL Facility.

Non-GAAP Financial Measures

Management uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include the non-GAAP financial measures of Adjusted Gross Margin, Adjusted Gross Margin Percentage, Adjusted EBITDA, Adjusted EBITDA Percentage, Discretionary Cash Flow and Free Cash Flow.

Adjusted Gross Margin and Adjusted Gross Margin Percentage

Adjusted Gross Margin is a non-GAAP financial measure. We define Adjusted Gross Margin as revenue less cost of operations, exclusive of depreciation and amortization expense. We define Adjusted Gross Margin Percentage as Adjusted Gross Margin divided by total revenues. We believe that Adjusted Gross Margin is useful as a supplemental measure toof our operating profitability. Adjusted Gross Margin is impacted primarily by the pricing trends for service operations and cost of operations, including labor rates for service technicians, volume and per compression unit costs for lubricant oils and coolants, quantity and pricing of routine preventative maintenance on compression units and property tax rates on compression units. Adjusted Gross Margin should not be considered an alternative to, or more

~~Table of Contents~~

meaningful than, gross margin or any other measure of financial performance presented in accordance with GAAP. Moreover, Adjusted Gross Margin as presented may not be comparable to similarly titled measures of other companies. Because we capitalize assets, depreciation and amortization of equipment is a necessary element of our costs. To compensate for the limitations of Adjusted Gross Margin as a measure of our performance, we believe that it is important to consider gross margin determined under GAAP, as well as Adjusted Gross Margin, to evaluate our operating profitability.

Table of Contents

Adjusted Gross Margin for Compression Operations


	Three Months Ended March 31,													Three Months Ended March 31,
	2024											2024			2023
		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022

		(in thousands)				(in thousands)
		(in thousands)
		(in thousands)
		(in thousands)
Total revenues	Total revenues	$	186,673	$	163,662	$	545,989	$	483,965
Cost of sales (excluding depreciation and amortization)	Cost of sales (excluding depreciation and amortization)	(65,470)		(55,872)		(193,257)		(167,145)
Depreciation and amortization	Depreciation and amortization	(46,087)		(44,111)		(136,414)		(129,913)
Gross margin	Gross margin	$	75,116	$	63,679	$	216,318	$	186,907
Gross margin percentage	Gross margin percentage	40.2%		38.9%		39.6%		38.6%		Gross margin percentage	41.7%		39.4%
Depreciation and amortization	Depreciation and amortization	46,087		44,111		136,414		129,913
Adjusted Gross Margin	Adjusted Gross Margin	$	121,203	$	107,790	$	352,732	$	316,820
Adjusted Gross Margin Percentage (1)		64.9%		65.9%		64.6%		65.5%
Adjusted Gross Margin Percentage(1)										Adjusted Gross Margin Percentage(1)	65.9%		64.7%

(1)Calculated using Adjusted Gross Margin for Compression Operations as a percentage of total Compression Operations revenues.

Adjusted Gross Margin for Other Services


	Three Months Ended March 31,															Three Months Ended March 31,
	2024												2024				2023
		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022

		(in thousands)				(in thousands)
		(in thousands)
		(in thousands)
		(in thousands)
Total revenues	Total revenues	$	44,310	$	18,983	$	78,412	$	44,172
Cost of sales (excluding depreciation and amortization)	Cost of sales (excluding depreciation and amortization)	(38,820)		(14,037)		(65,907)		(34,638)
Depreciation and amortization	Depreciation and amortization	—		—		—		—		Depreciation and amortization	—			—
Gross margin	Gross margin	$	5,490	$	4,946	$	12,505	$	9,534	Gross margin	$	4,409		$	3,427
Gross margin percentage	Gross margin percentage	12.4%		26.1%		15.9%		21.6%		Gross margin percentage	20.0%			27.6%
Depreciation and amortization	Depreciation and amortization	—		—		—		—		Depreciation and amortization	—			—
Adjusted Gross Margin	Adjusted Gross Margin	$	5,490	$	4,946	$	12,505	$	9,534	Adjusted Gross Margin	$	4,409		$	3,427
Adjusted Gross Margin Percentage (1)		12.4%		26.1%		15.9%		21.6%
Adjusted Gross Margin Percentage(1)										Adjusted Gross Margin Percentage(1)	20.0%			27.6%

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

Adjusted EBITDA and Adjusted EBITDA Percentage

We define Adjusted EBITDA as net income (loss) before interest expense, ~~net:~~net; income tax expense (benefit); and depreciation and amortization; plus (i) loss on extinguishment of debt; (ii) loss (gain) on derivatives; (iii) equity compensation expense; (iv) transaction expenses; (v) loss (gain) on sale of assets; and (vi) impairment of compression equipment. We define Adjusted EBITDA Percentage 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:

•the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets;

~~Table of Contents~~

•the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities;

•the ability of our assets to generate cash sufficient to make debt payments and pay dividends; and

•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 that Adjusted EBITDA and Adjusted EBITDA Percentage provide useful information because, when viewed with our GAAP results and the accompanying reconciliation, they provide a more complete understanding of our

Table of Contents

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.

Adjusted EBITDA and Adjusted EBITDA Percentage should not be considered as alternatives to, or more meaningful than, revenues, net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance and liquidity. Moreover, our Adjusted EBITDA and Adjusted EBITDA Percentage as presented may not be comparable to similarly titled measures of other companies.

Given we are a ~~capital intensive~~capital-intensive business, depreciation, impairment of compression equipment and the interest cost of acquiring compression equipment are necessary elements of our costs. To compensate for these items, we believe that it is important to consider both net income and net cash provided by operating activities determined under GAAP, as well as Adjusted EBITDA and Adjusted EBITDA Percentage, to evaluate our financial performance and our liquidity. Our Adjusted EBITDA and Adjusted EBITDA Percentage exclude some, but not all, items that affect net income and net cash provided by operating activities, and these measures may vary among companies. Management compensates for the limitations of Adjusted EBITDA and Adjusted EBITDA Percentage as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating this knowledge into management’s decision-making processes.

The following table reconciles net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA, its most directly comparable Non-GAAP financial measure, for each of the periods presented (in thousands):

Three Months Ended September 30,
Nine Months Ended September 30,
2023 2022 2023 2022
Net income $ 21,766 $ 45,900 $ 26,940 $ 104,356
Interest expense, net 39,710 49,859 182,030 104,616
Income tax expense 7,904 14,337 9,765 32,496
Depreciation and amortization 46,087 44,111 136,414 129,913
Loss on extinguishment of debt 6,757 — 6,757 —
Gain on derivatives (15,141) (51,862) (42,080) (76,972)
Equity compensation expense (1) 2,544 — 3,452 619
Transaction expenses (2) 440 — 1,713 1,600
Gain on sale of capital assets — (818) (721) (825)
Adjusted EBITDA $ 110,067 $ 101,527 $ 324,270 $ 295,803
Adjusted EBITDA Percentage 47.7% 55.6% 51.9% 56.0%


	Three Months Ended March 31,
	2024			2023
Net income (loss)	$	30,232		$	(12,343)
Interest expense, net	39,740			68,662
Income tax expense (benefit)	9,875			(3,990)
Depreciation and amortization	46,944			44,897
(Gain) loss on derivatives	(19,757)			7,995
Equity compensation expense(1)	2,848			879
Transaction expenses(2)	7,880			201
Gain on sale of property, plant and equipment	—			17
Adjusted EBITDA	$	117,762		$	106,318

Adjusted EBITDA Percentage	54.6		%	55.9		%

(1)For the three months ended ~~September 30,~~March 31, 2024, and March 31, 2023, there was $2.5 million of non-cash adjustments for equity compensation expense. For the three months ended September 30, 2022, there was no such adjustment. For the nine months ended September 30, 2023 and 2022, there were ~~$3.4~~$2.8 million and ~~$0.6~~$0.9 million ~~respectively,~~ of non-cash adjustments for equity compensation expense.

(2)Represents certain costs associated with non-recurring professional services, ~~our equity owners’ expenses~~primarily related to the CSI Acquisition for the three months ended March 31, 2024, and other costs.

3032

Table of Contents

The following table reconciles net cash provided by operating activities to Adjusted EBITDA for each of the periods presented (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
	Three Months Ended March 31,										Three Months Ended March 31,
	2024									2024		2023
Net cash provided by operating activities	Net cash provided by operating activities	$	85,731	$	59,207	$	203,699	$	186,854
Interest expense, net	Interest expense, net	39,710		49,859		182,030		104,616
Income tax expense		7,904		14,337		9,765		32,496
Income tax expense (benefit)
Deferred tax provision	Deferred tax provision	(5,551)		(11,833)		(6,312)		(26,807)
Cash (received) paid on derivatives		(7,163)		1,992		(55,631)		9,704
Loss on extinguishment of debt		2,398		—		2,398		—
Transaction expenses (1)		440		—		1,713		1,600
Other (2)		(3,705)		(5,066)		(16,814)		(11,978)
Cash received paid on derivatives
Transaction expenses(1)
Other(2)
Change in operating assets and liabilities	Change in operating assets and liabilities	(9,697)		(6,969)		3,422		(682)
Adjusted EBITDA	Adjusted EBITDA	$	110,067	$	101,527	$	324,270	$	295,803

(1)Represents certain costs associated with non-recurring professional services, ~~our equity owners’ expenses~~primarily related to the CSI Acquisition for the three months ended March 31, 2024, and other costs.

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

Discretionary Cash Flow

We define Discretionary Cash Flow as net cash provided by operating activities less (i) maintenance capital expenditures;(ii) gain (loss) on sale of ~~capital assets;~~property, plant and equipment; (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 in assessing our ability to pay cash dividends to our stockholders, make growth capital expenditures and assess our operating performance. Our ability to pay dividends is subject to limitations due to restrictions contained in our ABL Credit Agreement, as further described elsewhere herein. Discretionary Cash Flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, such as revenues, net income, operating income (loss) or cash flows from operating activities. Discretionary Cash Flow as presented may not be comparable to similarly titled measures of other companies.

Free Cash Flow

We define Free Cash Flow as net cash provided by operating activities less (i) maintenance capital expenditures;(ii) gain (loss) on sale of ~~capital assets;~~property, plant and equipment; (iii) certain changes in operating assets and liabilities; (iv) certain other expenses; and (v) net growth capital expenditures; plus (x) ~~cash loss on extinguishment of debt; (y)~~ transaction expenses; and (z) proceeds from sale of ~~capital assets.~~property, plant and equipment. We believe Free Cash Flow is a liquidity measure and useful supplemental financial measure for us in assessing our ability to pursue business opportunities and investments to grow our business and to service our debt. Free Cash Flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, such as revenues, net income (loss), operating income (loss) or cash flows from operating activities. Free Cash Flow as presented may not be comparable to similarly titled measures of other companies.

3133

Table of Contents

The following table reconciles net cash provided by operating activities, to Discretionary Cash Flow and Free Cash Flow, for each of the periods presented (in thousands):

Three Months Ended September 30,
Nine Months Ended September 30,
2023 2022 2023 2022
Net cash provided by operating activities $ 85,731 $ 59,207 $ 203,699 $ 186,854
Maintenance capital expenditures (1) (12,312) (10,340) (28,056) (27,771)
Loss on extinguishment of debt 2,398 — 2,398 —
Transaction expenses (2) 440 — 1,713 1,600
Gain on sale of capital assets — (818) (721) (825)
Change in operating assets and liabilities (9,697) (6,969) 3,422 (682)
Other (3) (3,516) (7) (4,833) (1,700)
Discretionary Cash Flow $ 63,044 $ 41,073 $ 177,622 $ 157,476
Growth capital expenditures (4)(5) (55,671) (36,572) (124,015) (163,162)
Proceeds from sale of capital assets — 8,010 1,055 8,023
Free Cash Flow $ 7,373 $ 12,511 $ 54,662 $ 2,337


	Three Months Ended March 31,
	2024		2023
Net cash provided by operating activities	$	51,542	$	23,290
Maintenance capital expenditures(1)	(10,642)		(4,803)
Transaction expenses(2)	7,880		201
Gain on sale of property, plant and equipment	—		17
Change in operating assets and liabilities	24,556		31,919
Other(3)	(1,411)		(918)
Discretionary Cash Flow	$	71,925	$	49,706
Growth capital expenditures(4)(5)	(59,401)		(35,816)
Proceeds from sale of property, plant and equipment	—		32
Free Cash Flow	$	12,524	$	13,922

(1)See “Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations —Liquidity~~Operations—Liquidity and Capital ~~Resources —Cash Requirements —Capital~~Resources—Cash Requirements—Capital Expenditures” for information regarding amounts designated as maintenance capital expenditures.

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

(4)For the three months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022,~~ growth capital expenditures include a ~~$16.4~~$9.9 million increase and a ~~$6.8 million decrease in accrued capital expenditures, respectively. For the nine months ended September 30, 2023 and 2022, growth capital expenditures includes a $6.5 million increase and a $8.8~~$8.0 million decrease in accrued capital expenditures, respectively.

(5)For the three months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022,~~ there were ~~$3.5~~$5.8 million and ~~$1.7~~$2.4 million of non-unit growth capital expenditures, respectively. For the nine months ended September 30, 2023 and 2022, there were $10.7 million and $3.9 million of non-unit growth capital expenditures, respectively. Remaining amounts for the nine months ended September 30, 2023 and 2022 represent growth capital expenditures to expand our compression fleet. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Requirements—Capital Expenditures” for information regarding amounts designated as growth capital expenditures.

~~Table of Contents~~

The following table reconciles net income (loss) to Discretionary Cash Flow and Free Cash Flow, for each of the periods presented (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Net income		$	21,766	$	45,900	$	26,940	$	104,356
	Three Months Ended March 31,										Three Months Ended March 31,
	2024									2024		2023
Net income (loss)
Depreciation and amortization	Depreciation and amortization	46,087		44,111		136,414		129,913
Change in fair value of derivatives	Change in fair value of derivatives	(7,978)		(53,854)		13,551		(86,676)
Loss on extinguishment of debt		6,757		—		6,757		—
Deferred tax provision	Deferred tax provision	5,551		11,833		6,312		26,807
Amortization of debt issuance costs	Amortization of debt issuance costs	189		4,241		11,260		9,453
Equity compensation expense (1)		2,544		—		3,452		619
Transaction expenses (2)		440		—		1,713		1,600
Gain on sale of capital assets		—		(818)		(721)		(825)
Maintenance capital expenditures (3)		(12,312)		(10,340)		(28,056)		(27,771)
Equity compensation expense(1)
Transaction expenses(2)
Gain on sale of property, plant and equipment
Maintenance capital expenditures(3)
Discretionary Cash Flow	Discretionary Cash Flow	$	63,044	$	41,073	$	177,622	$	157,476
Growth capital expenditures (4)(5)	Growth capital expenditures (4)(5)	(55,671)		(36,572)		(124,015)		(163,162)
Proceeds from sale of capital assets		—		8,010		1,055		8,023
Proceeds from sale of property, plant and equipment
Free Cash Flow	Free Cash Flow	$	7,373	$	12,511	$	54,662	$	2,337

(1)For the three months ended ~~September 30,~~March 31, 2024, and 2023, there ~~was $2.5~~were $2.8 million and $0.9 million of non-cash adjustments for equity compensation expense. For the three months ended September 30, 2022, there was no such adjustment. For the nine months ended September 30, 2023 and 2022, there were $3.4 million and $0.6 million, respectively, of non-cash adjustments for equity compensation expense.expense, respectively.

Table of Contents

(3)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Requirements—Capital Expenditures” for information regarding amounts designated as maintenance capital expenditures.

(4)For the three months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022,~~ growth capital expenditures include a ~~$16.4~~$9.9 million increase and a ~~$6.8~~$8.0 million decrease in the change in accrued capital expenditures, respectively. For the nine months ended September 30, 2023 and 2022, growth capital expenditures include a $6.5 million increase and a $8.8 million decrease in the change in accrued capital expenditures, respectively.

(5)For the three months ended ~~September 30,~~March 31, 2024, and 2023, ~~and 2022,~~ there were ~~$3.5~~$5.8 million and ~~$1.7~~$2.4 million of non-unit growth capital expenditures, respectively. For the nine months ended September 30, 2023 and 2022, there were $10.7 million and $3.9 million of non-unit growth capital expenditures, respectively. Remaining amounts for the nine months ended September 30, 2023 and 2022 represent growth capital expenditures to expand our operating capacity. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Requirements—Capital Expenditures” for information regarding amounts designated as growth capital expenditures.

Critical Accounting Policies and Estimates

~~The~~For a discussion ~~and analysis~~ of our ~~financial condition~~critical accounting estimates, see “Part II – Item 7. Management’s Discussion and ~~results~~Analysis of ~~operations is based upon certain financial estimates, judgments~~Financial Condition and ~~assumptions that affect the reported amounts~~Results of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. We base our estimates on historical experience, available information and various other assumptions we believe to be reasonable under the circumstances. On an ongoing basis, we evaluate our estimates; however, actual results may differ from these estimates under different assumptions or conditions. The accounting policies that we believe require management’s most difficult, subjective or complex judgments and are the most critical to its reporting of results of operations and financial position are as follows:

~~Business Combinations and Goodwill~~

Goodwill acquired in connection with business combinations represents the excess of consideration over the fair value of net assets acquired. Certain assumptions and estimates are employed in determining the fair value of assets acquired and

~~Table of Contents~~

liabilities assumed. Goodwill is not amortized, but is reviewed for impairment annually, or more frequently if impairment indicators arise that suggest the carrying value of goodwill may not be recovered.

~~Goodwill - Impairment Assessments~~

We evaluate goodwill for impairment annually and whenever events or changes indicate that it is more likely than not that the fair value at the reporting unit level could be less than its carrying value (including goodwill). We estimate the fair value based on a number of factors, including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and Company specific events. Estimating projected cash flows requires us to make certain assumptions as it relates to future operating performance.

Application of the goodwill impairment test requires judgments, including a qualitative assessment to determine whether there are any impairment indicators, and determining the fair value of the reporting unit. A number of significant assumptions and estimates are involved in the application of the income approach to forecast future cash flows, including revenue and operating income growth rates, discount rates and other factors. While we believe that our estimates of current value are reasonable, if actual results differ from the estimates and judgments used including such items as future cash flows and the volatility inherent in markets which we serve, impairment charges against the carrying value of those assets could be required in the future.

No events or circumstances occurred that indicated that the fair value of the entity may be below its carrying amount; therefore, no goodwill impairment was recorded for the three and nine months ended September 30, 2023 and 2022.

~~Impairment of Long-Lived Assets~~

Long-lived assets, including property, plant, and equipment, and other finite-lived identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances, including the removal of compression units from our active fleet, indicate that the carrying amount of an asset may not be recoverable. Such events and changes may include significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in our business strategy, among others. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to estimated future undiscounted net cash flows expected to be generated by the asset.

Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its fair value estimated future undiscounted net cash flows. No impairment was recorded for the three and nine months ended September 30, 2023 and 2022.

~~Estimated Useful Lives of Property, Plant and Equipment~~

Property, plant and equipment is carried at cost. Depreciation is computed on a straight-line basis using useful lives that are estimated based on assumptions and judgments that reflect both historical experience and expectations regarding future useOperations – Critical Accounting Estimates” of our assets. The use of different assumptions and judgments in the calculation of depreciation, especially those involving useful lives, would result in significantly different net book values of our assets and results of operations.

~~Commitments and Contingencies~~

From time to time, we may be involved in various claims and litigation arising in the ordinary course of business. Additionally, our compliance with state and local sales tax regulations is subject to audit by various taxing authorities. Certain taxing authorities have either claimed or issued an assessment that specific operational processes, which we and others in our industry regularly conduct, result in transactions that are subject to state sales taxes. We and others in our industry have disputed these claims and assessments basedAnnual Report on ~~either existing tax statutes or published guidance by the taxing authorities.~~

We utilize both internal and external counsel in evaluating our potential exposure to adverse outcomes from orders, judgments or settlements. While we are unable to predict the ultimate outcome of these actions, the accounting standardForm 10-K for contingencies requires management to make judgments about future events that are inherently uncertain. We are required to record a loss during any period in which we believe a contingency is probable and can be reasonably estimated. To the extent that actual outcomes differ from our estimates, or additional facts and circumstances cause us to revise our estimates, our earnings will be affected. We record legal costs as incurred, and all recorded legal liabilities are revised, as required, as better information becomes available to us.

~~Table of Contents~~

As of September 30, 2023, based on the information currently available, we have accrued a contingent liability of approximately $28.7 million relating to the Sales Tax Audit for the periods currently under audit classified in accrued liabilities on the consolidated balance sheet.

~~For~~ the year ended December 31, ~~2020, we wrote off an outstanding receivable balance of $3.7 million, due~~2023. There have been no significant changes to us from a previous acquisition, to bad debt expense. Additionally, we recorded a contingent liability of $3.7 million related to the remaining 50% of the receivable balance due to the seller in accrued liabilities. As of September 30, 2023, none of the outstanding receivables had been collected.

~~As of September 30, 2023, there are no other legal matters for which resolution could have a material adverse effect~~our critical accounting estimates since our Annual Report on ~~the consolidated financial statements.~~

~~Fair Value of Derivative Instruments~~

We use any of three valuation approaches to measure fair value: the market approach, the income approach, and the cost approach in determining the appropriate valuation methodologies based on the nature of the asset or liability being measured and the reliability of the inputs used in arriving at fair value.

~~As of September 30, 2023, $51.8 million was recorded~~Form 10-K for the ~~fair value of the asset of the derivative instruments compared to $65.3 million asset of the derivative instruments recorded as of~~year ended December 31, ~~2022.~~

~~Recently Adopted Accounting Pronouncements~~

~~In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13,~~ ~~Financial Instruments—Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments~~ which changes the impairment model for financial assets measured at amortized cost and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new current expected credit loss model that will result in earlier recognition of allowance for losses. The Company adopted this Topic 326 on January 1, 2023. ~~The adoption of this amendment did not have a material impact on the Company’s consolidated financial statements.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

Our primary exposure to interest rate risk results from outstanding borrowings under the ABL Facility, which has a floating interest rate component. We use interest rate derivative instruments to manage our exposure to fluctuations in these variable interest rate components.

As of ~~September 30, 2023~~March 31, 2024, and December 31, ~~2022,~~2023, we had ~~$1.789~~$1.1 billion and ~~$1.754~~$1.8 billion, respectively, outstanding under the ABL Facility and ~~$1.225~~$1.0 billion and ~~$1.325~~$1.2 billion outstanding and effective notional amounts of floating to fixed interest rate swaps, respectively, which we attribute to our borrowings under our ABL Facility. Excluding the effect of interest rate swaps, the average annualized interest rate incurred on the ABL Facility for borrowings during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024, was approximately ~~8.25%~~8.22% and we estimate that a 1.0% increase in the applicable average interest ~~rates~~rate for the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024, would have resulted in an estimated ~~$13.4~~$3.4 million increase in ABL-related interest expense.

Counterparty Risk

Our credit exposure generally relates to receivables for services provided and a ~~counterparty's~~counterparty’s failure to meet its obligations under a derivatives contract with the Company. If any significant customer of ours should have credit or financial problems resulting in a delay or failure to pay the amount ~~it owes us,~~due, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, if any significant vendor of ours should have financial problems or operational delays, it could have a material adverse effect on our business, financial condition, results of operations and cash flows. For example, an affiliate of one of our customers in the Powder River Basin has been undergoing a bankruptcy proceeding since 2019. Such customer has from time to time been late in remitting payment for our ~~compression services,~~Compression Operations, which we have continued to deliver, and we are pursuing prompt payment of the amount owed.

~~Table of Contents~~

We do not expect the amount owed presents any material concentration risk. If payment is not timely remitted, we expect to suspend services to such customer. ~~During the three month ended September 30 2023, the Company recorded bad debt expense of $2.0 million related to the collectability of outstanding receivables.~~

The Company uses credit and other financial criteria to evaluate the credit standing of, and to select, counterparties to its derivative instruments. Although the Company does not obtain collateral or otherwise secure the fair value of its derivative instruments, associated credit risk is mitigated by the ~~Company's~~Company’s risk management policies and procedures.

Concentration Risk

For the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024, and year ended December 31, ~~2022,~~2023, our four largest customers accounted for approximately 38% and ~~39%~~37%, respectively, of our recurring revenues, with no single customer accounting for more than 14% for ~~both~~either ending ~~periods.~~period. If any significant customer of ours should discontinue their ~~partnership~~relationship with us, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Commodity Price Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. We do not take title to any natural gas or oil in connection with our services and, accordingly, have no direct exposure to fluctuating commodity prices. However, the demand for our ~~compression operations~~Compression Operations depends upon the continued demand for, and production of, natural

Table of Contents

gas and oil. Sustained low natural gas or oil prices over the long term could result in a decline in the production of natural gas or oil, which could result in reduced demand for our ~~compression operations.~~Compression Operations.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

~~Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by~~As of March 31, 2024, an ~~issuer in the reports that it files or submits~~evaluation was performed under the ~~Exchange Act is accumulated~~supervision and communicated to the issuer’s management, including its principal executive and financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management, with the participation ~~and supervision~~ of our management, including the Chief Executive Officer and ~~our~~ Chief Financial Officer, ~~have evaluated~~of the effectiveness of the design and operation of our disclosure controls and procedures, ~~(as~~as defined in Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange Act, ~~of 1934,~~ as ~~amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report on Form 10-Q.~~amended. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, ~~have~~ concluded that ~~as of the end of the period covered by this Quarterly Report on Form 10-Q,~~ our disclosure controls and procedures were ~~not~~ effective due to the material weakness in our internal control over financial reporting described below. However, after giving full consideration to such material weakness, and the additional analyses and other procedures that we performed to ensure that our condensed consolidated financial statements included in this Quarterly Report were prepared in accordance with U.S. GAAP, our management has concluded that our consolidated financial statements present fairly, in all material respects, our financial position, resultsas of ~~operations and cash flows for the periods disclosed in conformity with U.S. GAAP.~~

Management has determined that the Company had a material weakness in its internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We did not maintain effective internal control over the proper inclusion of an out of period adjustment in the preparation of comparable interim unaudited condensed consolidated financial statements, which resulted in an adjustment to our derivative interest rate swaps for the period ended March 31, ~~2022.~~

~~Remediation Plan~~

We have begun the process of, and we are focused on, measures to remediate the material weakness related to out of period adjustments in the comparable interim unaudited condensed financial statements. Our internal control remediation efforts include the following:

•~~We have evaluated closing entries within each respective historical period and account balance by formally documenting and tracking out of period adjustments.~~

•We have enhanced our assessment of out of period adjustments for inclusion in comparable interim unaudited condensed financial statements to ensure transactions are recorded in the appropriate reporting period.

•We engaged an outside firm to assist management with (i) reviewing our current processes, procedures, and systems and assessing the design of controls to identify opportunities to enhance the design of controls that would

~~Table of Contents~~

~~address relevant risks identified by management, and (ii) enhancing and implementing protocols to retain sufficient documentary evidence of operating effectiveness of such controls.~~

~~We cannot provide any assurance that such remedial measures, or any other remedial measures we take, will be effective.~~2024.

Changes in Internal Control Over Financial Reporting

~~We are taking actions to remediate the material weaknesses relating to our internal control over financial reporting. Except as otherwise described above, there~~There were no changes in our internal control over financial reporting ~~(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)~~that occurred during the quarter ended ~~September 30, 2023~~March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3736

Table of Contents

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we and our subsidiaries may be involved in various claims and litigation arising in the ordinary course of business. In management’s opinion, the resolution of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows. See Note 13 (“Sales Tax Contingency”) to our unaudited condensed consolidated financial statements in Part I, Item 1 “Financial Statements” of this Report for more information on certain litigation.

Item 1A. Risk Factors.

~~Except as set forth below, there~~There have been no material changes to the risk factors previously disclosed ~~under the heading~~in Part I, Item 1A, “Risk Factors” ~~in the IPO Prospectus.~~

~~We have identified a material weakness in~~of our ~~internal controls, and we cannot provide assurances that this weakness will be effectively remediated, or that additional material weaknesses will not occur in the future.~~

If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner.

~~During the preparation and review of the unaudited interim condensed consolidated financial statements~~Annual Report on Form 10-K for the ~~three- and six-month periods~~fiscal year ended June 30, 2023 and 2022, the Company identified a previously corrected adjusting entry that was erroneously recorded in the three months ended June 30, 2022 and should have been recorded in the three months ended MarchDecember 31, ~~2022. This entry was specific to the unrealized (loss) gain on derivatives and did not impact the six-month period ended June 30, 2022 financial statements.~~

While we are in the process of remedial action to address the material weakness, we cannot provide any assurance that such remedial measures, or any other remedial measures we take, will be effective. The material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. Any failure to design or maintain effective internal control over financial reporting or any difficulties encountered in their implementation or improvement could increase compliance costs, negatively impact the market price of our common stock, or otherwise harm our operating results or cause us to fail to meet our reporting obligations.2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~None.~~During the three months ended March 31, 2024, there were no unregistered sales of equity securities. On April 1, 2024, in connection with the CSI Acquisition, the Company issued 5,562,273 shares of Series A Preferred Stock to the Electing Unitholders. The foregoing securities were issued pursuant to the exemption from registration provided by Section (4)(a)(2) of the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

Securities Trading Plans of Directors and Executive Officers

During the ~~quarter covered by this Report,~~three months ended March 31, 2024, none of our directors or “officers” (as such term is defined in Rule16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408(a) of Regulation S-K).

Item 6. Exhibits.


Exhibit Number						Description

2.1						Agreement and Plan of Merger, dated as of December 19, 2023, by and among Kodiak Gas Services, Inc., Kick Stock Merger Sub, LLC, Kick LP Merger Sub, LLC, Kick GP Merger Sub, LLC, CSI Compressco LP and CSI Compressco GP (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 19, 2023).

~~Table of Contents~~


3.1						Amended and Restated Certificate of Incorporation of Kodiak Gas Services, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2023).

3.2						Second Amended and Restated Bylaws of Kodiak Gas Services, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Annual Report on Form 10-K (File No. 001-41732) filed with the SEC on March 7, 2024).

3.3						Certificate of Designations of Series A Preferred Stock of Kodiak Gas Services, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on ~~July 5, 2023)~~April 1, 2024).

3.4						Certificate of Amendment of Certificate of Limited Partnership of CSI Compressco LP, effective March 26, 2024 (incorporated by reference to Exhibit 3.1 to Kodiak Gas Services, LLC’s (as successor in interest to CSI Compressco LP) Current Report on Form 8-K filed with the SEC on April 1, 2024).

Table of Contents


4.1						Registration Rights Agreement, dated as of July 3, 2023, by and among Kodiak Gas Services, Inc., Frontier TopCo Partnership, L.P. and each of the other signatories from time to time party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2023).

4.2						Stockholders’ Agreement, dated as of July 3, 2023, by and among Kodiak Gas Services, Inc. and Frontier TopCo Partnership, L.P. (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 5, 2023).

~~10.1~~4.3						Indenture, dated as of February 2, 2024, by and among Kodiak Gas Services, ~~Inc. Omnibus Incentive Plan~~LLC, the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee (including Form of Note) (incorporated by reference to Exhibit ~~10.4~~4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on ~~July 5, 2023)~~February 2, 2024).

~~10.2~~4.4						~~Form~~Registration Rights Agreement, dated as of ~~Restricted Stock Unit Grant Notice for Executives~~April 1, 2024 (incorporated by reference to Exhibit ~~10.2 to the Registrant’s Registration Statement on Form S-8 (File No. 333-273118) filed with the SEC on July 5, 2023).~~

~~10.3~~						Form of Restricted Stock Unit Grant Notice for Non-Employee Directors (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-8 (File No. 333-273118) filed with the SEC on July 5, 2023).

~~10.4~~						Form of Performance Stock Unit Grant Notice for Executives (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-8 (File No. 333-273118) filed with the SEC on July 5, 2023).

~~10.5~~						Novation, Assignment and Assumption Agreement, dated as of July 3, 2023, by and among Kodiak Gas Services, LLC, Frontier Intermediate Holding, LLC, Frontier TopCo Partnership, L.P., as the new borrower the other parties thereto, and Wells Fargo Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.310.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on ~~July 5, 2023)~~April 1, 2024).

~~10.6~~10.1						~~First~~Third Amendment to Fourth Amended and Restated Credit Agreement, dated as of ~~May 31, 2023,~~January 22, 2024, among Frontier Intermediate Holding, LLC, Kodiak Gas Services, LLC, the other obligors party thereto, the lenders party thereto, and JP Morgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit ~~10.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-271050) filed with the SEC on June 20, 2023).~~

~~10.7~~						~~Second Amendment to FourthAmended and Restated Credit Agreement, dated as of June 27, 2023, among Frontier Intermediate Holding,LLC, Kodiak Gas Services, LLC, the other obligors party thereto, the lenders party thereto, and JP MorganChase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.7 to the Registrant’sQuarterly Report on Form 10-Q (File No. 001-41732) filed with the SEC on August 10, 2023).~~

~~10.8~~						Form of Indemnification Agreement between Kodiak Gas Services, Inc. and each of the directors and officers thereof (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 (File No. 333-271050) filed with the SEC on March 31, 2023).

~~10.9~~						~~Executive Severance Plan of Kodiak Gas Services, Inc. (incorporated by reference to Exhibit 10.17~~10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on ~~July 5, 2023)~~January 23, 2024).

~~10.10~~10.2						~~Form of Executive Severance Plan Participation~~Sixth Amended and Restated Limited Liability Company Agreement of Kodiak Gas Services, ~~Inc.~~LLC, dated as of April 1, 2024 (incorporated by reference to Exhibit ~~10.18~~10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on ~~July 5, 2023)~~April 1, 2024).

~~10.11~~14.1*						~~Indemnification Agreement, dated August 8, 2023, by and among Kodiak Gas Services, Inc. and Nirav Shah (incorporated by reference to Exhibit 10.11 to the Registrant’s Quarterly Report~~Code of Business Conduct, as amended on ~~Form 10-Q (File No. 001-41732) filed with the SEC on August 10, 2023).~~May 2024

10.12*						Assumption, Ratification and Confirmation Agreement, dated as of June 29, 2023, by and among Kodiak Gas Services, Inc., Frontier Intermediate Holding, LLC, and JPMorgan Chase Bank, N.A., as administrative agent

31.1*						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~Table of Contents~~


32.2**						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*						Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH*						Inline XBRL Taxonomy Extension Schema Document

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*						Cover Page Interactive Data File (embedded within the Inline XBRL document)

__________

*Filed herewith.

**Furnished herewith.

4038

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Kodiak Gas Services, Inc.

Date: ~~November~~May 9, ~~2023~~2024	By:	/s/ John B. Griggs
		John B. Griggs
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date: ~~November~~May 9, ~~2023~~2024	By:	/s/ Ewan W. Hamilton
		Ewan W. Hamilton
		Executive Vice President and Chief Accounting Officer
		(Principal Accounting Officer)

4139


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues:
Compression Operations	$	186,673	$	163,662	$	545,989	$	483,965
Other Services	44,310		18,983		78,412		44,172
Total revenues	230,983		182,645		624,401		528,137
Operating expenses:
Cost of operations (exclusive of depreciation and amortization shown below):
Compression Operations	65,470		55,872		193,257		167,145
Other Services	38,820		14,037		65,907		34,638
Depreciation and amortization	46,087		44,111		136,414		129,913
Selling, general and administrative expenses	19,648		11,190		46,171		32,760
Gain on sale of capital assets	—		(818)		(721)		(825)
Total operating expenses	170,025		124,392		441,028		363,631
Income from operations	60,958		58,253		183,373		164,506
Other income (expenses):
Interest expense, net	(39,710)		(49,859)		(182,030)		(104,616)
Loss on extinguishment of debt	(6,757)		—		(6,757)		—
Gain on derivatives	15,141		51,862		42,080		76,972
Other income (expense)	38		(19)		39		(10)
Total other income (expenses)	(31,288)		1,984		(146,668)		(27,654)
Income before income taxes	29,670		60,237		36,705		136,852
Income tax expense	7,904		14,337		9,765		32,496
Net income	$	21,766	$	45,900	$	26,940	$	104,356
Basic and diluted earnings per share
Basic net earnings per share	$	0.28	$	0.78	$	0.41	$	1.77
Diluted net earnings per share	$	0.28	$	0.78	$	0.41	$	1.77
Basic weighted average shares of common stock outstanding	76,731,868		59,000,000		64,954,244		59,000,000
Diluted weighted average shares of common stock outstanding	76,899,483		59,000,000		65,121,859		59,000,000


	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total Stockholders’ Equity
Balance, January 1, 2022	59,000,000	$	590	$	871,403	$	88,078	$	960,071
Equity compensation - profits interests	—	—		(136)		619		483
Net income, as restated	—	—		—		49,555		49,555
Balance, March 31, 2022, as restated	59,000,000	$	590	$	871,267	$	138,252	$	1,010,109
Distribution to parent	—	—		(838,000)		—		(838,000)
Net income	—	—		—		8,901		8,901
Balance, June 30, 2022	59,000,000	$	590	$	33,267	$	147,153	$	181,010
Net income	—	—		—		45,900		45,900
Balance, September 30, 2022	59,000,000	$	590	$	33,267	$	193,053	$	226,910
Balance, January 1, 2023	59,000,000	$	590	$	33,189	$	195,314	$	229,093
Equity compensation - profits interests	—	—		(193)		879		686
Net loss	—	—		—		(12,343)		(12,343)
Balance, March 31, 2023	59,000,000	$	590	$	32,996	$	183,850	$	217,436
Equity compensation - profits interests	—	—		193		29		222
Distribution to parent	—	—		(33,189)		(9,111)		(42,300)
Net income	—	—		—		17,517		17,517
Balance, June 30, 2023	59,000,000	$	590	$	—	$	192,285	$	192,875
Proceeds from initial public offering, net of underwriter discount	18,400,000	184		277,656		—		277,840
Offering costs	—	—		(10,823)		—		(10,823)
Debt novation	—	—		687,590		—		687,590
Equity compensation - profits interests	—	—		—		502		502
Equity compensation - Omnibus Plan	—	—		2,042		—		2,042
Net income	—	—		—		21,766		21,766
Balance, September 30, 2023	77,400,000	$	774	$	956,465	$	214,553	$	1,171,792


	Remainder of 2023		2024		2025		2026		2027 and thereafter		Total
Remaining performance obligations	$	162,915	$	504,092	$	241,526	$	101,568	$	54,906	$	1,065,007


Derivative Instruments Not Designated as Hedging Instrument	Location of Gain Recognized	Three Months Ended September 30,
		2023		2022
Interest rate swaps	Gain on derivatives	$	15,141	$	44,809
Interest rate collars	Gain on derivatives	—		7,053
Total gain on derivative		$	15,141	$	51,862


Derivative Instruments Not Designated as Hedging Instrument	Location of Gain (Loss) Recognized	Nine Months Ended September 30,
		2023		2022
Interest rate swaps	Gain on derivatives	$	42,649	$	54,796
Interest rate collars	Gain (loss) on derivatives	(569)		22,176
Total gain on derivative		$	42,080	$	76,972


	As on September 30, 2023
	Level 1		Level 2		Level 3		Total
Debt	$	—	$	—	$	1,747,912	$	1,747,912
Contingent Consideration	—		—		3,673		3,673
Total	$	—	$	—	$	1,751,585	$	1,751,585


	For the Nine Months Ended September 30,				% Change
	2023		2022
Revenues:
Compression operations	$	545,989	$	483,965	12.8	%
Other services	78,412		44,172		77.5	%
Total revenues	624,401		528,137		18.2	%
Operating expenses:
Cost of operations (exclusive of depreciation and amortization shown below):
Compression operations	193,257		167,145		15.6	%
Other services	65,907		34,638		90.3	%
Depreciation and amortization	136,414		129,913		5.0	%
Selling, general and administrative expenses	46,171		32,760		40.9	%
Gain on sale of capital assets	(721)		(825)		(12.6)	%
Total operating expenses	441,028		363,631		21.3	%
Income from operations	183,373		164,506		11.5	%
Other income (expenses):
Interest expense, net	(182,030)		(104,616)		74.0	%
Loss on extinguishment of debt	(6,757)		—		nm
Gain on derivatives	42,080		76,972		(45.3)	%
Other income (expense)	39		(10)		(490.0)	%
Total other expenses	(146,668)		(27,654)		430.4	%
Income before income taxes	36,705		136,852		(73.2)	%
Income tax expense	9,765		32,496		(70.0)	%
Net income	$	26,940	$	104,356	(74.2)	%