HOUSTON, July 30, 2024 (GLOBE NEWSWIRE) -- Archrock, Inc. (NYSE:AROC) ("Archrock") today reported results for the second quarter 2024. Second Quarter 2024 and Recent Highlights Revenue for the second quarter of 2024 was $270.5 million compared to $247.5 million in the second quarter of 2023. Net income for the second quarter of 2024 was $34.4 million compared to $24.7 million in the second quarter of 2023. Adjusted EBITDA (a non-GAAP measure defined below) for the second quarter of 2024 was $129.7 million compared to $112.8 million in the second quarter of 2023. Leverage ratio at the end of the second quarter of 2024 was 3.2x compared to 4.2x at the end of the second quarter of 2023. Declared a quarterly dividend of $0.165 per share of common stock for the second quarter of 2024, 6% higher compared to the second quarter of 2023, supported by dividend coverage of 2.6x. Announced acquisition of Total Operations and Production Services, LLC ("TOPS"). Reaffirming Archrock 2024 Adjusted EBITDA guidance range of $510 million to $540 million, and 2024 total capital expenditures guidance range of $290 million to $300 million, excluding the impact of the acquisition of TOPS (the "Transaction"). Management Commentary and Outlook "Archrock's second quarter performance reflects the earnings power from our investment in high-quality assets, exceptional customer service, efficient execution and implementation of enabling technology," said Brad Childers, Archrock's President and Chief Executive Officer. "We grew our operating horsepower and our fleet remained fully utilized, with utilization exiting the quarter at a rate of 95 percent. In addition, we again achieved record-setting average revenue per horsepower and both of our segments delivered outstanding margin performance. "Market conditions for compression remain highly constructive, predominantly in oil plays with associated gas production like the Permian Basin. This strength and durability are being driven by the abundance of affordable U.S. natural gas that will support growth in its demand, use and production as well as the continued capital discipline being employed across the energy sector. We expect to see sustained compression booking demand well into the future as our customers plan for the call on natural gas production to support LNG export capacity growth and incremental electric generation demand from AI and data centers. "In addition to our strong operational performance and organic opportunity set, we are excited about the pending acquisition of TOPS. In this transaction, we are acquiring highly utilized and contracted horsepower that is expected to be immediately accretive to earnings and cash available for dividend, at an attractive price. We are expanding our business with existing and new customers, further enhancing our position in the Permian Basin and adding a talented management team and personnel with leading expertise in electric motor drive compression. The transaction also supports our ability to achieve our stated financial objectives, including growing our shareholder returns and maintaining a leverage ratio of between 3.0 to 3.5 times. We continue to expect the transaction will close in the second half of 2024," concluded Childers. Second Quarter 2024 Financial Results Archrock's second quarter 2024 net income of $34.4 million included a non-cash long-lived and other asset impairment of $4.4 million, as well as transaction-related expenses totaling $1.8 million. Archrock's second quarter 2023 net income of $24.7 million included a non-cash long-lived and other asset impairment of $2.9 million and a non-cash unrealized change in the fair value of our investment in an unconsolidated affiliate of $1.7 million. Adjusted EBITDA for the second quarter of 2024 and 2023 included $576,000 and $1.2 million, respectively, in net gains related to the sale of compression and other assets. Contract Operations For the second quarter of 2024, contract operations segment revenue totaled $225.5 million, an increase of 12% compared to $201.1 million in the second quarter of 2023. Adjusted gross margin was $146.2 million for the second quarter of 2024, up 17% from $125.1 million in the second quarter of 2023. Adjusted gross margin percentage was 65% for the second quarter of 2024, compared to 62% in the second quarter of 2023. At the end of the second quarter of 2024, total operating horsepower was 3.6 million and utilization was 95%, both consistent with the end of the second quarter of 2023. Aftermarket Services For the second quarter of 2024, aftermarket services segment revenue totaled $45.1 million, compared to $46.4 million in the second quarter of 2023. Adjusted gross margin of $9.9 million for the second quarter of 2024 compared to $11.1 million in the second quarter of 2023. Adjusted gross margin percentage was 22% for the second quarter of 2024, compared to 24% for the second quarter of 2023. Balance Sheet Long-term debt was $1.6 billion at June 30, 2024 and our available liquidity totaled $435 million. Our leverage ratio was 3.2x, compared to 4.2x as of June 30, 2023. Shareholder Returns Quarterly Dividend Our Board of Directors recently declared a quarterly dividend of $0.165 per share of common stock, or $0.66 per share on an annualized basis. Dividend coverage in the second quarter of 2024 was 2.6x. The second quarter 2024 dividend will be paid on August 13, 2024 to stockholders of record at the close of business on August 6, 2024. Share Repurchase Program The Board of Directors approved an extension of Archrock's share repurchase program upon expiry of the previous authorization on April 27, 2024, for an additional 24-month period. In connection with the extension, the Board of Directors replenished the amount of shares authorized for repurchase under the share repurchase program, resulting in available capacity of $50 million. During the quarter ended June 30, 2024, Archrock did not repurchase any common stock. Updated 2024 Annual Guidance (Excluding Impact of TOPS Transaction) Archrock is updating its standalone 2024 net income guidance range to between $139 million and $167 million, which includes transaction-related expenses related to the Transaction totaling between $1.8 million and $4 million; this range is an estimate of costs incurred to-date but excludes additional costs to be incurred after close. Archrock is updating its standalone 2024 selling, general, and administrative expense guidance range to between $125 million and $129 million, primarily to reflect an increase in performance-based short-term and long-term incentive compensation expense. Archrock continues to expect standalone 2024 Adjusted EBITDA between $510 million and $540 million. Archrock continues to expect $290 million to $300 million in standalone total capital expenditures during 2024, primarily consisting of approximately $190 million for growth capital expenditures and approximately $80 million to $85 million for maintenance capital expenditures. Summary Metrics (in thousands, except percentages, per share amounts and ratios)                           Three Months Ended     June 30,    March 31,      June 30,         2024      2024        2023 Net income   $ 34,425     $ 40,532     $ 24,653   Adjusted EBITDA   $ 129,712     $ 131,024     $ 112,775                         Contract operations revenue   $ 225,468     $ 223,051     $ 201,120   Contract operations adjusted gross margin   $ 146,190     $ 145,308     $ 125,087   Contract operations adjusted gross margin percentage     65 %      65 %       62 %                        Aftermarket services revenue   $ 45,058     $ 45,437     $ 46,423   Aftermarket services adjusted gross margin   $ 9,900     $ 10,437     $ 11,080   Aftermarket services adjusted gross margin percentage     22 %      23 %       24 %                        Selling, general, and administrative   $ 31,163     $ 31,665     $ 28,649                         Net cash provided by operating activities   $ 70,651     $ 137,702     $ 30,542   Cash available for dividend   $ 71,593     $ 82,026     $ 52,227   Cash available for dividend coverage     2.6 x      3.2 x     2.1 x                        Adjusted free cash flow   $ (16,914 )   $ 51,779     $ (62,738 ) Adjusted free cash flow after dividend   $ (42,733 )   $ 25,779     $ (86,242 )                       Total available horsepower (at period end)     3,806       3,780       3,770   Total operating horsepower (at period end)     3,601       3,593       3,578   Horsepower utilization spot (at period end)     95 %      95 %       95                             Conference Call Details Archrock will host a conference call on Wednesday, July 31, 2024, to discuss second quarter 2024 financial results. The call will begin at 10:00 a.m. Eastern Time. To listen to the call via a live webcast, please visit Archrock's website at www.archrock.com. The call will also be available by dialing 1 (800) 715-9871 in the United States or 1 (646) 307-1963 for international calls. The access code is 4749623. A replay of the webcast will be available on Archrock's website for 90 days following the event. ***** Adjusted EBITDA, a non-GAAP measure, is defined as net income (loss) excluding interest expense, income taxes, depreciation and amortization, long-lived and other asset impairment, unrealized change in fair value of investment in unconsolidated affiliate, restructuring charges, transaction-related costs, non-cash stock-based compensation expense, amortization of capitalized implementation costs and other items. A reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure, and a reconciliation of our full year 2024 Adjusted EBITDA guidance to net income appear below. Adjusted gross margin, a non–GAAP measure, is defined as revenue less cost of sales, exclusive of depreciation and amortization. Adjusted gross margin percentage, a non-GAAP measure, is defined as adjusted gross margin divided by revenue. A reconciliation of adjusted gross margin to net income, the most directly comparable GAAP measure, and a reconciliation of adjusted gross margin percentage to gross margin, appear below. Cash available for dividend, a non-GAAP measure, is defined as net income (loss) excluding interest expense, income taxes, depreciation and amortization, long-lived and other asset impairment, unrealized change in fair value of investment in unconsolidated affiliate, restructuring charges, non-cash stock-based compensation expense, transaction-related expense, amortization of capitalized implementation costs and other items, less maintenance capital expenditures, other capital expenditures, cash taxes and cash interest expense. Reconciliations of cash available for dividend to net income and net cash provided by operating activities, the most directly comparable GAAP measures, and a reconciliation of our updated full year 2024 cash available for dividend guidance to net income appear below. Adjusted free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities plus net cash provided by (used in) investing activities. A reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable GAAP measure, appears below. Adjusted free cash flow after dividend, a non-GAAP measure, is defined as net cash provided by operating activities plus net cash provided by (used in) investing activities less dividends paid to stockholders. A reconciliation of adjusted free cash flow after dividend to net cash provided by operating activities, the most directly comparable GAAP measure, appears below. About Archrock Archrock is an energy infrastructure company with a primary focus on midstream natural gas compression and a commitment to helping its customers produce, compress and transport natural gas in a safe and environmentally responsible way. Headquartered in Houston, Texas, Archrock is a premier provider of natural gas compression services to customers in the energy industry throughout the U.S. and a leading supplier of aftermarket services to customers that own compression equipment. For more information on how Archrock embodies its purpose, WE POWER A CLEANER AMERICA, visit www.archrock.com. Forward-Looking Statements All statements in this release (and oral statements made regarding the subjects of this release) other than historical facts are forward–looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These forward–looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and factors that could cause actual results to differ materially from such statements, many of which are outside the control of Archrock, Inc. Forward–looking information includes, but is not limited to statements regarding: guidance or estimates related to Archrock's results of operations or of financial condition; fundamentals of Archrock's industry, including the attractiveness of returns and valuation, stability of cash flows, demand dynamics and overall outlook, and Archrock's ability to realize the benefits thereof; Archrock's expectations regarding future economic, geopolitical and market conditions and trends; Archrock's operational and financial strategies, including planned growth, coverage and leverage reduction strategies, Archrock's ability to successfully effect those strategies, and the expected results therefrom; Archrock's financial and operational outlook; demand and growth opportunities for Archrock's services; structural and process improvement initiatives, the expected timing thereof, Archrock's ability to successfully effect those initiatives and the expected results therefrom; the operational and financial synergies provided by Archrock's size; statements regarding Archrock's dividend policy; the anticipated completion of the Transaction and the timing thereof; the expected benefits of the Transaction, including its expected accretion and the expected impact on Archrock's leverage ratio; and plans and objectives of management for future operations. While Archrock believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors that could impact the future performance or results of its business. The factors that could cause results to differ materially from those indicated by such forward-looking statements include, but are not limited to: inability to consummate the Transaction; inability to achieve the expected benefits of the Transaction and difficulties in integrating TOPS; risks related to acquisitions, including the Transaction, that can reduce our ability to make distributions to our common stockholders; risks related to pandemics and other public health crises; an increase in inflation; ongoing international conflicts and tensions; risks related to our operations; competitive pressures; inability to make acquisitions on economically acceptable terms; uncertainty to pay dividends in the future; risks related to a substantial amount of debt and our debt agreements; inability to access the capital and credit markets or borrow on affordable terms to obtain additional capital; inability to fund purchases of additional compression equipment; vulnerability to interest rate increases; uncertainty relating to the phasing out of London Interbank Offered Rate; erosion of the financial condition of our customers; risks related to the loss of our most significant customers; uncertainty of the renewals for our contract operations service agreements; risks related to losing management or operational personnel; dependence on particular suppliers and vulnerability to product shortages and price increases; information technology and cybersecurity risks; tax-related risks; legal and regulatory risks, including climate-related and environmental, social and governance risks. These forward-looking statements are also affected by the risk factors, forward-looking statements and challenges and uncertainties described in Archrock's Annual Report on Form 10-K for the year ended December 31, 2023, Archrock's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 and those set forth from time to time in Archrock's filings with the Securities and Exchange Commission, which are available at www.archrock.com. Except as required by law, Archrock expressly disclaims any intention or obligation to revise or update any forward-looking statements whether as a result of new information, future events or otherwise. SOURCE: Archrock, Inc. For information, contact: Archrock, Inc. INVESTORSMegan RepineVP of Investor MEDIAAndrew Siegel / Jed RepkoJoele Frank212-355-4449 Archrock, Inc.Unaudited Condensed Consolidated Statements of Operations(in thousands, except per share amounts)                         Three Months Ended     June 30,    March 31,    June 30,         2024      2024      2023 Revenue:                   Contract operations   $ 225,468     $ 223,051     $ 201,120   Aftermarket services     45,058       45,437       46,423   Total revenue     270,526       268,488       247,543                       Cost of sales, exclusive of depreciation and amortization                      Contract operations     79,278       77,743       76,033   Aftermarket services     35,158       35,000       35,343   Total cost of sales, exclusive of depreciation and amortization     114,436       112,743       111,376                       Selling, general and administrative     31,163       31,665       28,649   Depreciation and amortization     43,853       42,835       41,210   Long-lived and other asset impairment     4,401       2,568       2,892   Restructuring charges     —       —       (85 ) Interest expense     27,859       27,334       28,630   Transaction-related costs     1,782       —       —   Gain on sale of assets, net     (576 )     (2,381 )     (1,176 ) Other income, net     128       139       1,463   Income before income taxes     47,480