Kodiak Gas Services, Inc. Q4 FY2025 earnings call

• Safety: Goal is zero work-related injuries, made strides in 2025. - Fleet: Ended 2025 with 100% of operations in US and largest average horsepower fleet, divested underutilized non-strategic units. - Technology: Implemented new ERP system, invested in AI and machine learning, deployed custom large language model, technology roadmap includes wearable devices and autonomous solutions. - Balance sheet: Termed out large portion of ABL, reduced reliance on secured bank debt, achieved leverage target of three and a half times. - Dividends and buybacks: Increased dividend 20% year over year, bought back over $100 million in common stock, returned over $260 million to shareholders. - Acquisition: Recently announced acquisition of Distributed Power Solutions, received inbound interest in new distributed power offerings.

Contract services: Ended 2025 with 4.35 million revenue generating horsepower, average horsepower per revenue generating unit was 970, fleet utilization to 98%. Fourth quarter contract services revenues and adjusted gross margin grew year-over-year, adjusted gross margin percentage increased 247 basis points year over year to 69.2%. Other services: Fourth quarter reflected a sequential pickup in activity with positive uptick in shop services and station construction revenues, generates free cash flow with minimal capital investment.

Overall revenue expected to range between $1.37 and $1.43 billion. Adjusted gross margin percentage within contract services segments range between 67.5% and 69.5%. 2026 adjusted EBITDA guidance range is around $750 to $780 million. Maintenance capex to be in range of $75 to $85 million. Growth capital expenditures landing between $235 and $265 million. Other capital expenditures expected to range between 40 and 50 million. Expect to grow dividend annually and opportunistically repurchase stock.

Various risks, uncertainties, and contingencies could cause actual results to differ from forward-looking statements. Supply chain issues with extended lead times for new large horsepower compression equipment. Limited access to grid power causing increased demand for gas driven engines in certain applications which may impact business in unforeseen ways.

Q: Jim Rolison with Raymond James asked about lead times, how customers are thinking and planning.

A: Mickey McKee said been working to secure supply chain, customers understand tightness and engage in conversations.

Q: John McKay with Goldman Sachs asked about tight market and gross margins.

A: John Griggs said fourth quarter was clean, business predictable but had conservatism in guide.

Q: Doug Irwin with Citi asked about lead times and power.

A: Mickey McKee said taking more risk in spec ordering, full intention to grow power business.

Q: Gabby Simi with William Blair asked about approaching customers and LNG.

A: Mickey McKee said in discussions with customers for renewals and growth in LNG.

Q: Eli Johnson with JPMorgan Chase asked about contract compression visibility and pricing.

A: Mickey McKee said high visibility in compression business, pricing constructive.

Q: Nate Pendleton with Texas Capital Bank asked about AI and DPS acquisition.

A: Mickey McKee said AI improves financials, inbound interest in DPS deal.

Q: Selman Acklow with Stifel asked about 2027 contracts.

A: Mickey McKee said didn't have exact number but 25-30% of contracts recontract annually