Archrock, Inc. Q4 FY2024 earnings call

• 2024 was an excellent year with records in most operational and financial metrics, including record adjusted EPS and adjusted EBITDA. Adjusted EPS increased by 69% and adjusted EBITDA by over 30% compared to 2023. • Contract operating fleet increased by 716,000 horsepower (excluding non-strategic asset sales). Equipment utilization ended at 96%. • Delivered $124 million in capital to shareholders through dividends and share buybacks, with 2024 dividend coverage of 3.1 times. Year-end leverage ratio was 3.3 times. • 2025 business objectives: Capturing market opportunities, maximizing service reliability through innovation and technology adoption, and helping reduce carbon emissions with electric motor drive fleet expansion and methane emissions solutions. • In 2025, focused on robust market opportunities, leveraging innovation and technology for service reliability, and reducing carbon emissions.

Contract operations: In Q4 2024, revenue was $286 million, up 17% from Q3. Adjusted gross margin dollars grew by $35 million, with a record adjusted gross margin percentage of 70%. Full-year 2024 adjusted gross margin dollars were $657 million, up $155 million from 2023, translating to a 500 basis point increase in gross margin percentage. Average operating horsepower in Q4 was 4.2 million horsepower, up from previous quarters due to TOPS acquisition and organic growth. Aftermarket services: Q4 2024 revenue was $40 million, down due to seasonal softness. Full-year 2024 activity stayed strong with profitability substantially higher than historical levels, focusing on higher quality and higher marginal work.

• 2025 adjusted EBITDA guidance range: $750 million to $790 million, midpoint represents a nearly 30% increase from 2024. • Contract operations: Expected full-year revenue increase of 24% at midpoint, adjusted gross margin percentage range 68% - 71%. • Aftermarket services: Forecast full-year revenue $190 million to $210 million, adjusted gross margin percentage range 22% - 24%. • 2025 capital expenditures: Total expected $470 million to $535 million, with growth CapEx $330 million to $370 million to support new build horsepower and repackage CapEx, and other CapEx $35 million to $50 million primarily for new vehicles.

• Risk of lead times for new equipment pushing out, though currently in normalized range. • Uncertainty regarding tariffs on new equipment, as steel tariffs could potentially impact the business similar to supply chain challenges in 2020 - 2021, though not currently seen as material.

Q: Last quarter asked about margin sustainability and where pricing can go, A: Curve less steep, focus on growing profitable business by investing in high-return assets and long-term contracts.

Q: Growth CapEx stats and mix between traditional and gas lift, A: Expect to take delivery of over 200,000 horsepower in 2025, ~80% to large horsepower midstream gas drive engines, ~20% - 25% to electric motor drive on gas lift.

Q: 2025 guidance assumptions, A: Influenced by pricing, gross margin, and ability to start horsepower; AMS hard to forecast.

Q: Demand opportunities outside Permian, A: Permian gets 60% - 70% of new build capital, but other plays like Haynesville, Bakken, Northeast have incremental growth.

Q: Weighing month-to-month mix vs longer term deals, A: Can maintain record utilization, drive good pricing, and extend contract terms for long-term applications.

Q: Dry gas basin activity implications, A: ~30% of CapEx in other plays, industry CapEx mostly in Permian, but encouraged by dry gas pricing.

Q: Pricing difference between traditional gas and electric, A: No difference in pricing power, both competitive.

Q: Longer contract periods, A: Contract durations vary, seeking longer terms for new build deployment, with long-term relationships with large customers.

Q: Aftermarket revenue growth confidence, A: Customer activity high, tight utilization indicates need for services.

Q: Maintenance and other CapEx, A: Elevated maintenance CapEx due to more units, larger units, and TOPS addition; other CapEx mostly for trucks.

Q: New equipment lead times and tariffs, A: Lead times in normalized range; tariffs uncertain, but supply base mostly in US.

Q: CapEx shape and share repurchases, A: CapEx likely rateable, first quarter largest; share repurchases a tool, discussed quarterly by board.

Q: Slowdown in oil production impact, A: Slowdown in business growth, but business leveraged to production which doesn't typically decline.