USA Compression Partners, LP Q1 FY2025 earnings call

Operational Front

• Delivered strong revenues, adjusted gross margin, and average horsepower utilization, achieving a record average revenue per horsepower per month.
• Ordered approximately 40,000 new horsepower in Q1, with the majority to be delivered by year-end; evaluating remaining new horsepower for year-end delivery.
• Actively responding to 2026 proposals and anticipating ratable quarterly increases in new horsepower for 2026.
• Completed the idle to active initiative; large horsepower remains close to fully utilized.

Market and Commodities

• Commodity prices softened due to tariff-driven market uncertainty, but key upstream companies in Permian and Northeast reaffirmed full-year capital and production targets.
• Gas demand from data centers (Amazon, Microsoft, NVIDIA) remains strong; USA holds the largest contract compression fleet in the Northeast (~900,000 horsepower).

Capital and Tariffs

• No tariff impact to 2025 new horsepower cost as costs were locked in at order placement; monitoring tariffs with minimal impact on parts/materials business once current inventories are worked through.
• ABL refinancing expected in the near-term.

Personnel and Shared Services

• Chris Wauson promoted to Chief Operating Officer.
• IT and HR functions fully transitioned in Q1; on track for Q1 2026 ERP implementation for improved daily business management.

In the first quarter of 2025, USA Compression achieved strong financial performance. Sales saw an average revenue per horsepower of $21.06, a 1% sequential increase and 6% year-over-year growth. Adjusted gross margin was nearly 67%. The total fleet horsepower was approximately 3.9 million horsepower, essentially unchanged from the prior quarter. Revenue generating horsepower was flat sequentially but up 2% from the previous year. Average utilization for the first quarter was 94.4%, in line with the prior quarter's 94.5%.

• Adjusted EBITDA range: $590 million to $610 million.
• Distributable cash flow range: $350 million to $370 million.
• Expansion capital range: $120 million to $140 million, back-end loaded with most delivery expected in Q4.
• Maintenance capital: $38 million to $42 million.
• Leverage ratio: Target at or below 4 times debt to EBITDA, expected to be maintained with a marginal increase later in the year for new growth projects, which are anticipated to have returns exceeding cost of capital and pay back within the contract term.

• Tariff-driven market uncertainty could impact parts and materials business once current inventories are worked through.
• Macro environment uncertainty may affect growth outlook and commercial discussions for 2026.

Q: Just looking at the ’25 guidance range here. Is it fair to say you’re probably trending toward the upper half of that range today?

A: Yes, we set forth the range of $590 million to $610 million and are maintaining that range. The Q1 annualized number puts us right in the middle of that range, and horsepower is largely back-end loaded with most coming in Q4 with minimal impact, so guidance remains in the $590 million to $610 million range.

Q: How are your conversations progressing into ’26 particularly given the current macro environment?

A: We ordered 40,000 horsepower in Q1, expect additional orders in Q2, and are starting RFPs for 2026. Interest exists, the market is in better shape than the last downturn, with consolidation bringing stronger balance sheets and production growth in larger companies, and companies reaffirming growth targets though it's too early to tell how 2026 will play out fully.

Q: On your last call, you said you were looking to grow operating horsepower by about 1.5%. The 40,000 horsepower of new additions seems lower. Is that a function of remaining units to activate or pullback in customer demand?

A: The 40,000 is below our full-year forecast for new compression. The remainder is expected to be satisfied through year-end, hopefully in Q2, and we're well on our way towards that.

Q: How is the high-yield market affecting growth outlook on ’26?

A: The high-yield market has settled but pricing is higher. We can be patient as there's no need to rush, and we have strong commitments from banks for ABL refinancing planned for the second half, which we hope will result in lower financing costs.

Q: In discussions with customers, are you seeing more opt for term? How are pricing discussions?

A: We haven't seen significant differences in contract duration/term. We aim to re-term as much as possible, which is consistent with historical trends, and there have been no changes in discussion at this point.

Q: Impact of tariffs on lead times?

A: Lead times remain around the same, with cat at about 48 weeks, [walk-shaw] at about 25, aerial at 24 to 26, and packagers running between 30 and 40 weeks. Most of our stuff is locked in for end-of-year delivery, and we'll continue to get orders in place for 2026 deliveries.

Q: Modest asset sales or retirements in quarter, trending for rest of year?

A: We continue to look for ways to optimize our portfolio. Those were modest sales or asset swaps, and we'll continue to find ways to improve the overall efficiency of our horsepower.