USA Compression Partners, LP Q4 FY2024 earnings call

• Safety is a top priority, with the team committed to ensuring safety of employees, contractors, and customers.
• The company delivered record revenues, adjusted gross margin, adjusted EBITDA, distributable cash flow, distributable cash flow coverage, average revenue generating horsepower, and average revenue per revenue generating horsepower for the quarter and full year.
• 94.6% average horsepower utilization for full year 2024, a record. In 2025, majority of growth capital spent on new unit deliveries and remainder on fleet enhancements.
• Undertook organizational changes, including shared service model with Energy Transfer, ERP implementation, and moved headquarters from Austin to Dallas, anticipating $5 million annualized savings by January 2026.
• 2025 to reestablish growth platform for new compression units, with new horsepower and capital spend back-end loaded in 2025, expected to boost cash flow in 2026.
• Bullish on crude oil and natural gas macro backdrop, with new horsepower primarily focusing on existing large upstream and midstream customers, and看好 Permian and natural gas growth.

In the fourth quarter of 2024, USA Compression achieved record revenues, with an adjusted gross margin over 68% for the quarter. The fourth quarter net income was $25.4 million, operating income was $74.5 million, net cash provided by operating activities was $130.2 million, and cash interest expense net was $46.4 million. For the full year 2024, net income was $99.6 million, adjusted EBITDA was $584.3 million, and distributable cash flow was $355.3 million. The average revenue generating horsepower was 3.56 million in the fourth quarter, with an average revenue per revenue generating horsepower of $20.85 for the quarter. The full-year average horsepower utilization was 94.6%, a record for the company. Revenue contribution was driven by pricing improvements and increased average active horsepower.

• 2025 adjusted EBITDA range: $590 million to $610 million.
• 2025 distributable cash flow range: $350 million to $370 million.
• 2025 expansion capital range: $120 million to $140 million, with new horsepower additions largely back-end loaded, expected to increase active horsepower by approximately 1.5% mainly in Permian.
• 2025 maintenance capital anticipated: $38 million to $42 million.
• Opportunities to acquire existing horsepower tied to immediate revenue generation will be considered on an individual basis, potentially uplifting guidance.

• Uncertainty regarding steel tariffs and their impact on compression and compression manufacturing, as well as broader industry implications.
• Potential fluctuations in crude oil and natural gas markets which could affect business performance.
• Regulatory uncertainties that may impact operations and growth plans.

Q: About CapEx in 2025, with growth CapEx down from 2024, how is growth in 2025 driven and what about beyond 2025?

A: Want to maintain leverage ratio down, discipline is key, and EBITDA coming online will help bring leverage down. For beyond 2025, already discussing new order book with focus on existing large upstream and midstream customers.

Q: On 2025 guidance, contextualizing with fourth quarter results, including net sales tax credit in Q4?

A: Q4 benefited from a net sales tax credit of approximately $3 million. 2025 guidance reflects price increases in Q1, modest CPI-U tied increases for remainder of year, and new horsepower delivered in Q4. Upside possible if horsepower delivery early, larger price increases, or less turnaround time than budgeted.

Q: On CapEx cadence, not reaching 2024 growth CapEx number, and adjacent business opportunities?

A: In 2025, better handle on cost and inflationary measures of contracted new contract units, intent not to raise capital ranges multiple times in 2025. Adjacent business opportunities refer to third-party service division servicing customer-owned equipment, expected to grow in 2025.

Q: On gross margin, pricing and steel tariffs impact?

A: Customers favoring longer renewals over month-to-month. Steel tariffs impact on compression and manufacturing is early to determine, as it's a new factor. Focus on new build compression payback periods within term and IRR considering leverage and capital structure.

Q: On ABL in second half of 2025 and debt structure preferences?

A: Evaluate ABL sizing according to long-term growth budget and leverage targets. Currently around 4 times leverage, plan to be lower over time. Evaluate $750 million 2027 notes in Q2, considering fixed vs variable components. Focus on growth capital management to maintain debt measures and refinancing potential. On CapEx for new build equipment, year-over-year price increases seen on engines, compressors, etc., but recent new build pricing in Q4 vs Q1 not moved significantly, and Caterpillar 3600 engine still preferred by customers.