Kodiak Gas Services, Inc. (NYSE: KGS) (“Kodiak” or the
“Company”), a leading provider of critical energy infrastructure
and contract compression services, today reported financial and
operating results for the quarter ended June 30, 2024 and also
updated full-year 2024 guidance.
Second Quarter 2024 and Recent Highlights
- Total revenues were $309.7 million compared to $203.3 million
in the second quarter of 2023
- Contract Services segment revenues and Adjusted Gross Margin
Percentage(1) were $276.3 million and 64.0%, respectively
- Net income was $6.7 million compared to net income of $17.5
million in the second quarter of 2023
- Record quarterly Adjusted EBITDA(1) of $154.3 million compared
to $107.9 million in the second quarter of 2023
- Increased expected transaction run-rate cost synergies to
greater than $30 million
- Deployed 41,500 horsepower of new large horsepower compression
units
- Horsepower utilization on units with >1,000 horsepower was
~98% at June 30, 2024
- Entered into an agreement to divest a significant number of
small horsepower units both in the U.S and internationally
- Declared a cash dividend of $0.41 per share, or $1.64 per share
annualized, representing an 8% increase over the first quarter 2024
dividend
Updated 2024 Guidance
- Raised full-year 2024 Adjusted EBITDA guidance to a range of
$590 to $610 million, a $10 million increase to the low end of the
range
- Expect to generate Discretionary Cash Flow(1) in the range of
$365 to $385 million in 2024
(1)
Adjusted Gross Margin Percentage, Adjusted
EBITDA, and Discretionary Cash Flow are Non-GAAP Financial
Measures. Definitions and reconciliations to the most comparable
GAAP financial measure is included herein.
“We are pleased with our second quarter 2024 results as we
completed the acquisition of CSI Compressco to form the industry’s
largest contract compression fleet and delivered record revenues
and Adjusted EBITDA,” stated Mickey McKee, Kodiak’s President and
Chief Executive Officer. “We’ve made tremendous progress on
integration and have raised our estimate of the synergies we expect
to realize through the combination to over $30 million, driving
margin expansion and growth in future cash flows.
"Our leading position in the Permian Basin positions us to
benefit from the coming growth in U.S. natural gas supply to meet
demand from LNG and electricity load growth to power data centers.
Large horsepower compression remains in high demand, and our new
unit deliveries are effectively fully contracted through 2025. This
positive outlook along with our solid execution gives us confidence
to raise the low end of our 2024 Adjusted EBITDA guidance range and
increase our quarterly dividend. We’re committed to returning
capital to shareholders within our capital allocation framework,
while also investing for future growth and driving towards our
total leverage target of 3.5x.”
Second Quarter 2024 Financial Results
Net income for the second quarter of 2024 was $6.7 million,
compared to $17.5 million in the second quarter of 2023. Adjusted
EBITDA for the second quarter of 2024 was $154.3 million compared
to $107.9 million in the second quarter of 2023.
Selling, general and administrative expenses were $59.9 million
in the second quarter of 2024, compared to $13.4 million in the
second quarter of 2023. Second quarter 2024 selling, general and
administrative expenses were negatively impacted by $17.4 million
in transaction expenses and $9.0 million in severance costs related
to the CSI Acquisition, and a $4.5 million provision for expected
credit losses.
Segment Information
Kodiak formerly managed its business through two operating
segments: Compression Operations and Other Services. After the
acquisition of CSI Compressco (the “CSI Acquisition”), the Company
manages its business through the following two operating segments:
Contract Services and Other Services and operates predominantly in
the U.S. and in select international regions. Contract Services
consists of operating Company-owned compression, customer-owned
compression, and gas treating and cooling infrastructure, pursuant
to fixed-revenue contracts, to enable the production, gathering and
transportation of natural gas and oil. Other Services consists of
station construction, maintenance and overhaul, freight and crane
charges, part sales and other time and material-based
offerings.
Contract Services segment revenues were $276.3 million in the
second quarter of 2024, a 52% increase compared to $181.6 million
in the second quarter of 2023. Contract Services segment Adjusted
Gross Margin was $176.9 million in the second quarter of 2024, a
52% increase compared to $116.6 million in the second quarter of
2023. Second quarter 2024 Contract Services cost of operations
included a $3.3 million accrual for potential sales and use taxes
related to compressor parts purchases spanning several years.
Other Services segment revenues were $33.4 million in the second
quarter of 2024 compared to $21.7 million in the second quarter of
2023. Other Services segment Adjusted Gross Margin was $5.5 million
in the second quarter of 2024, compared to $3.6 million in the
second quarter of 2023.
Compression Fleet Update
Subsequent to June 30, 2024, Kodiak entered into an agreement to
sell a significant number of small horsepower units both in the
U.S. and internationally in a transaction that is anticipated to
close in the third quarter of 2024.
Long-Term Debt and Liquidity
Total debt outstanding was $2.5 billion as of June 30, 2024,
principally comprised of borrowings on the ABL Facility and senior
notes due 2029. At June 30, 2024, the Company had $411.4 million
available on its ABL Facility.
Summary Financial Data
(in thousands, except percentages)
Three Months Ended
June 30, 2024
March 31, 2024
June 30, 2023
Total revenues
$
309,653
$
215,492
$
203,306
Net income
$
6,713
$
30,232
$
17,517
Adjusted EBITDA (1)
$
154,342
$
117,762
$
107,885
Adjusted EBITDA percentage (1)
49.8
%
54.6
%
53.1
%
Contract Services revenue
$
276,250
$
193,399
$
181,619
Contract Services Adjusted Gross Margin
(1)
$
176,917
$
127,517
$
116,602
Contract Services Adjusted Gross Margin
Percentage (1)
64.0
%
65.9
%
64.2
%
Other Services revenue
$
33,403
$
22,093
$
21,687
Other Services Adjusted Gross Margin
(1)
$
5,467
$
4,409
$
3,588
Other Services Adjusted Gross Margin
Percentage (1)
16.4
%
20.0
%
16.5
%
Maintenance capital expenditures
$
19,147
$
10,642
$
10,940
Growth capital expenditures(2)
$
90,390
$
59,401
$
32,529
Discretionary Cash Flow (1)
$
90,617
$
71,925
$
64,873
Free Cash Flow (1)
$
638
$
12,524
$
33,367
(1)
Adjusted EBITDA, Adjusted EBITDA
Percentage, Adjusted Gross Margin, Adjusted Gross Margin
Percentage, Discretionary Cash Flow and Free Cash Flow are non-GAAP
financial measures. For definitions and reconciliations to the most
directly comparable financial measures calculated and presented in
accordance with GAAP, see “Non-GAAP Financial Measures” below.
(2)
For the three months ended June 30, 2024,
March 31, 2024 and June 30, 2023, growth capital expenditures
include a non-cash increase in the sales tax accrual on compression
equipment purchases of $19.8 million, $0.3 million and $0.3
million, respectively. These accrual amounts are estimated based on
the best-known information as it relates to open audit periods with
the state of Texas.
Summary Operating Data
(as of the dates indicated)
June 30, 2024
March 31, 2024
June 30, 2023
Fleet horsepower (1)
4,481,900
3,290,971
3,180,906
Revenue-generating horsepower (2)
4,224,839
3,285,592
3,177,286
Fleet compression units
7,317
3,091
3,038
Revenue-generating compression units
5,753
3,064
3,023
Revenue-generating horsepower per
revenue-generating compression unit (3)
734
1,072
1,051
Horsepower utilization (4)
94.3
%
99.8
%
99.9
%
(1)
Fleet horsepower includes owned horsepower
excluding 27,663, 27,663 and 32,340 of non-marketable or obsolete
horsepower as of June 30, 2024, March 31, 2024, and June 30, 2023,
respectively.
(2)
Revenue-generating horsepower includes
fleet horsepower that is under contract, operating and generating
revenue.
(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.
Full-Year 2024 Guidance
Kodiak is providing revised guidance for the full year 2024. The
full-year 2024 guidance below incorporates three quarters of the
financial impact of the CSI Acquisition that closed on April 1,
2024. Amounts below are in thousands except percentages.
Full-Year 2024
Guidance
Low
High
Adjusted EBITDA (1)
$
590,000
$
610,000
Discretionary Cash Flow (1)(2)
$
365,000
$
385,000
Segment Information
Contract Services revenues
$
1,000,000
$
1,040,000
Contract Services Adjusted Gross Margin
Percentage (1)
64
%
66
%
Other Services revenues
$
120,000
$
140,000
Other Services Adjusted Gross Margin
Percentage (1)
14
%
17
%
Capital Expenditures
Growth capital expenditures (3)
$
210,000
$
230,000
Maintenance capital expenditures
$
60,000
$
70,000
(1)
The Company is unable to reconcile
projected Adjusted EBITDA to projected net income (loss) and
Discretionary Cash Flow to projected net cash provided by operating
activities, the most comparable financial measures calculated in
accordance with GAAP, respectively, without unreasonable efforts
because components of the calculations are inherently
unpredictable, such as changes to current assets and liabilities,
unknown future events, and estimating certain future GAAP measures.
The inability to project certain components of the calculation
would significantly affect the accuracy of the reconciliations.
(2)
Discretionary Cash Flow assumes no change
to Secured Overnight Financing Rate futures.
(3)
Growth capital expenditures guidance
excludes (i) approximately $30 million in one-time capital
expenditures related to the CSI Acquisition, (ii) a $20 million
non-cash accrual for sales taxes on compression units purchased in
prior years and (iii) proceeds from the pending sale of small
horsepower compression units.
Conference Call
Kodiak will conduct a conference call on Tuesday, August 13,
2024, at 11:00 a.m. Eastern Time (10:00 a.m. Central Time) to
discuss financial and operating results for the quarter ended June
30, 2024. To listen to the call by phone, dial 877-407-4012 and ask
for the Kodiak Gas Services call at least 10 minutes prior to the
start time. To listen to the call via webcast, please visit the
Investors tab of Kodiak’s website at www.kodiakgas.com.
About Kodiak
Kodiak is the largest contract compression services provider in
the United States, serving as a critical link in the infrastructure
enabling the safe and reliable production and transportation of
natural gas and oil. Headquartered in The Woodlands, Texas, Kodiak
provides contract compression and related services to oil and gas
producers and midstream customers in high–volume gas gathering
systems, processing facilities, multi-well gas lift applications
and natural gas transmission systems. More information is available
at www.kodiakgas.com.
Non-GAAP Financial Measures
Adjusted EBITDA is defined as net income (loss) before interest
expense, net; income tax expense (benefit); and depreciation and
amortization; plus (i) loss (gain) on derivatives; (ii) equity
compensation expense; (iii) severance expenses; (iv) transaction
expenses; and (v) loss (gain) on sale of assets. Adjusted EBITDA
Percentage is defined as Adjusted EBITDA divided by total revenues.
Adjusted EBITDA and Adjusted EBITDA Percentage are used as
supplemental financial measures by our management and external
users of our financial statements, such as investors, commercial
banks and other financial institutions, to assess: (i) the
financial performance of our assets without regard to the impact of
financing methods, capital structure or historical cost basis of
our assets; (ii) the viability of capital expenditure projects and
the overall rates of return on alternative investment
opportunities; (iii) the ability of our assets to generate cash
sufficient to make debt payments and pay dividends; and (iv) our
operating performance as compared to those of other companies in
our industry without regard to the impact of financing methods and
capital structure. We believe Adjusted EBITDA and Adjusted EBITDA
Percentage provide useful information to investors because, when
viewed with our GAAP results and the accompanying reconciliation,
they provide a more complete understanding of our performance than
GAAP results alone. We also believe that external users of our
financial statements benefit from having access to the same
financial measures that management uses in evaluating the results
of our business. Reconciliations of Adjusted EBITDA to net income
(loss), the most directly comparable GAAP financial measure, and
net cash provided by operating activities are presented below.
Adjusted Gross Margin is defined as revenue less cost of
operations, exclusive of depreciation and amortization expense.
Adjusted Gross Margin Percentage is defined as Adjusted Gross
Margin divided by revenues. We believe Adjusted Gross Margin and
Adjusted Gross Margin Percentage are useful as supplemental
measures to investors of our operating profitability.
Reconciliations of Adjusted Gross Margin to gross margin are
presented below.
Discretionary Cash Flow is defined as net cash provided by
operating activities less (i) maintenance capital expenditures;(ii)
gain on sale of capital assets; (iii) certain changes in operating
assets and liabilities; and (iv) certain other expenses; plus (x)
cash loss on extinguishment of debt; and (y) transaction expenses.
We believe Discretionary Cash Flow is a useful liquidity and
performance measure and supplemental financial measure for us and
our investors in assessing our ability to pay cash dividends to our
stockholders, make growth capital expenditures and assess our
operating performance. Reconciliations of Discretionary Cash Flow
to net income and net cash provided by operating activities are
presented below.
Free Cash Flow is defined as net cash provided by operating
activities less (i) maintenance capital expenditures; (ii) gain on
sale of capital assets; (iii) certain changes in operating assets
and liabilities; (iv) certain other expenses; and (v) net growth
capital expenditures; plus (x) transaction expenses; and (y)
proceeds from sale of capital assets. We believe Free Cash Flow is
a liquidity measure and useful supplemental financial measure for
us and investors in assessing our ability to pursue business
opportunities and investments to grow our business and to service
our debt. Reconciliations of Free Cash Flow to net income and net
cash provided by operating activities are presented below.
Cautionary Note Regarding Forward-Looking Statements
This news release contains, and our officers and representatives
may from time to time make, “forward-looking statements” within the
meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are neither historical facts nor assurances of future
performance. Instead, they are based only on our current beliefs,
expectations and assumptions regarding the future of our business,
future plans and strategies, projections, anticipated events and
trends, the economy and other future conditions. Forward-looking
statements can be identified by words such as: “anticipate,”
“intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,”
“expect,” “strategy,” “future,” “likely,” “may,” “should,” “will”
and similar references to future periods. Examples of
forward-looking statements include, among others, statements we
make regarding: (i) expected operating results, such as revenue
growth and earnings, including changes due to CSI Acquisition, and
our ability to service our indebtedness; (ii) anticipated levels of
capital expenditures and uses of capital; (iii) current or future
volatility in the credit markets and future market conditions; (iv)
potential and pending acquisition transactions or other strategic
transactions, the timing thereof, the receipt of necessary
approvals to close those transactions, our ability to finance such
transactions and our ability to achieve the intended operational,
financial and strategic benefits from any such transactions; (v)
expected synergies and efficiencies to be achieved as a result of
the CSI Acquisition; (vi) expectations regarding leverage and
dividend profile as a result of the CSI Acquisition, including the
amount and timing of future dividend payments; (vii) expectations
of the effect on our financial condition of claims, litigation,
environmental costs, contingent liabilities and governmental and
regulatory investigations and proceedings; (viii) production and
capacity forecasts for the natural gas and oil industry; (ix)
strategy for customer retention, growth, fleet maintenance, market
position, and financial results; (x) our interest rate hedges; and
(xi) strategy for risk management.
Because forward-looking statements relate to the future, they
are subject to inherent uncertainties, risks and changes in
circumstances that are difficult to predict and many of which are
outside of our control. Our actual results and financial condition
may differ materially from those indicated in the forward-looking
statements. Therefore, you should not place undue reliance on any
of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ
materially from those indicated in the forward-looking statements
include, among others, the following: (i) a reduction in the demand
for natural gas and oil; (ii) the loss of, or the deterioration of
the financial condition of, any of our key customers; (iii)
nonpayment and nonperformance by our customers, suppliers or
vendors; (iv) competitive pressures that may cause us to lose
market share; (v) the structure of our Contract Services contracts
and the failure of our customers to continue to contract for
services after expiration of the primary term; (vi) our ability to
successfully integrate any acquired business, including CSI
Compressco, and realize the expected benefits thereof; (vii) our
ability to fund purchases of additional compression equipment;
(viii) a deterioration in general economic, business, geopolitical
or industry conditions, including as a result of the conflict
between Russia and Ukraine, inflation, and slow economic growth in
the United States; (ix) tax legislation and administrative
initiatives or challenges to our tax positions; (x) the loss of key
management, operational personnel or qualified technical personnel;
(xi) our dependence on a limited number of suppliers; (xii) the
cost of compliance with existing governmental regulations and
proposed governmental regulations, including climate change
legislation; (xiii) the cost of compliance with regulatory
initiatives and stakeholder pressures, including environmental,
social and governance scrutiny; (xiv) the inherent risks associated
with our operations, such as equipment defects and malfunctions;
(xv) our reliance on third-party components for use in our
information technology systems; (xvi) legal and reputational risks
and expenses relating to the privacy, use and security of employee
and client information; (xvii) threats of cyber-attacks or
terrorism; (xviii) agreements that govern our debt contain features
that may limit our ability to operate our business and fund future
growth and also increase our exposure to risk during adverse
economic conditions; (xix) volatility in interest rates; (xx) our
ability to access the capital and credit markets or borrow on
affordable terms to obtain additional capital that we may require;
(xxi) the effectiveness of our disclosure controls and procedures;
and (xxii) such other factors as discussed throughout the "Risk
Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" sections of our Annual Report
on Form 10-K for the year ended December 31, 2023, as filed with
the U.S. Securities and Exchange Commission.
Any forward-looking statement made by us in this news release is
based only on information currently available to us and speaks only
as of the date on which it is made. Except as may be required by
applicable law, we undertake no obligation to publicly update any
forward-looking statement whether as a result of new information,
future developments or otherwise.
KODIAK GAS SERVICES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except share and
per share data)
Three Months Ended
June 30, 2024
March 31, 2024
June 30, 2023
Revenues:
Contract Services
$
276,250
$
193,399
$
181,619
Other Services
33,403
22,093
21,687
Total revenues
309,653
215,492
203,306
Operating expenses:
Cost of operations (exclusive of
depreciation and amortization shown below)
Contract Services
99,333
65,882
65,017
Other Services
27,936
17,684
18,099
Depreciation and amortization
69,463
46,944
45,430
Selling, general and administrative
expenses
59,927
24,824
13,438
Gain on sale of property, plant and
equipment
(1,173
)
—
(738
)
Total operating expenses
255,486
155,334
141,246
Income from operations
54,167
60,158
62,060
Other income (expenses):
Interest expense, net
(52,133
)
(39,740
)
(73,658
)
Gain on derivatives
6,797
19,757
34,934
Other income (expense), net
218
(68
)
32
Total other expenses, net
(45,118
)
(20,051
)
(38,692
)
Income before income taxes
9,049
40,107
23,368
Income tax expense
2,336
9,875
5,851
Net income
6,713
30,232
17,517
Less: Net income attributable to
noncontrolling interests
485
—
—
Net Income attributable to common
shareholders
$
6,228
$
30,232
$
17,517
Earnings per share attributable to common
shareholders:
Basic net earnings per share
$
0.07
$
0.39
$
0.30
Diluted net earnings per share
$
0.06
$
0.39
$
0.30
Basic weighted average shares of common
stock outstanding
84,202,352
77,432,283
59,000,000
Diluted weighted average shares of common
stock outstanding
90,669,239
78,102,450
59,000,000
KODIAK GAS SERVICES,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(in thousands, except share and
per share data)
As of June 30, 2024
As of December 31,
2023
Assets
Current assets:
Cash and cash equivalents
$
3,852
$
5,562
Accounts receivable, net
203,426
113,192
Inventories, net
119,649
76,238
Fair value of derivative instruments
5,590
8,194
Contract assets
5,424
17,424
Prepaid expenses and other current
assets
14,418
10,353
Total current assets
352,359
230,963
Property, plant and equipment, net
3,424,849
2,536,091
Operating lease right-of-use assets,
net
53,939
33,716
Finance lease right-of-use assets, net
4,698
—
Goodwill
403,390
305,553
Identifiable intangible assets, net
165,213
122,888
Fair value of derivative instruments
31,153
14,256
Deferred tax assets
17
—
Other assets
3,662
639
Total assets
$
4,439,280
$
3,244,106
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
65,592
$
49,842
Accrued liabilities
197,424
97,078
Contract liabilities
71,418
63,709
Total current liabilities
334,434
210,629
Long-term debt, net of unamortized debt
issuance cost
2,486,767
1,791,460
Operating lease liabilities
49,392
34,468
Financing lease liabilities
2,555
—
Deferred tax liabilities
97,861
62,748
Other liabilities
4,889
2,148
Total liabilities
2,975,898
2,101,453
Commitments and contingencies (Note
14)
Stockholders’ equity:
Preferred stock, par value $0.01 per
share; 50,000,000 shares of preferred stock authorized, 5,562,273
and zero issued and outstanding as of June 30, 2024, and December
31, 2023, respectively
56
—
Common stock, par value $0.01 per share;
750,000,000 shares of common stock authorized, 84,312,360 and
77,400,000 shares of common stock issued and outstanding as of June
30, 2024, and December 31, 2023, respectively
842
774
Additional paid-in capital
1,157,735
963,760
Noncontrolling interest
152,529
—
Retained earnings
152,220
178,119
Total stockholders’ equity
1,463,382
1,142,653
Total liabilities and stockholders’
equity
$
4,439,280
$
3,244,106
KODIAK GAS SERVICES,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
Six Months Ended June
30,
2024
2023
Cash flows from operating
activities:
Net Income
$
36,945
$
5,174
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
116,407
90,327
Equity compensation expense
8,159
908
Amortization of debt issuance costs
4,946
11,071
Non-cash lease expense
1,648
1,786
Provision for credit losses
4,589
2
Inventory reserve
476
250
Gain on sale of property, plant and
equipment
(1,173
)
(721
)
Change in fair value of derivatives
(14,293
)
21,529
Deferred tax provision
7,104
761
Changes in operating assets and
liabilities, exclusive of effects of business acquisition:
Accounts receivable
(45,933
)
(21,705
)
Inventories
(3,147
)
(4,907
)
Contract assets
12,000
(958
)
Prepaid expenses and other current
assets
4,671
(10,681
)
Accounts payable
21,983
10,954
Accrued and other liabilities
11,871
(14,971
)
Contract liabilities
6,308
29,149
Other assets
63
—
Net cash provided by operating
activities
172,624
117,968
Cash flows from investing
activities:
Net cash acquired in acquisition of CSI
Compressco LP
9,458
—
Purchase of property, plant and
equipment
(177,186
)
(94,034
)
Proceeds from sale of property, plant and
equipment
411
1,055
Other
(35
)
(14
)
Net cash used in investing activities
(167,352
)
(92,993
)
Cash flows from financing
activities:
Borrowings on debt instruments
1,945,775
499,279
Payments on debt instruments
(1,867,851
)
(428,812
)
Principal payments on other borrowings
(1,843
)
—
Payment of debt issuance cost
(16,346
)
(32,202
)
Dividends paid to stockholders
(62,393
)
—
Principal payments on finance leases
(408
)
—
Offering costs
(1,162
)
—
Cash paid for shares withheld to cover
taxes
(294
)
—
Distribution to stockholders
—
(42,300
)
Distribution to noncontrolling
interest
(2,460
)
—
Net cash used in financing activities
(6,982
)
(4,035
)
Net (decrease) increase in cash and cash
equivalents
(1,710
)
20,940
Cash and cash equivalents - beginning of
period
5,562
20,431
Cash and cash equivalents - end of
period
$
3,852
$
41,371
Supplemental cash disclosures:
Cash paid for interest
$
40,861
$
116,370
Cash paid for taxes
$
9,225
$
5,726
Supplemental disclosure of non-cash
investing activities:
Decrease in accrued capital
expenditures
$
2,702
$
9,946
Supplemental disclosure of non-cash
financing activities:
Dividends equivalent
$
(455
)
$
—
Issuance of common shares
$
188,099
$
—
Issuance of preferred shares and
noncontrolling interest
$
154,186
$
—
KODIAK GAS SERVICES,
INC.
RECONCILIATION OF NET INCOME
TO ADJUSTED EBITDA
(in thousands, excluding
percentages; unaudited)
Three Months Ended
June 30, 2024
March 31, 2024
June 30, 2023
Net income
$
6,713
$
30,232
$
17,517
Interest expense, net
52,133
39,740
73,658
Income tax expense
2,336
9,875
5,851
Depreciation and amortization
69,463
46,944
45,430
Gain on derivatives
(6,797
)
(19,757
)
(34,934
)
Equity compensation expense(1)
5,311
2,848
29
Severance expense(2)
8,969
—
—
Transaction expenses(3)
17,387
7,880
1,072
Gain on sale of property, plant and
equipment
(1,173
)
—
(738
)
Adjusted EBITDA
$
154,342
$
117,762
$
107,885
Adjusted EBITDA Percentage
49.8
%
54.6
%
53.1
%
(1)
For the three months ended June 30, 2024, March 31, 2024, and
June 30, 2023, there were $5.3 million, $2.8 million and $0.0
million, respectively, of non-cash adjustments for equity
compensation expense.
(2)
For the three months ended June 30, 2024 there were $9.0 million
of severance expenses related to the CSI Acquisition. There were no
such expenses for the three months ended March 31, 2024 and June
30, 2023.
(3)
Represents certain costs associated with non-recurring
professional services, primarily related to the CSI Acquisition for
the three months ended June 30, 2024 and March 31, 2024.
KODIAK GAS SERVICES,
INC.
RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES TO ADJUSTED EBITDA
(in thousands; unaudited)
Three Months Ended
June 30, 2024
March 31, 2024
June 30, 2023
Net cash provided by operating
activities
$
121,082
$
51,542
$
94,678
Interest expense, net
52,133
39,740
73,658
Income tax (benefit) expense
2,336
9,875
5,851
Deferred tax provision
(843
)
(6,261
)
(3,282
)
Cash received on derivatives
(6,745
)
(5,516
)
(38,529
)
Severance expense(1)
8,969
—
—
Transaction expenses(2)
17,387
7,880
1,072
Other(3)
(7,605
)
(4,054
)
(6,763
)
Change in operating assets and
liabilities
(32,372
)
24,556
(18,800
)
Adjusted EBITDA
$
154,342
$
117,762
$
107,885
(1)
For the three months ended June 30, 2024 there were $9.0 million
of severance expenses related to the CSI Acquisition. There were no
such expenses for the three months ended March 31, 2024 and June
30, 2023.
(2)
Represents certain costs associated with non-recurring
professional services, primarily related to the CSI Acquisition for
the three months ended June 30, 2024 and March 31, 2024.
(3)
Includes amortization of debt issuance costs, non-cash lease
expense, provision for credit losses and inventory reserve.
KODIAK GAS SERVICES,
INC.
RECONCILIATION OF ADJUSTED
GROSS MARGIN TO GROSS MARGIN FOR CONTRACT SERVICES
(in thousands, excluding
percentages; unaudited)
Three Months Ended
June 30, 2024
March 31, 2024
June 30, 2023
Total revenues
$
276,250
$
193,399
$
181,619
Cost of sales (excluding depreciation and
amortization)
(99,333
)
(65,882
)
(65,017
)
Depreciation and amortization
(69,463
)
(46,944
)
(45,430
)
Gross margin
$
107,454
$
80,573
$
71,172
Gross margin percentage
38.9
%
41.7
%
39.2
%
Depreciation and amortization
69,463
46,944
45,430
Adjusted Gross Margin
$
176,917
$
127,517
$
116,602
Adjusted Gross Margin Percentage(1)
64.0
%
65.9
%
64.2
%
(1)
Calculated using Adjusted Gross Margin for Contract Services as
a percentage of total Contract Services revenues.
KODIAK GAS SERVICES,
INC.
RECONCILIATION OF ADJUSTED
GROSS MARGIN TO GROSS MARGIN FOR OTHER SERVICES
(in thousands, excluding
percentages; unaudited)
Three Months Ended
June 30, 2024
March 31, 2024
June 30, 2023
Total revenues
$
33,403
$
22,093
$
21,687
Cost of sales (excluding depreciation and
amortization)
(27,936
)
(17,684
)
(18,099
)
Depreciation and amortization
—
—
—
Gross margin
$
5,467
$
4,409
$
3,588
Gross margin percentage
16.4
%
20.0
%
16.5
%
Depreciation and amortization
—
—
—
Adjusted Gross Margin
$
5,467
$
4,409
$
3,588
Adjusted Gross Margin Percentage(1)
16.4
%
20.0
%
16.5
%
(1)
Calculated using Adjusted Gross Margin for Other Services as a
percentage of total Other Services revenues.
KODIAK GAS SERVICES,
INC.
RECONCILIATION OF NET INCOME
TO DISCRETIONARY CASH FLOW AND FREE CASH FLOW
(in thousands; unaudited)
Three Months Ended
June 30, 2024
March 31, 2024
June 30, 2023
Net income
$
6,713
$
30,232
$
17,517
Depreciation and amortization
69,463
46,944
45,430
Change in fair value of derivatives
(52
)
(14,241
)
3,595
Deferred tax provision
843
6,261
3,282
Amortization of debt issuance costs
2,303
2,643
5,626
Equity compensation expense(1)
5,311
2,848
29
Severance expense(2)
8,969
—
—
Transaction expenses(3)
17,387
7,880
1,072
Gain on sale of property, plant and
equipment
(1,173
)
—
(738
)
Maintenance capital expenditures
(19,147
)
(10,642
)
(10,940
)
Discretionary Cash Flow
$
90,617
$
71,925
$
64,873
Growth capital expenditures(4)(5)(6)
(90,390
)
(59,401
)
(32,529
)
Proceeds from sale of property, plant and
equipment
411
—
1,023
Free Cash Flow
$
638
$
12,524
$
33,367
(1)
For the three months ended June
30, 2024, March 31, 2024, and June 30, 2023, there were $5.3
million, $2.8 million and $0.0 million, respectively, of non-cash
adjustments for equity compensation expense.
(2)
For the three months ended June
30, 2024 there were $9.0 million of severance expenses related to
the CSI Acquisition. There were no such expenses for the three
months ended March 31, 2024 and June 30, 2023.
(3)
Represents certain costs
associated with non-recurring professional services, primarily
related to the CSI Acquisition for the three months ended June 30,
2024, and other costs.
(4)
For the three months ended June
30, 2024, March 31, 2024, and June 30, 2023, growth capital
expenditures include a $12.6 million decrease, a $9.9 million
increase and a $2.0 million decrease in accrued capital
expenditures, respectively.
(5)
For the three months ended June
30, 2024, March 31, 2024 and June 30, 2023, there were $7.2
million, $5.8 million and $4.8 million of non-unit growth capital
expenditures, respectively.
(6)
For the three months ended June
30, 2024, March 31, 2024 and June 30, 2023, growth capital
expenditures include a non-cash increase in the sales tax accrual
on compression equipment purchases of $19.8 million, $0.3 million
and $0.3 million, respectively. These accrual amounts are estimated
based on the best known information as it relates to open audit
periods with the state of Texas.
KODIAK GAS SERVICES,
INC.
RECONCILIATION OF NET CASH
PROVIDED BY OPERATING ACTIVITIES TO DISCRETIONARY CASH FLOW AND
FREE CASH FLOW
(in thousands; unaudited)
Three Months Ended
June 30, 2024
March 31, 2024
June 30, 2023
Net cash provided by operating
activities
$
121,082
$
51,542
$
94,678
Maintenance capital expenditures
(19,147
)
(10,642
)
(10,940
)
Severance expense(1)
8,969
—
—
Transaction expenses(2)
17,387
7,880
1,072
Gain on sale of property, plant and
equipment
(1,173
)
—
(738
)
Change in operating assets and
liabilities
(32,372
)
24,556
(18,800
)
Other(3)
(4,129
)
(1,411
)
(399
)
Discretionary Cash Flow
$
90,617
$
71,925
$
64,873
Growth capital expenditures(4)(5)(6)
(90,390
)
(59,401
)
(32,529
)
Proceeds from sale of property, plant and
equipment
411
—
1,023
Free Cash Flow
$
638
$
12,524
$
33,367
(1)
For the three months ended June
30, 2024 there were $9.0 million of severance expenses related to
the CSI Acquisition. There were no such expenses for the three
months ended March 31, 2024, and June 30, 2023.
(2)
Represents certain costs
associated with non-recurring professional services, primarily
related to the CSI Acquisition for the three months ended June 30,
2024, and other costs.
(3)
Includes non-cash lease expense,
provision for credit losses and inventory reserve.
(4)
For the three months ended June
30, 2024, March 31, 2024, and June 30, 2023, growth capital
expenditures include a $12.6 million decrease, a $9.9 million
increase and a $2.0 million decrease in accrued capital
expenditures, respectively.
(5)
For the three months ended June
30, 2024, March 31, 2024 and June 30, 2023, there were $7.2
million, $5.8 million and $4.8 million of non-unit growth capital
expenditures, respectively.
(6)
For the three months ended June
30, 2024, March 31, 2024 and June 30, 2023, growth capital
expenditures include a non-cash increase in the sales tax accrual
on compression equipment purchases of $19.8 million, $0.3 million
and $0.3 million, respectively. These accrual amounts are estimated
based on the best known information as it relates to open audit
periods with the state of Texas.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240812158226/en/
Investor Contact Graham Sones, VP – Investor Relations
ir@kodiakgas.com (936) 755-3529
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