Kodiak Gas Services Reports Fourth Quarter and Full Year 2024 Results; Provides Full Year 2025 Guidance

Kodiak Gas Services, Inc. (NYSE:KGS) ("Kodiak" or the "Company"), a leading provider of critical energy infrastructure and contract compression services, today reported financial and operating results for the fourth quarter and full year ended December 31, 2024 and also provided full year 2025 guidance.

Net income attributable to common shareholders for the fourth quarter and full year ended December 31, 2024 was $19.1 million and $49.9 million, respectively, compared to a net loss of $6.9 million and net income of $20.1 million for the fourth quarter and full year ended December 31, 2023, respectively.

Fourth Quarter 2024 Highlights

• Contract Services segment adjusted gross margin percentage⁽¹⁾ increased sequentially to 66.7%
• Fleet utilization increased sequentially to 97%
• Divested approximately 33,000 horsepower of non-core compression assets and exited operations in South America
• Announced and executed on $15 million of a $50 million share repurchase program

Fiscal Year 2024 Highlights

• Adjusted EBITDA⁽¹⁾ was $609.6 million in 2024 compared to $438.1 million in 2023
• Repurchased 1.4 million shares of common stock at a weighted average per share price of $27.88
• Deployed approximately 162,000 horsepower of new large horsepower compression units, primarily in the Permian Basin
• Divested approximately 129,000 horsepower of non-core compression assets and exited operations in four countries

2025 Outlook Highlights

• Provided full year 2025 capital spending outlook and financial guidance ranges
• 2025 Adjusted EBITDA expected to be in the range of $685 million to $725 million
• Growth capital expenditures expected to be in the range of $240 million to $280 million

CEO Commentary

"Kodiak had a transformative year, completing the CSI acquisition which allowed us to build upon our industry-leading position in the Permian Basin and set new financial records," stated Mickey McKee, Kodiak's founder and Chief Executive Officer. "While maintaining capital discipline and deleveraging, we increased our contract compression fleet by roughly 1 million horsepower and actively high-graded our asset base, allowing us to set new records in revenue, adjusted EBITDA and free cash flow. We realized improvements in margins as well, with our Contract Services segment delivering a record adjusted gross margin percentage in the fourth quarter. Additionally, we enhanced our shareholder return program through increased dividends and $40 million in share repurchases, returning a total of $179 million to shareholders in 2024. Kodiak's record-setting year would not have been possible without the tireless efforts of our dedicated employees that are focused on providing our customers with unequaled service quality.

"Kodiak's outlook has never been stronger. The work we completed last year to streamline our operations and maintain our focus on oil-driven basins prepared us for future success. Customer demand for large horsepower compression infrastructure continues to be strong, particularly in the Permian Basin, where approximately 70% of our horsepower is deployed. Our fleet is approaching full utilization, and we expect this to continue given the robust multi-year demand outlook for natural gas to supply the coming wave of LNG export projects and to meet the rapidly increasing demand for natural gas-fired electricity. In closing, we remain committed to having the safest and most sustainable contract compression fleet in the industry and delivering the high quality of service and industry-leading mechanical availability that our customers have come to expect."

(1) Adjusted gross margin percentage and adjusted EBITDA are non-GAAP financial measures. Definitions and reconciliations to the most comparable GAAP financial measures are included herein.

Segment Information - Full Year 2024

Contract Services segment revenues were $1.0 billion in the year ended December 31, 2024, a 40.6% increase compared to $735.6 million in the year ended December 31, 2023. Contract Services segment gross margin was $418.9 million in the year ended December 31, 2024, a 41.7% increase compared to $295.6 million in the year ended December 31, 2023. Contract Services segment adjusted gross margin was $679.2 million in the year ended December 31, 2024, a 41.9% increase compared to $478.5 million in the year ended December 31, 2023.

Other Services segment revenues were $125.1 million in the year ended December 31, 2024 compared to $114.8 million in the year ended December 31, 2023. Other Services segment gross margin and adjusted gross margin were each $21.8 million in the year ended December 31, 2024, up from $21.0 million in the year ended December 31, 2023.

Long-Term Debt and Liquidity

Total debt outstanding was $2.6 billion as of December 31, 2024, comprised primarily of borrowings on the ABL Facility and senior notes due 2029. At December 31, 2024, the Company had $322.5 million available on its ABL Facility and Kodiak's credit agreement leverage ratio was 3.9x.

Full-Year 2025 Guidance

Kodiak is providing guidance for the full year 2025. All amounts below are in thousands except percentages.

Conference Call

Kodiak will host a conference call on Thursday, March 6, 2025 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to discuss financial and operating results for the quarter and year ended December 31, 2024. To listen to the call by phone, dial 877-407-4012 and ask for the Kodiak Gas Services call at least 10 minutes prior to the start time. To listen to the call via webcast, please visit the Investors tab of Kodiak's website at www.kodiakgas.com.

About Kodiak Gas Services, Inc.

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

Non-GAAP Financial Measures

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

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

Discretionary cash flow is defined as net cash provided by operating activities less (i) maintenance capital expenditures; (ii) certain changes in operating assets and liabilities; and (iii) certain other expenses; plus (w) cash loss on extinguishment of debt; (x) severance expenses; 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. Reconciliations of discretionary cash flow to net income (loss) and net cash provided by operating activities are presented below.

Free cash flow is defined as net cash provided by operating activities less (i) maintenance capital expenditures; (ii) certain changes in operating assets and liabilities; (iii) certain other expenses; and (iv) growth capital expenditures; plus (w) cash loss on extinguishment of debt; (x) severance expenses; (y) transaction expenses; and (z) proceeds from sale of assets. 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. Reconciliations of free cash flow to net income (loss) and net cash provided by operating activities are presented below.

Cautionary Note Regarding Forward-Looking Statements

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

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: (i) a reduction in the demand for natural gas and oil; (ii) the loss of, or the deterioration of the financial condition of, any of our key customers; (iii) nonpayment and nonperformance by our customers, suppliers or vendors; (iv) competitive pressures that may cause us to lose market share; (v) the structure of our Contract Services contracts and the failure of our customers to continue to contract for services after expiration of the primary term; (vi) our ability to successfully integrate any acquired businesses, including CSI Compressco, and realize the expected benefits thereof; (vii) our ability to fund purchases of additional compression equipment; (viii) a deterioration in general economic, business, geopolitical or industry conditions, including as a result of the conflict between Russia and Ukraine and the Israel-Hamas war, inflation, and slow economic growth in the United States; (ix) a downturn in the economic environment, as well as continued inflationary pressures; (x) international operations and related mobilization and demobilization of compression units, operational interruptions, delays, upgrades, refurbishment and repair of compression assets and any related delays and costs overruns or reduced payment of contracted rates; (xi) tax legislation and administrative initiatives or challenges to our tax positions; (xii) the loss of key management, operational personnel or qualified technical personnel; (xiii) our dependence on a limited number of suppliers; (xiv) the cost of compliance with existing and new governmental regulations, including climate change legislation, and associated uncertainty given the new administration as a result of the outcome of the 2024 election cycle; (xv) changes in trade policies and regulations, including the potential for increases or changes in duties, current and potentially new tariffs or quotas, including the new and rapidly evolving tariffs enacted in February 2025; (xvi) the cost of compliance with regulatory initiatives and stakeholder pressures, including environmental, social and governance scrutiny; (xvii) the inherent risks associated with our operations, such as equipment defects and malfunctions; (xviii) our reliance on third-party components for use in our IT systems; (xix) legal and reputational risks and expenses relating to the privacy, use and security of employee and client information; (xx) threats of cyber-attacks or terrorism; (xxi) agreements that govern our debt contain features that may limit our ability to operate our business and fund future growth and also increase our exposure to risk during adverse economic conditions; (xxii) volatility and/or elevated interest rates and associated central bank policy actions; (xxiii) our ability to access the capital and credit markets or borrow on affordable terms (or at all) to obtain additional capital that we may require; (xxiv) major natural disasters, severe weather events or other similar events that could disrupt operations; (xxv) unionization of our labor force, labor interruptions and new or amended labor regulations; (xxvi) renewal of insurance; (xxvii) the effectiveness of our disclosure controls and procedures; and (xxvii) such other factors as discussed throughout the "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our Annual Report on Form 10-K for the year ended December 31, 2024, to be filed with the U.S. Securities and Exchange Commission.

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

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Kodiak Gas Services, Inc.

Graham Sones, VP – Investor Relations

[email protected]