Kodiak Gas Services, Inc. (KGS) Earnings

Management highlights

### Safety Prioritization - Kodiak maintains a safety-first organizational mindset, requiring all employees to complete a mandatory safe driving program ahead of summer driving season - Telematics technology was rolled out in 2025 to reduce driver distractions, with dedicated internal safety and training teams supporting employee capability building ### Core Compression Business Market Dynamics and Operational Updates - Industry fundamentals are very strong: natural gas demand is growing driven by LNG exports and power generation for AI data centers, leading to widespread market tightness - New large horsepower gas compression equipment lead times have extended to over 180 weeks (more than 3 years), but Kodiak has fully secured equipment deliveries for 2027 and 2028 and is actively securing units for 2029 - The company is on track to hit its target of 150,000 horsepower of annual growth, reaching a total compression fleet of at least 5.2 million horsepower by 2030 - Customers are increasingly signing 10-year long-term contracts to lock in equipment availability; Kodiak recently executed a 10-year extension with one top customer and is finalizing a second, plus closed an accretive 20,000 horsepower large horsepower compression purchase leaseback transaction with a Permian producer that generates immediate cash flow - Kodiak has strategically upgraded its fleet over the past two years, divesting non-core small horsepower units to increase average horsepower per unit from 943 (Q1 2025) to 977 (Q1 2026), while also lifting average revenue per horsepower; fleet utilization hit 98% in Q1 2026, an industry-leading metric - Margin improvements are driven by technology investments: real-time equipment monitoring and connected platforms reduce failures, lower parts spend, and improve technician efficiency, delivering consistent margin growth for seven consecutive quarters ### New Distributed Power Business (Kodiak Power Solutions) Strategy - DPS integration is progressing rapidly, with the business already moved onto Kodiak's ERP platform and commercial/operations teams realigned - The DPS acquisition brings existing experience with islanded primary power for data centers, including a 3-year operating contract with 99.9% reliability - Long-term growth opportunity is driven by massive AI-related data center development, with over 30 gigawatts of planned data centers in Texas over the next two years, and behind-the-meter distributed power is increasingly cost-competitive with grid power - Kodiak has already placed firm orders for 260 megawatts of new power equipment (61 megawatts for 2026 delivery, the remainder 2027-2029), and is in advanced discussions for an additional 1.3 gigawatts - Target growth is 300 to 500 megawatts per year through 2030, reaching a total 2 gigawatt power fleet by end-decade, with expected unlevered returns over 15% and EBITDA multiples around 5x, comparable to the compression business ### Financial Position - Q1 2026 total company revenue was $346 million, up 5% year-over-year; adjusted EBITDA hit a new record of $190 million, up 7% year-over-year; discretionary cash flow was $126.5 million, up 9% year-over-year - Kodiak issued $1 billion of 5.7% senior notes due 2031 in February 2026, using proceeds to redeem 2029 senior notes and pay down ABL; net debt was $2.7 billion at quarter-end, with a leverage ratio of 3.6x - The board declared a $0.49 per share dividend, well covered at 2.9x by Q1 discretionary cash flow - Resilient free cash flow from the core compression business will fund initial power growth, with ample existing liquidity and multiple financing options available

Guidance

- Compression Infrastructure: The low end of 2026 revenue guidance was increased due to strong recontracting progress and improved visibility into new unit growth. Adjusted gross margin guidance was raised to 68.5% to 70% from prior levels, reflecting operational gains, with conservative modeling for high oil price impacts on lube oil and fuel costs in the second half of 2026. Compression growth CapEx is guided to $245 million to $275 million, consistent with prior announcements, and the company remains on track to add ~170,000 horsepower in 2026. - Power Infrastructure: Full-year 2026 revenue is guided to $95 million to $125 million, with adjusted gross margin of 60% to 70%; the wide range reflects the newness of the acquisition and preserves commercial flexibility for long-term project timing. No material revenue from 2026 equipment deliveries is expected until early 2027. 2026 power growth CapEx is guided to $400 million to $500 million, with ~$90 million for 2026-delivered gen sets and balance of plant, and the remainder for 2027 and later deliveries. Target long-term annual growth is 300 to 500 megawatts per year from 2027 through 2030. - Other Services: The top end of the 2026 revenue guidance range was increased to include non-recurring power-related revenue. - Total Company: 2026 adjusted EBITDA guidance is now $820 million to $860 million, and discretionary cash flow guidance is $520 million to $570 million. Maintenance and other CapEx were each increased by $5 million due to the addition of the power fleet.

Segment performance

1. Compression Infrastructure (formerly Contract Services): Total Q1 2026 revenue increased 6% year-over-year and 2% sequentially. Revenue-generating horsepower increased by 35,000 sequentially, ending the quarter at 4.4 million total revenue-generating horsepower, with an average of 977 horsepower per revenue-generating unit. The segment realized a 3.7% year-over-year price increase to $23.31 per ending revenue-generating horsepower. Adjusted gross margin hit 70.6%, up 138 basis points sequentially and 286 basis points year-over-year, a new company record. This segment contributes the vast majority of total company revenue and adjusted EBITDA. 2. Power Infrastructure (new segment post-DPS acquisition): The DPS acquisition closed on April 1, 2026, so only three quarters of contribution will be reflected in full-year 2026 results. As of Q1 2026, the segment had 61 megawatts of equipment scheduled for delivery in 2026, with no material revenue expected from these new units until 2027. Full-year 2026 revenue guidance is set at $95 million to $125 million, with an adjusted gross margin range of 60% to 70%. 3. Other Services: Q1 2026 revenue rose 25% sequentially driven by increased station construction activity. Sequential adjusted gross margin increased to ~16%, lifted by a higher share of higher-margin activity. The full-year 2026 revenue guidance range was increased at the top end to account for non-recurring power-related revenue (fleet mobilization and logistics) from the DPS acquisition.

Risks & headwinds

- Industry-wide supply chain tightness has pushed large horsepower compression equipment lead times to over three years, requiring proactive long-term procurement of both engines and packaging shop capacity to avoid delivery gaps - High oil price volatility increases input costs for lube oil and fuel, creating uncertainty for full-year compression margins that required conservative guidance modeling - Power equipment procurement requires larger upfront progress payments, particularly for turbines, which impacts near-term cash flow timing - Scaling the new power business requires building out trained technical staff and integrating new operations, with near-term margin uncertainty from the short-term contract mix inherited from DPS - Power market growth depends on continued AI capex expansion by hyperscalers and regulatory developments for behind-the-meter power, with contract execution still in early stages - Leverage will temporarily drift above the company's 4x long-term target during the power investment cycle, though management expects deleveraging once power projects begin generating revenue

Analyst Q&A

• Q: How should investors think about contracting for the 2 gigawatt 2030 power target, and how does Kodiak secure equipment amid widespread supply chain tightness? /

  A: Only five weeks have passed since the DPS acquisition closed, so management is currently prioritized securing equipment supply before finalizing most contracts. There is strong inbound customer interest from both data center and microgrid segments, with quarterly contract updates planned going forward. Kodiak leverages its existing long-term vendor relationships from the compression business to secure supply, and is working to finalize new long-term supply framework agreements that will be shared once complete.

• Q: How does Kodiak plan to compete in the new distributed power market, and how is it securing compression capacity to meet demand amid multi-year lead times? /

  A: Kodiak brings the same differentiated customer service and total solutions approach it used to build share in compression to the power market, aligned with DPS's existing track record of 99.9% reliability for long-term data center power contracts. For compression, Kodiak has already fully locked in engines and packaging shop capacity for 2027 and 2028, and is actively securing capacity for 2029 to align with growing customer demand driven by LNG and power generation growth, staying ahead of industry supply constraints.

• Q: How much is balance of plant capex per megawatt for power projects, what is the expected customer mix, and can management confirm the 15% unlevered return target still holds? /

  A: Base generation equipment costs $1.1 to $1.2 million per megawatt, and balance of plant averages an additional $1.5 million per megawatt, varying from below 1x to over 2x of equipment cost based on project complexity. The majority of the current opportunity set is data center customers, mixed between general digital infrastructure and AI-specific loads. Management confirms returns will meet the 15% target, as project costs are fully modeled upfront to meet return thresholds before any contract is signed.

• Q: How are power equipment delivery timelines and upfront payment requirements structured, and how will Kodiak fund the large power capex program while protecting balance sheet strength? /

  A: The 2027-2030 300-500 megawatt annual growth target is near a straight line, with delivery schedules already advanced for most planned equipment. Turbines require larger upfront progress payments than compression equipment, which management is working to minimize via existing vendor relationships. Management will temporarily allow leverage to drift above the 4x long-term target during the build phase, but will protect the balance sheet, and expects rapid deleveraging once power contracts start generating revenue; the resilient compression business provides strong funding capacity, and Kodiak has multiple existing financing options available.