USA Compression Partners Q3 2025 Earnings Call - Raising Guidance Amid Strategic Cost Cuts and Capacity Expansion

Conference Operator: Good morning. Welcome to the USA Compression Partners Third Quarter twenty twenty five Earnings Conference Call. During today’s call, all parties will be in a listen only mode. At the conclusion of management’s prepared remarks, the call will be opened for Q and A. Conference is being recorded today, 11/05/2025.

I now would like to turn the call over to Chris Porter, Vice President, General Counsel and Secretary. Mr. Porter, you may begin.

Chris Porter, Vice President, General Counsel and Secretary, USA Compression Partners: Good morning, everyone, and thank you for joining us. With me today is Clint Green, President and CEO Chris Paulson, Vice President and CFO and Chris Watson, Vice President and COO. This morning, we released our operational and financial results for the quarter ending 09/30/2025. You can find a copy of our earnings release as well as a recording of this call in the Investor Relations section of our website at usacompression.com. During this call, our management will reference certain non GAAP measures.

You will find definitions and reconciliations of these non GAAP measures to the most comparable U. S. GAAP measures in our earnings release. As a reminder, our conference call will include forward looking statements. These statements are based on management’s current beliefs and include projections and expectations regarding our future performance and other forward looking matters.

Actual results may differ materially from these statements. Please review the risk factors included in this morning’s earnings release and in our other public filings. Please note that information provided on this call speaks only to management’s views as of today, 11/05/2025, and may no longer be accurate at the time of a replay. I will now turn the call over to Clint Green, President and CEO of USA Compression.

Clint Green, President and CEO, USA Compression Partners: Thanks, Chris, and good morning. Thank you all for joining our call. We are pleased to deliver another solid quarter with revenues of over $250,000,000 adjusted EBITDA over 160,000,000 and DCF approaching $104,000,000 with strong margins and consistent utilization resulting in improved leverage ratio of 3.9 times and DCF coverage ratio of 1.6 times. Based on year to date performance, we have increased our twenty twenty five ranges for EBITDA and DCF guidance. This increase in guidance is a result of management’s commitment to effective cost management and operational discipline.

This includes certain one time impacts that Chris Paulson will discuss later in the call. Additionally, we will deploy most of our twenty twenty five new unit horsepower in Q4, setting the foundation for continued momentum in 2026. We are in the process of finalizing our 2026 capital budget, which we anticipate releasing in February. We expect that new horsepower will exceed twenty twenty five levels given continued natural gas demand and new projects both expanding takeaway capacity and increased localized demand in the Permian and Northeast. We have already committed to several deliveries in Q2 and 2026.

Notably, we have recently seen lead times increase to more than sixty weeks for larger orders. Although U. S. Producers are still evaluating macro market conditions to arrive at their appropriate capital budgets for 2026, we continue to see growth opportunities in the markets we operate. We expect our active horsepower in the Northeast and Central Regions to grow by more than 40,000 horsepower before the 2025 relative to Q2.

This is partially due to contracting 300 small horsepower units that will draw from idle capacity and increase small horsepower utilization to nearly 80% over the coming months. These contracts include a thirty six month initial term. This deployment coupled with Q4 new unit deliveries to the Permian will bring our projected year end active fleet to roughly 3,600,000 horsepower. Turning to SG and A, we now expect to realize the majority of the $5,000,000 of shared services annualized savings in 2025, SG ahead of the 2026 time line shared on our last call. These savings have and will continue to come from cost improvements seen through centralized IT efforts and other savings due to economies of scale.

For example, Q3 benefited from a onetime health care cost true up, reflecting a lower monthly per employee health care cost than previously estimated. We expect 2026 gs and A to grow modestly off of our new baseline, reflecting typical wage inflation and modest investments in new commercial and financial capabilities. Finally, we are pleased that both our bank syndicate and long term investors continue to recognize the quality of the compression market. In Q3, we refinanced our ABL and our 2027 senior notes, significantly reducing our weighted average borrowing costs and improved strategic flexibility. With that, I will turn the call over to Chris Paulson, our Chief Financial Officer, for a detailed financial update.

Chris Paulson, Vice President and CFO, USA Compression Partners: Thanks, Clint. In Q3, our sales team continued to build upon pricing improvements, up to an all time high averaging $21.46 per horsepower for the third quarter, a 1% increase in sequential quarters and a 4% increase compared to a year ago. Average active horsepower remained flattish compared to Q2 at $3,550,000 Our third quarter adjusted gross margins were higher at 69.3% in large part due to the realization of both onetime and ongoing cost savings tied to our centralized procurement processes, employee health care savings and onetime sales tax refund recognized at the completion of a prior year sales tax audit. While Q3 gross margins were partially elevated due to one time true up and cost savings, going forward we expect margins to stay consistent with our trailing twelve month rate. Regarding the consolidated financial results, our third quarter twenty twenty five net income was $34,500,000 operating income was $83,900,000 net cash provided by operating activities was $75,900,000 and cash interest expense net was $44,900,000 Our leverage ratio at the end of the third quarter was 3.9 times.

As you may recall, our leverage ratio is determined in accordance with our ABL definition, which remain consistent with our latest refinancing and is calculated as funded debt divided by the latest quarter annualized adjusted EBITDA. Turning to operational results. Our total fleet horsepower at the end of the quarter was approximately 3,900,000 horsepower, essentially flat versus the prior quarter. Our average utilization for the third quarter was 94%, consistent with the prior quarter. Third quarter twenty twenty five expansion capital expenditures were $37,300,000 and our maintenance capital expenditures were $9,000,000 Expansion capital spending in Q3 primarily consisted of new units, and we expect that to be the same in Q4.

Turning to 2025 guidance, we have increased and tightened our adjusted EBITDA range to $610,000,000 to $620,000,000 increasing the midpoint of the range by approximately $15,000,000 We have also increased our DCF range to $370,000,000 to $380,000,000 reduced our expansion capital range to $115,000,000 to $125,000,000 and maintain our maintenance capital between $38,000,000 and $42,000,000 Approximately $11,000,000 of expansion capital tied to late December deliveries is now expected to be realized in 2025 instead of January 2026 as stated in our Q2 call and therefore is factored into our 2025 capital range. As previously discussed, we continue to maintain our leverage ratio and expect it to marginally increase at the end of the year as we fund new growth projects that are back end loaded. Our target remains at or below four times debt to EBITDA. Finally, as Clint mentioned earlier, Q3 was characterized by two major refinancings. First, we extended and expanded our ABL from $1,600,000,000 to $1,750,000,000 reducing our drawn cost by approximately 25 basis points.

Second, we called our $750,000,000 $20.27 notes at par in favor of the 2,033 notes of the same quantum, reducing our interest rate 62.5 basis points. All in all, we are on track to realize over $10,000,000 annualized interest savings given these efforts and based on forecasted rate cuts, all while increasing overall liquidity and extending tenure. And with that, I will turn the call back to Clint for concluding remarks.

Clint Green, President and CEO, USA Compression Partners: Thanks, Chris. I want to thank our employees that have worked diligently towards our ERP implementation in early twenty twenty six. The collaboration across the organization has been significant and has brought regions and departments closer together. At the same time, we are realizing cost synergies from our new shared services model. The combination of both is improving our control, sophistication, data integrity and profitability.

Therefore, I am excited about the path forward.

Conference Operator: Your first question comes from Nate Pendleton with Texas Capital.

Nate Pendleton, Analyst, Texas Capital: Morning and congrats on the record quarter. In a sustained slowdown in oil directed activity, can you speak to your willingness to lean further into compression and dry gas plays in this environment based on the success you just highlighted in your prepared remarks? And also, would there be any investment in basin facilities required to support any significant increase in gas directed compression?

Clint Green, President and CEO, USA Compression Partners: Nate, thank you for that question. We’re already established in the dry gas markets. We’ve we we while we have a the majority of our our operations is in the Permian, we’re still very large in the Northeast up in the in in Oklahoma, down on the Gulf Coast. And we see with these demands coming online and these pipelines being built out of West Texas or out of the Permian, we see those plays as a place to as a growth where we expect to see drilling for gas instead of drilling for gas and associated gas and oil. And I missed the second part of your question there, Nate.

What was that?

Nate Pendleton, Analyst, Texas Capital: Just would there be any incremental investment needed in in basin facility to support any increase in assets deployed there?

Clint Green, President and CEO, USA Compression Partners: Well, we have active horsepower running in those basins, in the other dry gas basins. And we can move equipment from anywhere that may slow down to those basins or we can buy new equipment and install there for operating. I hope that answers your question.

Nate Pendleton, Analyst, Texas Capital: Yes, it does. Thank you. I was just trying to get your geographic diversification. It does sound like you’re already established there, so it would just be a matter of moving the horsepower in. Definitely That’s

Clint Green, President and CEO, USA Compression Partners: exactly right. Thank you.

Nate Pendleton, Analyst, Texas Capital: Then Clint, if I may, more. With the strong pricing trends that you guys noted during the quarter, can you speak to recent pricing dynamics and how spot prices are comparing to your fleet average here?

Chris Watson, Vice President and COO, USA Compression Partners: Yes. It’s Chris Wasson. I’ll take that one. Our market is definitely picked up since Q2. So our pricing trends from a dollar per horsepower basis is going to be consistent into the back half of 2025 into 2026.

We feel like our dollar per horsepower revenue is going to be consistent. So we’ll just see how everything works out, but that’s our feeling right now.

Chris Porter, Vice President, General Counsel and Secretary, USA Compression Partners: Great. Thanks a lot for taking my questions, and I’ll turn it back.

Conference Operator: There are no further questions at this time. I’ll now turn the conference back over to Clint Green for closing remarks.

Clint Green, President and CEO, USA Compression Partners: Yes. Thank you all for joining our call. We appreciate the interest in our company, and you all have a good day.

Conference Operator: This concludes today’s conference call. You may now disconnect.