• Revenue Increase: 2% sequentially and 9% year-over-year.
• Average Revenue per Horsepower: $20.85 for the fourth quarter.
• Adjusted Gross Margin: Over 68% for the fourth quarter.
• Net Income: $25.4 million for the fourth quarter.
• Operating Income: $74.5 million for the fourth quarter.
• Net Cash Provided by Operating Activities: $130.2 million for the fourth quarter.
• Cash Interest Expense: $46.4 million for the fourth quarter.
• Leverage Ratio: Declined to a record low of 4.02 times.
• Total Fleet Horsepower: Approximately 3.9 million horsepower at the end of the quarter.
• Average Utilization: 94.5% for the fourth quarter.
• Expansion Capital Expenditures: $37.6 million for the fourth quarter.
• Maintenance Capital Expenditures: $8.2 million for the fourth quarter.
• Full Year Net Income: $99.6 million for 2024.
• Adjusted EBITDA: $584.3 million for 2024.
• Distributable Cash Flow: $355.3 million for 2024.
• 2025 Adjusted EBITDA Guidance: $590 million to $610 million.
• 2025 Distributable Cash Flow Guidance: $350 million to $370 million.
• 2025 Expansion Capital Guidance: $120 million to $140 million.
• 2025 Maintenance Capital Guidance: $38 million to $42 million.

• Warning! GuruFocus has detected 10 Warning Signs with USAC.

Release Date: February 11, 2025

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

Positive Points

• USA Compression Partners LP (NYSE:USAC) reported record revenues, adjusted gross margin, adjusted EBITDA, and distributable cash flow for the fourth quarter and full year 2024.
• The company achieved a record average horsepower utilization of 94.6% for the full year, indicating efficient use of assets.
• USAC is implementing organizational changes and adopting a shared service model with Energy Transfer, expected to yield significant cost savings, including a minimum of $5 million in annualized savings by 2026.
• The company is strategically focusing on converting idle units to active status, contributing to increased revenue-generating horsepower.
• USAC remains optimistic about the crude oil and natural gas market, particularly in the Permian region, which supports their growth plans and business strategy.

Negative Points

• The company's growth capital expenditure for 2025 is expected to be back-loaded, potentially delaying cash flow benefits until 2026.
• USAC's leverage ratio, while improved, remains a focus, with management aiming to maintain discipline to avoid significant increases.
• The company faces challenges related to electrification of oil field compression, as infrastructure in key areas like the Permian is currently inadequate.
• Steel tariffs and potential oil tariffs present uncertainties that could impact costs and operations.
• USAC has been borrowing to fund distributions, raising concerns about long-term financial sustainability and debt management.

Q & A Highlights

Q: Clint, with the growth CapEx for 2025 being lower than 2024, what is driving this decision despite a generally bullish outlook? A: Clint Green, President and CEO, explained that the decision is driven by a desire to maintain leverage ratios and discipline in spending. The company expects leverage to decrease as EBITDA increases, balancing growth with financial stability.

Q: With distribution coverage improving, how do you view potential distribution growth in the future? A: Christopher M. Paulsen, CFO, stated that while they aim to grow distribution coverage and the underlying distribution price, they are focused on determining the right coverage level to withstand market cycles, considering their capital and debt structure.

Q: Can you contextualize the 2025 guidance in relation to the fourth-quarter results? A: Chris Paulsen noted that Q4 benefited from a net sales tax credit and that the company is optimistic about maintaining margin and utilization trends into 2025. The guidance reflects price increases and new horsepower deliveries expected in Q4.

Q: Could you elaborate on the adjacent business opportunities mentioned? A: Clint Green highlighted the third-party service division, which focuses on servicing customer-owned equipment. This business is expected to grow and play a larger role in the company's operations.

Q: How are you addressing the ABL and debt structure in the second half of the year? A: Chris Paulsen mentioned that they are evaluating the sizing of the ABL to align with long-term growth and leverage targets. They plan to assess their $750 million 2027 notes, considering market conditions and potential rate cuts.

Q: Have prices for new build equipment increased significantly over the last few years? A: Clint Green confirmed that there have been significant price increases for engines, compressors, and fabrication, with Caterpillar frequently raising prices. However, the market has supported these increases through contract rates.

Q: Is there potential for compression units to be used in other applications, such as electric power? A: Clint Green explained that compression units are primarily designed for gas compression. However, their dual drive technology could theoretically be used to distribute electricity, though this market is not currently a focus.

Q: What are the trends in gross margin and pricing for your services? A: Chris Paulsen noted that customers are favoring longer contracts, which could mitigate future pricing pressures. Steel tariffs are a new factor being considered, but it's too early to determine their impact.

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