HOUSTON, Nov. 11, 2024 (GLOBE NEWSWIRE) -- Archrock, Inc. (NYSE: AROC) ("Archrock”) today reported results for the third quarter 2024.
Third Quarter 2024 Highlights
- Revenue for the third quarter of 2024 was $292.2 million compared to $253.4 million in the third quarter of 2023.
- Net income for the third quarter of 2024 was $37.5 million and earnings per share ("EPS”) was $0.22, compared to $30.9 million and $0.20, respectively, in the third quarter of 2023.
- Adjusted net income (a non-GAAP measure defined below) for the third quarter of 2024 was $47.3 million and adjusted EPS (a non-GAAP measure defined below) was $0.28, compared to $30.9 million and $0.20, respectively, in the third quarter of 2023.
- Adjusted EBITDA (a non-GAAP measure defined below) for the third quarter of 2024 was $150.9 million compared to $120.2 million in the third quarter of 2023.
- Declared a quarterly dividend of $0.175 per share of common stock for the third quarter of 2024, 6% higher compared to the second quarter of 2024 and 13% higher compared to the third quarter of 2023, supported by dividend coverage of 3.0x.
- Closed acquisition of Total Operations and Production Services, LLC ("TOPS”).
- Raised full-year 2024 adjusted EBITDA guidance to a range of $575 million to $585 million.
"Archrock drove tremendous performance during the third quarter, marked by the achievement of several financial and strategic milestones,” said Brad Childers, Archrock's President and Chief Executive Officer. "Our compression fleet remained fully utilized and our contract operations and aftermarket services segments delivered record-setting adjusted gross margins. In addition, at the end of August, we closed the previously announced acquisition of TOPS, and our teams are doing a great job integrating this high-quality electric motor drive compression operation into Archrock.
"The significant outperformance in our pre-acquisition business, the continued deployment of innovative technology and an expanded electric motor drive fleet result in an increase to our 2024 adjusted EBITDA guidance expectations and set a strong foundation for even higher levels of customer service, operational execution and profitability in 2025.
"We see sustained strength in compression booking demand as our customers plan for continuing production growth to meet increased LNG export capacity and electric generation demand from AI and data centers. I'm particularly excited about our enhanced position in the Permian Basin, which is forecasted to lead the U.S. in oil and gas production growth.
"Against this robust market backdrop, we expect to continue to make high-return investments in large midstream and electric motor drive newbuild horsepower to support our exceptional customer base. Our capital allocation is differentiated and bolstered by the accretive acquisition of TOPS, supporting a 6% sequential increase in our dividend per share and $12 million in share repurchases during the third quarter, as well as our expectation for continued increases to shareholder returns in the future,” concluded Childers.
Third Quarter 2024 Financial Results
Archrock's third quarter 2024 net income of $37.5 million included a non-cash long-lived and other asset impairment of $2.5 million, a debt extinguishment loss of $3.2 million as well as transaction-related expenses totaling $9.2 million. Archrock's third quarter 2023 net income of $30.9 million included a non-cash long-lived and other asset impairment of $2.9 million and restructuring charges of $0.6 million.
Adjusted EBITDA for the third quarter of 2024 and 2023 included $2.2 million and $3.2 million, respectively, in net gains related to the sale of compression and other assets.
Contract Operations
For the third quarter of 2024, contract operations segment revenue totaled $245.4 million, an increase of 18% compared to $207.6 million in the third quarter of 2023. Adjusted gross margin was $165.6 million for the third quarter of 2024, up 25% from $132.3 million in the third quarter of 2023. Adjusted gross margin percentage was 67% for the third quarter of 2024, compared to 64% in the third quarter of 2023. At the end of the third quarter of 2024, total operating horsepower was 4.2 million, up from 3.6 million in the third quarter of 2023, primarily reflecting the acquisition of TOPS. Horsepower utilization at period end remained at 95%.
Aftermarket Services
For the third quarter of 2024, aftermarket services segment revenue totaled $46.7 million, compared to $45.8 million in the third quarter of 2023. Adjusted gross margin was $12.3 million for the third quarter of 2024, compared to $9.1 million in the third quarter of 2023. Adjusted gross margin percentage was 26% for the third quarter of 2024, compared to 20% for the third quarter of 2023.
Balance Sheet
Long-term debt was $2.2 billion at September 30, 2024, which reflects the offering of $700 million aggregate principal amount of 6.625% senior notes due 2032, as well as the tender of $200 million aggregate principal amount of 6.875% senior notes due 2027 (of the $500 million aggregate principal amount outstanding of the notes). Our available liquidity at September 30, 2024 totaled $650 million. Our leverage ratio was 3.57x as of September 30, 2024, compared to 3.84x as of September 30, 2023.
Shareholder Returns
Quarterly Dividend
Our Board of Directors recently declared a quarterly dividend of $0.175 per share of common stock, or $0.70 per share on an annualized basis. Dividend coverage in the third quarter of 2024 was 3.0x. The third quarter 2024 dividend will be paid on November 13, 2024 to stockholders of record at the close of business on November 6, 2024.
Share Repurchase Program
During the quarter ended September 30, 2024, Archrock repurchased 649,854 common shares at an average price of $18.63 per share, for an aggregate of approximately $12.1 million. Approximately $37.9 million remains available for future common share repurchases under Archrock's current share repurchase program.
Updated 2024 Annual Guidance
Archrock is providing revised guidance for the full year 2024. The full-year 2024 guidance below incorporates four months of the financial impact of the TOPS acquisition that closed on August 30, 2024.
(in thousands, except percentages, per share amounts, and ratios)
| Full Year 2024 Guidance | |||||||||
| Low | High | ||||||||
| Net income (1) (2) | $ | 157,000 | $ | 167,000 | |||||
| Adjusted EBITDA(3) | 575,000 | 585,000 | |||||||
| Cash available for dividend(4) (5) | 339,000 | 349,000 | |||||||
| Segment | |||||||||
| Contract operations revenue | $ | 970,000 | $ | 980,000 | |||||
| Contract operations adjusted gross margin percentage | 66 | % | 67 | % | |||||
| Aftermarket services revenue | $ | 180,000 | $ | 185,000 | |||||
| Aftermarket services adjusted gross margin percentage | 22 | % | 23 | % | |||||
| Selling, general and administrative | $ | 134,000 | $ | 132,000 | |||||
| Capital expenditures | |||||||||
| Growth capital expenditures (6) | $ | 260,000 | $ | 260,000 | |||||
| Maintenance capital expenditures | 85,000 | 85,000 | |||||||
| Other capital expenditures | 25,000 | 25,000 | |||||||
| (1) | 2024 annual guidance for net income includes $9.5 million of long-lived and other asset impairment as of September 30, 2024, but does not include the impact of any such future costs, because due to its nature, it cannot be accurately forecasted. Long-lived and other asset impairment does not impact adjusted EBITDA or cash available for dividend, however it is a reconciling item between these measures and net income. Long-lived and other asset impairment for the years 2023 and 2022 was $12.0 million and $21.4 million, respectively. |
| (2) | Reflects estimate of expenses incurred to date related to the TOPS acquisition. |
| (3) | Management believes adjusted EBITDA provides useful information to investors because this non-GAAP measure, when viewed with our GAAP results and accompanying reconciliations, provides a more complete understanding of our performance than GAAP results alone. Management uses this non-GAAP measure as a supplemental measure to review current period operating performance, comparability measure and performance measure for period-to-period comparisons. |
| (4) | Management uses cash available for dividend as a supplemental performance measure to compute the coverage ratio of estimated cash flows to planned dividends. |
| (5) | A forward-looking estimate of cash provided by operating activities is not provided because certain items necessary to estimate cash provided by operating activities, including changes in assets and liabilities, are not estimable at this time. Changes in assets and liabilities were $(28.0) million and $(24.5) million for the years 2023 and 2022, respectively. |
| (6) | The $70 million increase from prior annual guidance of $190 million is exclusively related to the addition of horsepower in TOPS' backlog and payments due at delivery. |
(in thousands, except percentages, per share amounts and ratios)
| Three Months Ended | ||||||||||||||
| September 30, | June 30, | September 30, | ||||||||||||
| 2024 | 2024 | 2023 | ||||||||||||
| Net income | $ | 37,516 | $ | 34,425 | $ | 30,858 | ||||||||
| Adjusted net income (1) | $ | 47,313 | $ | 35,793 | $ | 30,858 | ||||||||
| Adjusted EBITDA (1) | $ | 150,854 | $ | 129,712 | $ | 120,150 | ||||||||
| Contract operations revenue | $ | 245,420 | $ | 225,468 | $ | 207,552 | ||||||||
| Contract operations adjusted gross margin (1) | $ | 165,610 | $ | 146,190 | $ | 132,279 | ||||||||
| Contract operations adjusted gross margin percentage | 67 | % | 65 | % | 64 | % | ||||||||
| Aftermarket services revenue | $ | 46,741 | $ | 45,058 | $ | 45,815 | ||||||||
| Aftermarket services adjusted gross margin (1) | $ | 12,346 | $ | 9,900 | $ | 9,127 | ||||||||
| Aftermarket services adjusted gross margin percentage | 26 | % | 22 | % | 20 | % | ||||||||
| Selling, general, and administrative | $ | 34,059 | $ | 31,163 | $ | 28,558 | ||||||||
| Net cash provided by operating activities | $ | 96,900 | $ | 70,651 | $ | 120,070 | ||||||||
| Cash available for dividend | $ | 92,887 | $ | 71,593 | $ | 63,021 | ||||||||
| Cash available for dividend coverage (2) | 3.0 | x | 2.6 | x | 2.6 | x | ||||||||
| Adjusted free cash flow (1) (3) | $ | (834,282 | ) | $ | (16,914 | ) | $ | 62,859 | ||||||
| Adjusted free cash flow after dividend (1) (3) | $ | (862,147 | ) | $ | (42,733 | ) | $ | 38,609 | ||||||
| Total available horsepower (at period end) (4) | 4,418 | 3,806 | 3,773 | |||||||||||
| Total operating horsepower (at period end) (5) | 4,179 | 3,601 | 3,608 | |||||||||||
| Horsepower utilization spot (at period end) | 95 | % | 95 | % | 96 | ()[\]\\.,;:\s@\"]+)*)|(\".+\"))@((\[[0-9]{1,3}\.[0-9]{1,3}\.[0-9]{1,3}\.[0-9]{1,3}\])|(([a-zA-Z\-0-9]+\.)+[a-zA-Z]{2,}))$/;return b.test(a)}$(document).ready(function(){if(performance.navigation.type==2){location.reload(true)}$("iframe[data-lazy-src]").each(function(b){$(this).attr("src",$(this).attr("data-lazy-src"))});if($(".owl-article-body-images").length){$(".owl-article-body-images").owlCarousel({items:1,loop:true,center:false,dots:false,autoPlay:true,mouseDrag:false,touchDrag:false,pullDrag:false,nav:true})}var a=$("#display_full_text").val();if(a==0){$.ajax({url:"/ajax/set-article-cookie",type:"POST",data:{cmsArticleId:$("#cms_article_id").val()},dataType:"json",success:function(b){},error:function(b,d,c){}})}$(".read-full-article").on("click",function(d){d.preventDefault();var b=$(this).attr("data-cmsArticleId");var c=$(this).attr("data-productId");var f=$(this).attr("data-href");dataLayer.push({event:"paywall_click",paywall_name:"the_manila_times_premium",paywall_id:"paywall_article_"+b});$.ajax({url:"/ajax/set-article-cookie",type:"POST",data:{cmsArticleId:b,productId:c},dataType:"json",success:function(e){window.location.href=$("#BASE_URL").val()+f},error:function(e,h,g){}})});$(".article-embedded-newsletter-form .close-btn").on("click",function(){$(".article-embedded-newsletter-form").fadeOut(1000)})});$(document).on("click",".article-embedded-newsletter-form .newsletter-button",function(){var b=$(".article-embedded-newsletter-form .newsletter_email").val();var d=$("#ga_user_id").val();var c=$("#ga_user_yob").val();var a=$("#ga_user_gender").val();var e=$("#ga_user_country").val();if(validateEmail(b)){$.ajax({url:"/ajax/sendynewsletter",type:"POST",data:{email:b},success:function(f){$(".article-embedded-newsletter-form .nf-message").html(f);$(".article-embedded-newsletter-form .nf-message").addClass("show");setTimeout(function(){$(".article-embedded-newsletter-form .nf-message").removeClass("show");$(".article-embedded-newsletter-form .nf-message").html("")},6000);dataLayer.push({event:"newsletter_sub",user_id:d,product_name:"newsletter",gender:a,yob:c,country:e})},error:function(f,h,g){}})}else{$(".article-embedded-newsletter-form .nf-message").html("Please enter a valid email address.");$(".article-embedded-newsletter-form .nf-message").addClass("show");setTimeout(function(){$(".article-embedded-newsletter-form .nf-message").removeClass("show");$(".article-embedded-newsletter-form .nf-message").html("")},6000)}});$(document).on("click",".article-embedded-newsletter-form .nf-message",function(){$(this).removeClass("show");$(this).html("")});
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