• Adjusted EPS Growth: Increased by 69% compared to 2023.
• Adjusted EBITDA Growth: Increased by more than 30% compared to 2023.
• Contract Compression Operating Fleet: Increased by 716,000 horsepower.
• Equipment Utilization: Maintained at an all-time high of 96%.
• Capital Returned to Shareholders: $124 million through dividends and share buybacks.
• Dividend Coverage: 3.1 times for the full year 2024.
• Leverage Ratio: Reduced to 3.3 times at year-end.
• Net Income (Q4 2024): $60 million.
• Adjusted Net Income (Q4 2024): $62 million or $0.35 per share.
• Adjusted EBITDA (Q4 2024): $184 million.
• Contract Operations Revenue (Q4 2024): $286 million, up 17% from Q3.
• Adjusted Gross Margin (Q4 2024): Record 70% for contract operations.
• AMS Revenue (Q4 2024): $40 million, reflecting seasonal softness.
• Total Debt (Year-End 2024): $2.2 billion.
• Available Liquidity (Year-End 2024): Nearly $700 million.
• Dividend Increase: 15% year-over-year increase in quarterly dividends.
• 2025 Adjusted EBITDA Guidance: $750 million to $790 million.
• 2025 Contract Operations Revenue Growth: Expected 24% increase at midpoint.
• 2025 Capital Expenditures: $470 million to $535 million.

• Warning! GuruFocus has detected 6 Warning Signs with AROC.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Archrock Inc (NYSE:AROC) reported record adjusted EPS and adjusted EBITDA for 2024, with a 69% increase in adjusted EPS and over 30% growth in adjusted EBITDA compared to 2023.
• The company achieved an all-time high equipment utilization rate of 96% by the end of 2024, reflecting strong demand and operational efficiency.
• Archrock Inc (NYSE:AROC) successfully completed a transformative acquisition of TOPS, enhancing its leadership in electric compression and contributing to its financial performance.
• The company returned $124 million in capital to shareholders through dividends and share buybacks, demonstrating strong financial health and commitment to shareholder returns.
• Archrock Inc (NYSE:AROC) announced a 15% year-over-year increase in quarterly dividends, reflecting confidence in its financial outlook and sector-leading financial flexibility.

Negative Points

• The company experienced an $8 million sequential increase in SG&A expenses, largely due to higher long-term incentive compensation driven by stock price increases.
• Despite strong performance, the aftermarket services segment faced seasonal softness in the fourth quarter, leading to a decline in revenue compared to the third quarter.
• Archrock Inc (NYSE:AROC) anticipates elevated maintenance CapEx in 2025 due to the timing of fleet editions and inflation, which could impact cash flow.
• The company faces potential risks from tariffs on new equipment, which could affect supply chain costs and operational efficiency.
• There is uncertainty in forecasting the aftermarket services segment due to its notoriously difficult nature, which could impact financial projections.

Q & A Highlights

Q: Brad, last quarter, you mentioned the sustainability and potential expansion of margins. With pricing still rising, where do you see margins going? A: As we approach 100% utilization, the curve will flatten. We're proud of our gains, leveraging pricing and managing costs through technology. Our focus now is on growing a profitable business by investing in high-return assets and long-term contracts to support infrastructure build-out.

Q: Can you provide stats on how much total horsepower you will add in 2025 and the mix between traditional large horsepower and gas lift opportunities? A: We expect to take delivery of over 200,000 horsepower in 2025. About 80% of the budget will go to large horsepower midstream gas drive engines, and 20% to 25% will go toward electric motor drive, primarily for gas lift. This capital budget is designed to meet customer demand.

Q: Could you provide more detail on the assumptions for the high and low ends of the 2025 guidance range? A: The guidance is influenced by our success in implementing price increases and managing costs in a growing market. For contract operations, it's about getting all the horsepower started throughout the year. AMS is harder to forecast, but we're pleased with current activity and profitability levels.

Q: Are you seeing demand opportunities outside of the Permian, given the growing demand drivers like LNG and data centers? A: The Permian consumes 60% to 70% of our new build capital, but we see growth opportunities in other areas like the Hainesville, Bakken, and Northeast. These are more incremental, but we maintain stability and profitability in areas not attracting new capital.

Q: How is the team weighing month-to-month mix versus opportunities for longer-term deals given elevated customer demand? A: We maintain record utilization and good pricing, with revenue per horsepower up 15% year-over-year. We extend contract terms for long-term midstream applications, maximizing opportunities in a robust market where our fleet and services are highly valuable.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.