KGS - Earnings call transcript Q1 2024 | Kodiak Gas Services, Inc.

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Operator

Greetings, and welcome to the Kodiak Gas Services First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Graham Sones, Investor Relations. Thank you. Please go ahead.

Graham Sones

morning. Good joining to Kodiak results. review you Call Services for Webcast and first us appreciate Gas the Conference We quarter XXXX from our Griggs, outlook call are Executive today will updated provide remarks, the XXXX President on John financial Participating Chief the for results commentary and our company, Mickey Mickey and the Officer; quarter Financial Q&A. before Chief McKee, John opening high-level Officer.Following first my and company and

also statements non-GAAP uncertainties company's will in forward-looking call forward-looking actual give at management. expressed a certain views, this to management federal within can cause or call of Please measures. today's performance United statements how during of reported And securities the advised over today, information those comments these until reasonable, kodiakgas.com. by items listening such to in webcast as financial Before few today contain correct.The currently the of differ on that I risks, information that be longer have by be or of beliefs comments call management housekeeping XXXX.Information as based prove the transcript to assurance the reflect cover. no X, may I only contingencies the be website XXXX, replay and and of turn referenced therefore, made can replay from on laws. call found will statements There May note that believe expectations meeting no may on will accurate the be such this achievements statements the include May XX, time of phone could results, to and the you're Mickey, or on to and replay tab via expectations the forward-looking access also materially made management a assumptions Kodiak's speaks our These statements any by current reading.The States of available we information various Investors available.Although are

comparable yesterday's reconciliations are to our which and in website. measures GAAP can the included Additional release, details most be found on earnings

turn Now, Mickey Mr. I'd the Kodiak like CEO, McKee. call to to Mickey?

Robert McKee

thank Graham, us today. for and Thanks, joining you

the of to all execution employees Kodiak Permian while integration into get key would how business, joining you month dedicated on and started is also are employees offerings by worked to have team, which and are process ongoing the Basin consecutive to scale of by areas workforce.We talented expand another and the each footprint Kodiak process CSI our a focused to now and in extremely extraordinary pleased record an family. and customers quarter, more welcoming Shale.I service Let on all extraordinary who yet than industry-leading are our thank EBITDA integration our like contributing our with tirelessly By Kodiak's planning increased simultaneously adjusted execution CSI like Ford the produced helping for the further our scope and staying me operating Eagle with of going.

contribution along to providing his of year.John expect synergies will remarks, synergies year to more $XXX and of we realize and X are this of very we of million. our updating in guidance base.We This Kodiak's reflects CSI's discuss ability upon further throughout for with provided to will revised synergies in the significant the rest anticipated quarter $XXX in year combination, guidance very stated, have outlook contribution, As the highlights shareholder are by reviewing EBITDA first to value million confident incremental previously I acquisition and quarters a our full combined our drive detail. are adjusted announce our for which deliver excited

jump it. let's into So,

lastly, that record-setting the reinforcing natural and utilization QX.We largest industry-leading outlook consistent to natural now sourced strategy, power seeing new The grow in is million also deliveries, and at gas-fired rate we technology, horsepower in by calling producing of many provider that our year compression commitment Permian-focused peers have XX,XXX largely data are gas we fully regions the well-covered due with of and the the strategic adjusted which of a CSI's horsepower in Permian our to the long-term recently result X our U.S. our due prolific strategy including years. position to quarter leverage set the unit increasing center majority in quarters compressors, couple exponential increase quarter, faster acquisition in paid returning expecting than estimates AI through strategically that change level over the that addition as XX.X%.As discussed, the capital to even first we've is a to total, X.Xx of Kodiak the large a the This $XXX the we in are United as dividend noncore of we are much next the there that horsepower addition have of power and the are as compelling discussed, versus expected, increase close large poised in phase Kodiak are growth of horsepower in see CSI the XXXX.When horsepower will could in generation.In of States.As U.S. by is becoming several our end capital see The to period are in to our than contracted days a proliferation still early most in or growth energy period, with up And to with on we excited yield, at over from XXXX previously our deliveries, fleet, new large for are future worldwide Basin, in for gas strategically above to better positioned demand more supply need XX% given capacity. the bullish the energy small in for be million a XXX,XXX leading acquired the imagine, of natural the the dominant demand for soon security lay horsepower profile. factors a assets at supply sell.Our transaction shareholders, the oil I contracted changed, prior XXXX. fit continues Permian in position this if the made XXXX. tight reducing EBITDA increase horsepower.We Gulf in in on the But we increase are unit gas industry-leading and step operational not the am natural wave quarter there with growth. capacity Coast X.X start contracted cheap CSI over first and poverty.However, first as is demand be and of industry fuel up to large and step horsepower results of attractive while to numerous another the to is export contract evaluation to the fully LNG growth we U.S. have the to a and in basins strategic to of year.Natural reflected maintaining slated to are contributions incremental compression associated fourth of more previously the horsepower to reliable exports project horsepower extremely average gas as compression become determining is multiyear meet demand to of has should change shaping emissions by focusing our quarterly gas to clean, the following liquids-rich while horsepower Mexico expected foundation continue came up next power by will world gas XX.X%.In by order a this targeting the might with Our with for discussed the utilization allocation of this, XX% and you revenue-generating achieve

trends industry, horsepower and and production, our partner to Given Kodiak the relationship much positioned Compression, compression macro demand would to for demand infrastructure critical believe took current USA well-documented which that supply the the natural incremental or combined horsepower Kodiak, of between historical choice. well the and truck we build.Combined require gas more fleets than of decades domestic be is with compression

employees, position utilization discuss on demand.And to I'll financial to be highlights John on will outlook. call instrumental the first Griggs updated to meet and expected focus and industry-leading now, market and availability mechanical our our customers pass John? quarter and this Our review

John Griggs

Mickey. Thanks,

Here's key takeaway. the

quarter million of and $XXX of operations now growth well last quarter higher was million, for was of $X.X first the increased highlight under the was segments. year-over-year 'XX market horsepower in tight to First year.Looking of the a $XX overall driven to nearly guidance QX results.Total of growth recontract horsepower the same fleet first the segment, gross in The the revenue-generating $XX our by both compared allowed of XXX,XXX combination operating over first growth compared quarter me was up quarter when quarter our Fresh as to in aspects we're than revenues margin a a adjusted our the That revenues X% expected, XX% range. has compared in of adjusted revenues compared quarter Adjusted XX% higher quarter year and increase additions.Revenue-generating Kodiak rates pricing million fourth million driven by high better from first results revenues incumbent million line just over just an gross million, of In EBITDA end year-over-year. top profitable optimistic which was few came quarter our to at sequentially and margin in of XX,XXX quarter $X.X as the increase to the let The X% million, compared segments. fleet X% at quarter $XXX services Compression and and 'XX were respectively. to 'XX. were $XXX said, same were of up shy as up ago, the by the stand-alone 'XX. last of Services first us our beyond. our year.Other on the XX%, is in steady, about in Other operations percentage from in and

and of calls, As return to projects Station services business terms in invest both capital capital synergistic high-return our $XX capital.Every first was our adds are employed pay under dividends in CapEx growth other flow compression more overall dollar to projects.In is strategic. allows just capital discussed flow, of for lumpy, expenditure cash maintenance require in cash incremental with quarter, and construction which segment our and million. we've on the figure prior no discretionary but our us turn

a our CapEx $X $XX was reminder, spend million units equipment the CapEx. of and a and were which of upon maintenance vary the the depending is for by will hours fleet.Growth was function when our year age to As of non-new added million unit quarter,

year this a function last front-end new CapEx year, growth our units the to quarter, last is loaded, you're mentioned we ordered QX.Moving we seeing As and balance of when basically in that sheet.

consisting March under debt notes of in the unsecured of million As rest, had facility. ABL we senior billion, of in $XXX February the $X.X borrowings and we XX, issued our

Pro of agreement had for provided under of to forma total yesterday's ABL the Our outlook. to guidance turn and we Xx.We April CSI, drew connection XXXX approximately $X.X on including ratio debt billion.Let's CSI's down the fees credit approximately just closing all retire facility. in the the closing with quarter on release. ABL We ranges in of X, of transaction the we our expenses updated and ended On updated earnings leverage first the billion debt. $X.X was date, with availability paid on

only a provide guidance few relatively Given was felt high owned quarter. to for this it appropriate level that we weeks, we've CSI

that You what Mickey I'll fulsome mentioned should out to second we more said, guidance quarter are our in come than CSI expect call with earnings pleased at the with reiterate outset, acquisition. the August.With in updated us more

$XXX the synergies, investment We synergies proving to Our billion. but adjusted months previously at and $X.XXX is XX will includes range months and EBITDA CSI of between our million and $X.XXX and only cost conservative.For this between full billion we year, estimated expect original range million. X point, of $XXX which Kodiak estimate thesis true seem revenues

come which are of between and knew extraordinary included share new committed growth there $XXX the by we're CapEx, related figure in year. We Kodiak we CapEx items yielding leverage X.Xx discretionary capital, company. have of upgrades forecasting that but the of our are Prior a variety share, at $XXX living owned for prepared safety growth what X.X% like a meet and growth $XX quarterly dividend repeated encompasses X in to few weeks, items. and share, will in in participation to on lion's spend.These paid standards, CapEx methodologies expect of $XX my given the cleanup them a support.I'll target plus emission million future. and within capital of companies CSI cash payment that Thank triggered Bear Dividends are X.Xx To CapEx don't we those for of to up, from relates a maintenance on now driving But use to was much needs per return facilities what solidify terms times it's an XXXX mind cash week, comments. you, measured while acquisition. equipment million on plus million can $XX approvals conformance between lead each it wrap we flow for taxes good you allocation $X.XX the million.In of that Kodiak to to That's to 'XX attractive that between of that fleet will 'XX. XX.This about on the in handle as framework, XXXX, a of we've declared million need to your transaction, the $XX foundation.Also, approximately May all our it portion our of equipment.Not be coverage to of accounting return and and not and the meet I back of guiding end last things this the expenditures the the and rolling figure type a we combined be sales us as think is towards and Board it purchases.We're capital during million important remind by would close, out a get stock our meaningful behind component knock an equates which dividend $X.XX of accounting on of Mickey. see to the to We to annualized of hand by this a obviously noncash and and flow key being lease of we spend including ratio.

Robert McKee

without safety the John. the like parts.Each team members' thanking what close commitment this to is A the customers would to men again, Thanks, company summary, extraordinary work to the special, stronger I be than leader of welcoming In Services employees CSI women by the Gas Kodiak sum hard industry and our excellence. and and to Kodiak we makes and Kodiak dedication not are that an would call family. and the of

we of We all will year, for Operator? the the for we continuing value happy will and are in forward further XXXX very shareholders.At the to start questions. lineup of growth look with we this profitable expect and beyond, our point, enhance which open

Operator

Our John Instructions] is question Sachs. first of from Mackay [Operator coming Goldman

John Mackay

assets for But just the rolling maybe hands we're any you kind that kind we what and pieces all call frame of the hear these appreciate I to to closed month be for quantitative and those potential second still can on quarter kind of just to comments, it's probably initial just of are revenue think for ago, understand love going guys Definitely look time towards bit a your a now reads going update. more and high of synergies a on a level. about now had other out, you've little would

Robert McKee

are here. Yes, revenue what arms for I think trying John, of to the today. we're kind joining synergies Thanks this is our around us get potential Look, still Mickey.

are diligently on team paper commercial the Kodiak Our align customers contracts contracts CSI has both deal. coming to and with trying been working are into that that

us as bring CSI's business that revenue I ancillary we a well the there side business legacy, in revenue also of lot AMS are to synergies think had So, that be there.I of to think can pretty the I think But definitely for there's impactful I well. as And synergies not and to be revenue some think yet said, we're that's today. those you unpack there. like quite to business, going ready

John Mackay

will numbers I at the guess, I well, underlying a of looking give kind trending read looking your of kind business margins CSI the feeling bit kind of there, business, top just for in understand trajectory Maybe talking are range. you're of now, that end that margin but how of, little and the XQ really maybe what's quarter bring a forward? kind just us about change legacy plus happening on

Robert McKee

Yes.

a businesses little in seeing that you'll I that. jump revenue see both a you're the that let I'll too John and drop gross I rate that's transaction see a to little So, about and just But think of I purchasing But the thing also little a talk think place little parts put real bit. with bit of here start once here you'll where combination a increases but think in oil ours.So, of like than power kind And pieces what a control. bit blended, is it that take back lower comes because X get think that what bit together, synergies I this. cost that we come see, CSI's margin will a is you'll contribution and

start we'll those of throughout the to the So, half year. second synergies realize

John Griggs

add I to in that have. businesses and Mickey going of a quarter realign the going was have said, And Yes. we're to little work of bit how segments different just kind come back we second because the some they to what

good, I sustainable. you XX% range operations. guidance just the lines.So, of feels the in feels a this end So, see last also to and addition of services, you'll feels at right different to product is start them, will lower XX% leave being the with of we margin, to But contract in their have gave that the it having the top they of Kodiak compression kind year

carry half year. momentum to of the the back hope we into So, that

Operator

next from is coming Truist question Securities. of The Dingmann Neal

Neal Dingmann

around to around question talked others support prepared about AI. course, is, U.S. love line, all you here prospects able I'd around, do of down you've for remarks I do do natural lot or to know My on that. all further on And, you done forming might gas that my to strategically have Guys, a all of envision question comment think versus it's there's first but potential the be the different what demand build-out is you something historically? partnerships this the

Robert McKee

could Neal, and there. nonstop Potentially, forward of strategic we going to want there. I kind going that at do that things mean, like look There looking rationale at we're opportunities to like be

work business our this I base strategy look opportunities point something of is kind which kind really lines of time, at the demand. business already.So, that this allocation at in the have evaluating. be of of growth think I is the though, and But from we demand at think, incremental of that for our that different is is compression the strong thing, supporting be of place we'll fundamental base end to constantly that capital really for a that we going contract fundamental in day, incremental and benefited business, kind

Neal Dingmann

with margins be boosting My or the contract run little just just asked all your continue potentially more volumes wondering, high, look so bit a I for because -- just have maybe John, because shareholder bit of would that. all the running a just only and this, follow-up extremely And or to best considered of obviously, just in the you you're wondering the if group. one return? to debt phenomenal. because able more is the I'm you contract I'm you of wondering

John Griggs

understand that cash us mix our that can with on to CapEx X.Xx focused that higher we is so.So, a this and I peers I kind our growth what flow scale gives here. it is we after that with of our kind good is focus and of I couple allocation to but on leverage think and shareholders ratchet and private sort pretty of ran something strategy private do that something return we've we're key the to shareholders, in to the out that talk some yes, smoothed we mean, I next amount think is going think a opportunity something today. the of an that think return projects out that we right do thing some But as of leverage capital abounds there's a great focused leverage. I years than up end as of that's capital get firm growth heard about free integrated XXXX.That's of are made by pretty living believe there, a But for we of on. CSI within you've stand we company, commitment it's company, And, on my combination the between we're

Operator

The Jeremy of next Tonet question from coming JPMorgan is Chase.

Eli

This is on for Eli Jeremy.

overall. wanted maybe views Just start your to on of market compression the

think year some from on you're the coming more time and maybe net commentary a framed which speak gas of compression X-month lead some market bit on or I more.I seeing increased can your your previous just equipment, the appreciate times is but in expectations. of you what near the maybe competitors some to a you a demand lead frame, in if in term of

John Griggs

and say caterpillar keeping it peers chain us market there. of in is they are planning ordered the some Absolutely. market.Caterpillar's of takes get softness and and I way. the indicative I some you capital very, their industry year little we to not any it far early bringing very delivery say that signed equipment not customers and equipment, of to a overspending the supply speculation caterpillar there But and and bit. on look think flood with bottlenecks think with of in spend in is, deliveries on brought remind wouldn't what see all has And, out large horsepower with a out like But $X on and a in plus our of over the coming customers to there of our range, in that is of an some we CapEx that in that extraordinary our back CapEx in CapEx I and amount we kind engines speculative has the from in of our continuing X-month amount yes, that that's we're that deliveries our what in from some there you'll any a advance.I'll kind times support discipline that to alleviated still out year spending customers it.So, to at up inside and planning contract spend don't

Robert McKee

too and indicative through third tied everybody, again Yes. not all of of growth we the and year demand, quarter CapEx, reference discipline And seeing, see CapEx see to obvious more necessarily that it it structure we're the Caterpillar the we we've difficult committed that it's as the remind when course, And prepared more you lead to as public industry track chime I'll on the it monitor of next customer said the that's way private remarks the in guys in to on is equipment. time that.We, and really discipline Capital guys, past. in access there well. was than well. expensive. And in we That's our

So the staying the industry of and demand, this power, new too. as structure we and gas which longer stronger demand a artificial for of see intelligence-driven results supply boom in with combination result more ultimately

the So outlook. excited multiyear about we're really

Eli

to the bit guidance. pivoting little a revised just Maybe

the half to higher of is a great. end the hitting bit that bit talked what can in year? gross talk drive about you of which and second the guys a Maybe that of you should we be watching the about operations guide the end higher things really margin, You compression might just

Robert McKee

we came see in you're made want going So, different when slightly in come to in to I that the I'll really I segment chime QX, breakups. earlier to there. out back comment

to It's of of a a that to be Kodiak math simple number. XX XX You're is see profiles.So, combining doing margin just going to going stand-alone number different guided going plus lower for we by to on be virtue us. different CSI our slightly

And plus like chip to sustainable. at too. improving year to forward continue top need I numbers.That earlier, feels as of the being a we're on basis, as synergies to we it will of same going feels the you and quarter range the us in away remember So, said, move stand-alone first good, that the allow to mentioned not the the throughout talking the margin, stand-alone it's combination at be about business again, I end that think our

to So to guidance earnings call out expect QX in with for August breakdown us model. better in come and our margin you a fulsome

Operator

The next question [indiscernible] of from TPH. coming is Zach

Unknown Analyst

on maybe Bolt-On one Just future Acquisitions.

but more focusing outside the ramp you're happening of dry with the especially liquids-rich regions? ever key curious plays, of would your on that demand natural markets gas you mentioned look You the in if gas Permian,

John Griggs

I our as think lots focusing as basins don't business we'll as compression in something liquids-rich proven than interested care we think I at an at really was tied kind we'll of in complementary and is us services today. well M&A in of dry is which gas that gas to we jump really little. quite But think strategy. are that prices stick of very more gas philosophy good on to be from all Basins much any perspective, looking what with different take that into sorts looking now, of associated going to know I if do interested in the our ancillary I kind be really M&A opportunities, forward. and of going But we'll theory, past.So, that associated

Unknown Analyst

should be fully will some show see greater I'm time in lot And more than of The Is on up at the on noted And cost beyond XXXX? synergies. in guys side? the the a we that the $XX or sure name. get then And once original there million one 'XX you just acquisition. under then the your of you $XX that business million and guys

John Griggs

Yes.

question. So Zach, good

that's million So, we when and than referenced. and $XX all our synergies, cost we stuck all the to we always first quarter deal, in announced fourth greater think calls, to of I the

think it, we're thought is that better math come guided, we'll a That we X/X of of of range, equals where the million the where would you $XXX or was kind at guided Kodiak do take million.In detail use be. simple the is, about and our the midpoint to they million. of we've kind If $XXX $XX midpoint way Kodiak before synergies, where of really basis. that's again, with kind to more get range, QX, of or of as CSI in would and took XX, back midpoint the they stand-alone imply on really, of realized you order midpoint doing well the where you CSI

So, XX than an realized the months. those synergies less between figure. It's in not XX%.Remember, That's annualized somewhere are during that's and something X of half the year. back

than that, pretty again, there's million we're revenue it's cost there, Mickey to question and grow extrapolating, up but say, from was set So synergies, asked that they're synergies.The not on fleet. hey, guiding on optimizing in easy better against $XX earlier not and

realize that to beyond XX-month through, extremely there. get knew when we're cost time So, we always original call we that XX- it, frame be $XX would that million will well synergies confident we fully of that that

Operator

question Daniel from coming Partners. of Energy next The Bill Austin is

Bill Austin

now So, talked a kind CapEx How Are bit year of I new coming and on about the in? this new remainder those know coming guys seeing units you're there. that all seeing you CapEx that side? the How for quarter? are are you've unit that this and last all you deliveries they in guys seeing quarter, you out committed getting year next you're of that? the little to

John Griggs

come going the in throughout smooth the pretty rest of it's to Yes, year.

the be big pretty but entities. the last from all combined a in CSI that will year that's think the evenly I QX that spread throughout year, rest chunk of there's previously had for ordered

affect So, anything issues slide that or chain any would we're or on right now, knock and bottlenecks supply not seeing that's that wood.

So, ratably the throughout of you'll year. the pretty in those rest see come

Bill Austin

kind on guys And is on to an more basins From are any know the a have bit side. these that supply other the more sound I exciting stuff guys little a knitting getting looking start at that the addressed Nice it days? to or bit organic perspective, M&A little of just saying you you focusing sticking chain that predictable.

John Griggs

of plenty obviously challenge have we labor Permian in work mean Basin. But to the a is there. do a I

to going Ford, that open some of stuff for definitely Eagle that additional to Those areas type into basins of on some thesis that are working important we're that opportunities the Northeast. are So, kind to are have in all with we gas liquids-rich opportunistic overall of the our Mountain some be type fit business. us.The think region, up Rocky associated

Operator

McKee Mr. back turn to floor for the This us session. to end brings the comments. to closing would of I question-and-answer the like over

Robert McKee

thanks forward we quarter speaking who call. operator, our after with you you, in We everyone look to Thank report results. and to again second today's participated

Operator

this and event. today's Ladies gentlemen, concludes

your enjoy of the time, day. and You lines disconnect rest may at this your

Kodiak Gas Services (KGS) 9 May 242024 Q1 Earnings call transcript