Q1 2026 Archrock Inc Earnings Call

May 6, 2026

Operator: Good morning, welcome to the Archrock Q1 2026 Conference Call. Your host for today's call is Megan Repine, Vice President of Investor Relations at Archrock. I would now like to turn the call over to Ms. Repine. You may begin.

Speaker #2: I would now like to turn the call over to Ms. Repine. You may begin. Thank you, Carrie. Hello, everyone, and thanks for joining us on today's call.

Megan Repine: Thank you, Carrie. Hello, everyone, and thanks for joining us on today's call. With me today are Brad Childers, President and Chief Executive Officer of Archrock, and Doug Aron, Chief Financial Officer of Archrock. Yesterday, Archrock released its financial and operating results for Q1 of 2026. If you have not received a copy, you can find the information on the company's website at www.archrock.com. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 based on current beliefs and expectations as well as assumptions made by and information currently available to Archrock's management team. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that expectations will prove to be correct.

Speaker #2: With me today are Brad Childers, President and Chief Executive Officer of Archrock and Doug Aaron, Chief Financial Officer of Archrock. Yesterday, Archrock released its financial and operating results for the first quarter of 2026.

Speaker #2: If you have not received a copy, you can find the information on the company's website at www.archrock.com. During this call, we will make forward-looking statements within the meaning of Section 21(e) of the Securities and Exchange Act of 1934, based on current beliefs and expectations, as well as assumptions made by, and information currently available to, Archrock's management team.

Speaker #2: Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that expectations will prove to be correct.

Speaker #2: Please refer to our latest SEC filings with the Securities with the SEC for a list of factors that may cause actual results to defer materially from those in the forward-looking statements.

Megan Repine: Please refer to our latest SEC filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. In addition, our discussion today will reference certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EPS, Adjusted Net Income, Cash Available for Dividend, Adjusted Free Cash Flow, and adjusted free cash flow after dividend. For reconciliations of these non-GAAP financial measures to our GAAP financial results, please see yesterday's press release and our Form 8-K furnished to the SEC. I'll now turn the call over to Brad to discuss Archrock's Q1 results and provide an update on our business.

Speaker #2: Made during this call. In addition, our discussion today will reference certain non-gap financial measures, including adjusted EBITDA, adjusted EPS, adjusted net income, cash available for dividend, adjusted free cash flow, and adjusted free cash flow after dividend.

Speaker #2: For reconciliations of these non-gap financial measures to our gap financial results, please see yesterday's press release and our Form 8K furnished to the SEC.

Speaker #2: I'll now turn the call over to Brad to discuss Archrock's first quarter results and provide an update on our business. Thank you, Megan, and good morning, everyone.

D. Bradley Childers: Thank you, Megan. Good morning, everyone. Archrock is off to a strong start in 2026, driven by disciplined execution and continued progress on our strategy with a clear focus on delivering returns to our investors. At the same time, customer demand remains strong, and our order book continues to build, supporting a constructive outlook for compression and Archrock over the long term. Let me share a few highlights from the quarter that underscore the momentum in our performance and the durability of our business model. We delivered Adjusted EPS of $0.42 during the first quarter of 2026 and Adjusted EBITDA of $221 million. Compared to the first quarter of 2025, we increased our Adjusted EBITDA by 12%. Our fleet remained fully utilized, extending our multi-year track record of full utilization.

D. Bradley Childers: Thank you, Megan. Good morning, everyone. Archrock is off to a strong start in 2026, driven by disciplined execution and continued progress on our strategy with a clear focus on delivering returns to our investors. At the same time, customer demand remains strong, and our order book continues to build, supporting a constructive outlook for compression and Archrock over the long term. Let me share a few highlights from the quarter that underscore the momentum in our performance and the durability of our business model. We delivered Adjusted EPS of $0.42 during the Q1 of 2026 and Adjusted EBITDA of $221 million. Compared to the Q1 of 2025, we increased our Adjusted EBITDA by 12%. Our fleet remained fully utilized, extending our multi-year track record of full utilization.

Speaker #2: Archrock is off to a strong start in 2026. Driven by disciplined execution and continued progress on our strategy, with a clear focus on delivering returns to our investors.

Speaker #2: At the same time, customer demand remains strong and our order book continues to build, supporting a constructive outlook for compression and Archrock over the long term.

Speaker #2: Let me share a few highlights from the quarter that underscore the momentum in our performance and the durability of our business model. We delivered adjusted EPS of 42 cents during the first quarter of 2026 and adjusted EBITDA of 221 million dollars.

Speaker #2: Compared to the first quarter of 2025, we increased our adjusted EBITDA by 12%. Our fleet remained fully utilized, extending our multi-year track record of full utilization.

Speaker #2: At the same time, we continue to hydrate our fleets with a sale of non-strategic compression units totaling approximately 40,000 horsepower strengthening our portfolio and supporting disciplined capital allocation.

D. Bradley Childers: At the same time, we continue to hybrid our fleets with a sale of non-strategic compression units totaling approximately 40,000 horsepower, strengthening our portfolio and supporting disciplined capital allocation with year-to-date asset sale proceeds of $21 million helping to fund our new build program. We again delivered outstanding performance and profitability in both our Contract Compression and Aftermarket Services business segments. We translated this performance into adjusted free cash flow of $92 million in the quarter, of which we returned $44 million to shareholders through dividends and share repurchases, which is up 29% year-over-year.

Speaker #2: With year-to-date asset sale proceeds of 21 million dollars helping to fund our new build program. We again delivered outstanding performance and profitability in both our contract compression and aftermarket services business segments.

Speaker #2: And we translated this performance into adjusted free cash flow of 92 million dollars in the quarter of which we returned 44 million dollars to shareholders through dividends and share repurchases which is up 29% year over year.

Speaker #2: Overall, we're encouraged by the strong start to 2026 which keeps us on pace to achieve our full year 2026 adjusted EBITDA guidance range of between 865 million and 915 million dollars which we expect will translate into meaningful free cash flow generation for the year.

D. Bradley Childers: Overall, we're encouraged by the strong start to 2026, which keeps us on pace to achieve our full year 2026 Adjusted EBITDA guidance range of between $865 million and $950 million, which we expect will translate into meaningful free cash flow generation for the year. As we look ahead, we believe our strategy is supported by three key drivers: the right market, the right platform, and the right balance sheet. Let me briefly walk through each one. First, the right market. The importance of natural gas is clear today, and it has been underscored again by recent conflict in the Middle East. Natural gas remains essential to powering economic growth, delivering affordable, reliable energy, and enabling energy security, driving sustained demand for the infrastructure needed to move more gas to market. Second, the right platform.

Speaker #2: As we look ahead, we believe our strategy is supported by three key drivers. The right market, the right platform, and the right balance sheet.

Speaker #2: Let me briefly walk through each one. First, the right market. The importance of natural gas is clear today, and it has been underscored again by recent conflict in the Middle East.

Speaker #2: Natural gas remains essential to powering economic growth, delivering affordable, reliable energy, and enabling energy security driving sustained demand for the infrastructure needed to move more gas to market.

Speaker #2: Second, the right platform. We have the people, assets, and technologies in place to help customers move more gas to market more efficiently and safely and to do so profitably.

D. Bradley Childers: We have the people, assets, and technologies in place to help customers move more gas to market more efficiently and safely, and to do so profitably. Customer service is a top priority for our organization, and we're continually deploying technology and data-driven tools for the benefit of our customers, our employees, and our shareholders. Our scale, operating discipline, and focus on reliability position us to execute consistently. Third, the right balance sheet. Our leverage profile reflects the strength and durability of our cash flows. It provides the flexibility to invest in the organic and inorganic opportunities the current market is offering while continuing to return capital to shareholders. Taken together, these three drivers give us confidence in our ability to continue compounding earnings and free cash flow.

Speaker #2: Customer service is a top priority for our organization and we're continually deploying technology and data-driven tools for the benefit of our customers, our employees, and our shareholders.

Speaker #2: Our scale operating discipline and focus on reliability position us to execute consistently. Third, the right balance sheet. Our leverage profile reflects the strength and durability of our cash flows and it provides the flexibility to invest in the organic and inorganic opportunities the current market is offering while continuing to return capital to shareholders.

Speaker #2: Taken together, these three drivers give us confidence in our ability to continue compounding earnings and free cash flow. And as we execute by moving more gas to market safely and efficiently, investing in the highest return segments of the growing compression industry, and maintaining balance sheet strength, we believe Archrock is well positioned to deliver sustainable and superior returns on capital natural gas production continues to climb and we expect US volumes to reach record levels for the sixth consecutive year in 2026.

D. Bradley Childers: As we execute by moving more gas to market safely and efficiently, investing in the highest return segments of the growing compression industry, and maintaining balance sheet strength, we believe Archrock is well-positioned to deliver sustainable and superior returns on capital. Natural gas production continues to climb, and we expect US volumes to reach record levels for the sixth consecutive year in 2026. For Archrock, our footprint is concentrated in the faster-growing basins, especially the Permian, where associated gas volumes are expected to grow at mid-single-digit rates. Rising gas oil ratios are making the basin more compression-intensive, about 4.6 BCF a day of new takeaway capacity expected later this year should further support expanding levels of activity. We are also seeing early but encouraging signs of improving compression demand beyond the Permian across other basins. On demand, LNG remains a key driver.

Speaker #2: For Archrock, our footprint is concentrated in the faster growing basins especially the Permian where associated gas volumes are expected to grow at mid-single digit rates.

Speaker #2: Rising gas to oil ratios are making the basin more compression intensive and about 4.6 BCF a day of new takeaway capacity expected later this year should further support expanding levels of activity.

Speaker #2: We're also seeing early but encouraging signs of improving compression demand beyond the Permian across other basins. On demand, LNG remains a key driver. Roughly 2 BCF a day of additional FID export capacity is expected to come online in 2026.

D. Bradley Childers: Roughly 2 BCF a day of additional FID export capacity is expected to come online in 2026. Projects already sanctioned represent about 14 BCF a day of incremental capacity through 2030. At the same time, the build-out of AI data centers is accelerating power demand, reinforcing natural gas-fired generation as a practical, scalable source of incremental electricity. Bottom line, we continue to see a constructive setup for natural gas and for compression across the market. Near term, the US is on track for another record year in 2026. In the Permian, we expect mid-single-digit gas growth supported by rising gas oil ratios and new takeaway later this year. Geopolitical risk in the Middle East, including Iran-related volatility, reinforces the strategic value of US supply and supports tighter global LNG fundamentals. Longer term, the outlook is improving.

Speaker #2: And projects already sanctioned represent about 14 BCF a day of incremental capacity through 2030. At the same time, the build-out of AI data centers is accelerating power demand reinforcing natural gas-fired generation as a practical scalable source of incremental electricity.

Speaker #2: Bottom line, we continue to see a constructive setup for natural gas and for compression across the market. Near term, the US is on track for another record year in 2026.

Speaker #2: And in the Permian, we expect mid-single digit gas growth supported by rising gas to oil ratios and new takeaway later this year. Geopolitical risk in the Middle East including Iran-related volatility reinforces the strategic value of US supply and supports tighter fundamentals.

Speaker #2: And longer term, the outlook is improving. The EIA's annual energy outlook 2026 raised its view of US gas production and demand versus last year driven in part by LNG growth and AI data center power needs with production projected to rise from 107 BCF a day in 2025 to approximately 133 to 151 BCF a day by 2050.

D. Bradley Childers: The EIA's Annual Energy Outlook 2026 raised its view of US gas production and demand versus last year, driven in part by LNG growth and AI data center power needs, with production projected to rise from 107 BCF a day in 2025 to approximately 133 to 151 BCF a day by 2050. That would represent an increase in natural gas production of between 24% and 41%, reinforcing our view of a longer-term growth trajectory for both natural gas production and for compression. Moving to our segments, Contract Operations delivered outstanding performance, supported by excellent execution and continued high demand for our compression fleet, particularly our large horsepower and electric motor drive units, extending our track record of strong results.

Speaker #2: That would represent an increase in natural gas production of between 24% and 41% reinforcing our view of a longer-term growth trajectory for both natural gas production and for compression.

Speaker #2: Moving to our segments, contract operations delivered outstanding performance, supported by excellent execution and continued high demand for our compression fleet, particularly our large horsepower and electric motor drive units, extending our track record of strong results.

Speaker #2: Our fleet remained highly utilized during the quarter exiting at 95% utilization reflecting continued high demand and the high quality of our fleet and sustaining strong utilization in our contract operations business over a multi-year period.

D. Bradley Childers: Our fleet remains highly utilized during the quarter, exiting at 95% utilization, reflecting continued high demand and the high quality of our fleet and sustaining strong utilization in our contract operations business over a multi-year period. That durability is also evident in the time on location, with the blended fleet averaging approximately 6 years in units of 1,500 horsepower or greater averaging approximately 8 years in largely midstream applications. At quarter end, we had 4.5 million operating horsepower. Operating horsepower declined by approximately 43,000 as new-build deliveries during the quarter were more than offset by the sell approximately 40,000 non-strategic horsepower, including 21,000 active horsepower. As a reminder, we also sold approximately 123,000 horsepower, including 84,000 active horsepower at the end of 2025.

Speaker #2: That durability is also evident in the time on location with the blended fleet averaging approximately six years in units of 1,500 horsepower or greater averaging approximately eight years in largely midstream applications.

Speaker #2: At quarter end, we had 4.5 million operating horsepower. Operating horsepower declined by approximately 43,000 as new build deliveries during the quarter were more than offset by the sale of approximately 40,000 non-strategic horsepower including 21,000 active horsepower.

Speaker #2: As a reminder, we also sold approximately 123,000 horsepower including 84,000 active horsepower at the end of 2025 taken together these sales reduced first quarter adjusted EBITDA by approximately 3 million on a sequential basis.

D. Bradley Childers: Taken together, these sales reduced first quarter Adjusted EBITDA by approximately $3 million on a sequential basis. Monthly revenue per horsepower moves higher on a sequential and year-over-year basis. In 2026, we continue to expect monthly revenue per horsepower to benefit from the full year carryover of the rate increases implemented in 2025 and increases in 2026. We achieved a quarterly adjusted gross margin percentage of 72%. Consistent profitability above 70% continues to be driven by strong pricing, disciplined execution, and a continued focus on per horsepower cost management. Over the last several years, we've executed well on the cost inputs into our operations, offsetting some of the cost increases we experienced during the recent higher inflationary environment, including higher costs for labor and parts. We remain focused on continuing this level of execution through technology deployment and ongoing cost management.

Speaker #2: Monthly revenue per horsepower moved higher on a sequential and year-over-year basis. In 2026, we continue to expect monthly revenue per horsepower to benefit from the full-year carryover of the rate increases implemented in 2025 and increases in 2026.

Speaker #2: We achieved a quarterly adjusted gross margin percentage of 72%. Consistent profitability above 70% continues to be driven by strong pricing, disciplined execution, and a continued focus on per horsepower cost management.

Speaker #2: Over the last several years, we've executed well on the cost inputs into our operations offsetting some of the cost increases we experienced during the recent higher inflationary environment including higher costs for labor and parts.

Speaker #2: We remain focused on continuing this level of execution through technology deployment and ongoing cost management. Moving to our aftermarket services segment, performance was solid in the first quarter.

D. Bradley Childers: Moving to our aftermarket services segment, performance was solid in Q1. As expected, Q1 is seasonally slower. Even so, we continue to deliver strong profitability levels in the business, reflecting disciplined execution and an ongoing focus on higher quality, higher margin work. Turning to capital allocation, we remain disciplined and returns-focused, prioritizing growth investment and shareholder returns supported by a strong balance sheet. We reaffirmed our 2026 growth capital plan of $250 to 275 million for fleet investment, reflecting strong demand and our desire to continue growing our profitable platform through high return new build investments. We expect substantial free cash flow to support increasing shareholder returns. We declared a quarterly dividend of $0.22 per share, up approximately 16% year over year, while maintaining robust coverage.

Speaker #2: As expected, Q1 is seasonally slower; even so, we continue to deliver strong profitability levels in the business, reflecting disciplined execution and an ongoing focus on higher-quality, higher-margin work.

Speaker #2: Turning to capital allocation, we remain disciplined and returns focused prioritizing growth investment and shareholder returns supported by a strong balance sheet. We reaffirmed our of $250 to $275 million for fleet investment reflecting strong demand and our desire to continue growing our profitable platform through high return new build investments.

Speaker #2: We expect substantial free cash flow to support increasing shareholder returns we declared a quarterly dividend of 22 cents per share up approximately 16% year over year while maintaining robust coverage.

Speaker #2: We also have flexibility for additional shareholder returns including $113 million of remaining authorization under our share repurchase program as of quarter end which we view as a tool within our returns-based framework and may use more actively during periods of market dislocation.

D. Bradley Childers: We also have flexibility for additional shareholder returns, including $113 million of remaining authorization under our share repurchase program as of quarter end, which we view as a tool within our returns-based framework and may use more actively during periods of market dislocation. We exited the quarter below our long-term leverage target of between 3 times to 3.5 times and expect to operate below 3 times in the near term, preserving flexibility for both organic and inorganic growth, as well as continued shareholder returns. In summary, Archrock is delivering consistent, strong results underpinned by a culture of disciplined execution and continuous improvement. Looking ahead, we see a meaningful runway for profitable growth with earnings supported by our returns-based capital allocation and durable tailwinds for natural gas infrastructure, including compression. Before I hand it over, I want to recognize Doug Aron.

Speaker #2: We exited the quarter below our long-term leverage target of between three times to 3.5 times and expect to operate below three times in the near term preserving flexibility for both organic and inorganic growth as well as continued shareholder returns.

Speaker #2: In summary, Archrock is delivering consistent strong results underpinned by a culture of disciplined execution, and continuous improvement. Looking ahead, we see a meaningful runway for profitable growth with earnings supported by our returns-based capital allocation and durable tailwinds for natural gas infrastructure, including compression.

Speaker #2: Before I hand it over, I want to recognize Doug Aaron. As we previously announced, Doug plans to retire by the end of the year.

D. Bradley Childers: As we previously announced, Doug plans to retire by the end of the year. On behalf of Archrock, thank you, Doug, for more than 7 years of outstanding service and leadership during an exciting and transformative period for the company. Doug has been a key leader and a trusted advisor to me, the rest of the executive leadership team, and our board. To be clear, he's not going anywhere just yet. Doug will stay in his role until a successor is named to ensure a smooth transition. With that, I'll turn the call over to Doug to walk through our Q1 and 2026 outlook.

Speaker #2: On behalf of Archrock, thank you, Doug. For more than seven years of outstanding service and leadership during an exciting and transformative period for the company.

Speaker #2: Doug has been a key leader and a trusted advisor to me the rest of the executive leadership team and our board. And to be clear, he's not going anywhere just yet Doug will stay in his role until a successor is named to ensure a smooth transition.

Speaker #2: With that, I'll turn the call over to Doug to walk through our first quarter and 2026 outlook. Thank you, Brad. Certainly appreciate the kind words.

Douglas Aron: Thank you, Brad. Certainly appreciate the kind words. Good morning, everyone. Thanks for joining us. Let's review our Q1 results and then cover our current financial outlook for 2026. Net income for Q1 2026 was $73.8 million. Excluding transaction-related and restructuring costs and adjusting for the associated tax impact, we delivered adjusted net income of $74.4 million or $0.42 per share. We reported adjusted EBITDA of $221 million for Q1 2026. Underlying business performance exceeded our basis for guidance, and results also benefited from a $10 million net gain from the sale of non-strategic compression and other assets. Strength in segment fundamentals was somewhat offset by higher selling, general, and administrative expense in the quarter.

Doug S. Aron: Thank you, Brad. Certainly appreciate the kind words. Good morning, everyone. Thanks for joining us. Let's review our Q1 results and then cover our current financial outlook for 2026. Net income for Q1 2026 was $73.8 million. Excluding transaction-related and restructuring costs and adjusting for the associated tax impact, we delivered adjusted net income of $74.4 million or $0.42 per share. We reported adjusted EBITDA of $221 million for Q1 2026. Underlying business performance exceeded our basis for guidance, and results also benefited from a $10 million net gain from the sale of non-strategic compression and other assets. Strength in segment fundamentals was somewhat offset by higher selling, general, and administrative expense in the quarter.

Speaker #2: Good morning, everyone. Thanks for joining us. Let's review our first quarter results and then cover our current financial outlook for 2026. Net income for the first quarter of 2026 was $73.8 million.

Speaker #2: Excluding transaction-related and restructuring costs and adjusting for the associated tax impact, we delivered adjusted net income of $74.4 million or 42 cents per share.

Speaker #2: We reported adjusted EBITDA of $221 million for the first quarter of 2026. Underlying business performance exceeded our basis for guidance and results also benefited from a $10 million net gain from the sale of non-strategic compression and other assets.

Speaker #2: Strength in segment fundamentals was somewhat offset by higher selling general and administrative expense in the quarter. That performance translated into adjusted free cash flow of $92 million and adjusted free cash flow after dividend of $52 million in the quarter driven by durable operating cash flow and further supported by proceeds from the non-strategic asset sales supporting our ongoing commitment to return capital to shareholders.

Douglas Aron: That performance translated into Adjusted Free Cash Flow of $92 million and adjusted free cash flow after dividend of $52 million in the quarter, driven by durable operating cash flow and further supported by proceeds from the non-strategic asset sales, supporting our ongoing commitment to return capital to shareholders. SG&A expenses were $45 million in Q1 2026 compared to $37 million in Q1 2025, with the increase primarily driven by higher long-term incentive compensation for 2 reasons. First, a little more than half of this increase was the result of the sharply higher stock price in the quarter. Second, the balance of the increase was the result of a GAAP accounting acceleration of expense recognition for long-term incentive compensation under an executive retention agreement, which we do not expect will recur in the remaining periods of this year.

Doug S. Aron: That performance translated into Adjusted Free Cash Flow of $92 million and adjusted free cash flow after dividend of $52 million in the quarter, driven by durable operating cash flow and further supported by proceeds from the non-strategic asset sales, supporting our ongoing commitment to return capital to shareholders. SG&A expenses were $45 million in Q1 2026 compared to $37 million in Q1 2025, with the increase primarily driven by higher long-term incentive compensation for 2 reasons. First, a little more than half of this increase was the result of the sharply higher stock price in the quarter. Second, the balance of the increase was the result of a GAAP accounting acceleration of expense recognition for long-term incentive compensation under an executive retention agreement, which we do not expect will recur in the remaining periods of this year.

Speaker #2: SG&A expenses were $45 million in the first quarter of 2026 compared to $37 million in the first quarter of 2025 with the increased primarily driven by higher long-term incentive compensation for two reasons.

Speaker #2: First, a little more than half of this increase was the result of the sharply higher stock price in the quarter. Second, the balance of the increase was the result of a gap accounting acceleration of expense recognition for long-term incentive compensation under an executive retention agreement which we do not expect will recur in the remaining periods of this year.

Speaker #2: Turning to our business segments, contract operations revenue came in at $331 million in the first quarter up 10% compared to the first quarter of 2025 driven by growth in horsepower and higher pricing.

Douglas Aron: Turning to our business segments, Contract Operations revenue came in at $331 million in Q1, up 10% compared to Q1 2025, driven by growth in horsepower and higher pricing. Operating horsepower of 4.53 million at the end of the quarter was up approximately 250,000 year over year from 4.28 million in Q1 2025. Our adjusted gross margin percentage of 72% in Q1 2026 reflects consistent profitability. While reported adjusted gross margin percentage was down from 78% last quarter, the figure increased slightly on a sequential basis after excluding the impact of out-of-period cash, tax settlements and credits we benefited from during Q4 2025 that were more one-time in nature.

Doug S. Aron: Turning to our business segments, Contract Operations revenue came in at $331 million in Q1, up 10% compared to Q1 2025, driven by growth in horsepower and higher pricing. Operating horsepower of 4.53 million at the end of the quarter was up approximately 250,000 year over year from 4.28 million in Q1 2025. Our adjusted gross margin percentage of 72% in Q1 2026 reflects consistent profitability. While reported adjusted gross margin percentage was down from 78% last quarter, the figure increased slightly on a sequential basis after excluding the impact of out-of-period cash, tax settlements and credits we benefited from during Q4 2025 that were more one-time in nature.

Speaker #2: Operating horsepower of $4.53 million at the end of the quarter was up approximately $250,000 year over year from $4.28 million in the first quarter of 2025.

Speaker #2: Our adjusted gross margin percentage of 72% in the first quarter of 2026 reflects consistent profitability. While reported adjusted gross margin percentage was down from 78% last quarter, the figure increased slightly on a sequential basis after excluding the impact of out-of-period cash tax settlements and credits we've been benefited from during the fourth quarter of 2025 that were more one-time in nature.

Speaker #2: In our aftermarket services segment, we reported first quarter 2026 revenue of $43 million reflecting lower service activity and a seasonal slowdown. Even with the expected seasonal softness, AMS delivered a great level of profitability.

Douglas Aron: In our aftermarket services segment, we reported Q1 2026 revenue of $43 million, reflecting lower service activity and a seasonal slowdown. Even with the expected seasonal softness, AMS delivered a great level of profitability. Q1 2026 adjusted gross margin percentage was 23%, consistent with the high end of our guidance range for the year. We ended the quarter with total debt of $2.4 billion. In January, we issued $800 million of senior notes to fund the 1 April repurchase of 100% of our senior notes due 2028 at par, which moves our nearest bond maturity to 2032.

Doug S. Aron: In our aftermarket services segment, we reported Q1 2026 revenue of $43 million, reflecting lower service activity and a seasonal slowdown. Even with the expected seasonal softness, AMS delivered a great level of profitability. Q1 2026 adjusted gross margin percentage was 23%, consistent with the high end of our guidance range for the year. We ended the quarter with total debt of $2.4 billion. In January, we issued $800 million of senior notes to fund the 1 April repurchase of 100% of our senior notes due 2028 at par, which moves our nearest bond maturity to 2032.

Speaker #2: First quarter 2026 adjusted gross margin percentage was 23% consistent with the high end of our guidance range for the year. We ended the quarter with total debt of $2.4 billion.

Speaker #2: In January, we issued $800 million of senior notes to fund the April 1st repurchase of 100% of our senior notes due 2028 at par.

Speaker #2: Which moves our nearest bond maturity to 2032. Pro forma for this activity available liquidity was approximately $600 million. Our leverage ratio at quarter end was 2.6 times compared to 2.7 in the fourth quarter of 2025 as we continued to operate comfortably below our stated target of $3 times in the near term.

Douglas Aron: Pro forma for this activity, available liquidity was approximately $600 million. Our leverage ratio at quarter-end was 2.6x compared to 2.7 in Q4 2025 as we continue to operate comfortably below our stated target of 3x in the near term. We recently declared a Q1 dividend of $0.22 per share or $0.88 on an annualized basis. This is consistent with the Q4 2025 dividend level and up approximately 16% year over year. Cash Available for Dividend for Q1 2026 totaled $134 million, leading to robust quarterly dividend coverage of 3.5x.

Doug S. Aron: Pro forma for this activity, available liquidity was approximately $600 million. Our leverage ratio at quarter-end was 2.6x compared to 2.7 in Q4 2025 as we continue to operate comfortably below our stated target of 3x in the near term. We recently declared a Q1 dividend of $0.22 per share or $0.88 on an annualized basis. This is consistent with the Q4 2025 dividend level and up approximately 16% year over year. Cash Available for Dividend for Q1 2026 totaled $134 million, leading to robust quarterly dividend coverage of 3.5x.

Speaker #2: We recently declared a first quarter dividend of $22 cents per share or 88 cents on an annualized basis. This is consistent with the fourth quarter 25 dividend level and up approximately 16% year over year.

Speaker #2: Cash available for dividend for the first quarter of 2026 totaled $134 million leading to robust quarterly dividend coverage of $3.5 times. During the quarter, we repurchased approximately $171,000 shares for approximately $4.4 million and an average price of $25.87 per share.

Douglas Aron: During the quarter, we repurchased approximately 171,000 shares for approximately $4.4 million at an average price of $25.87 per share. This leaves approximately $113 million in remaining capacity for additional share repurchases. Given our solid Q1 performance, we are reaffirmed our full year 2026 guidance with yesterday's earnings release. We remain on track to deliver our 2026 Adjusted EBITDA guidance of $865 to 915 million. Segment performance in the Q1 was consistent with the basis of that guidance, with strength in the underlying business partially offset by higher SG&A. We do not expect the $3.7 million of long-term compensation expense acceleration to recur in future periods for the remainder of 2026.

Doug S. Aron: During the quarter, we repurchased approximately 171,000 shares for approximately $4.4 million at an average price of $25.87 per share. This leaves approximately $113 million in remaining capacity for additional share repurchases. Given our solid Q1 performance, we are reaffirmed our full year 2026 guidance with yesterday's earnings release. We remain on track to deliver our 2026 Adjusted EBITDA guidance of $865 to 915 million. Segment performance in the Q1 was consistent with the basis of that guidance, with strength in the underlying business partially offset by higher SG&A. We do not expect the $3.7 million of long-term compensation expense acceleration to recur in future periods for the remainder of 2026.

Speaker #2: This leaves approximately $113 million in remaining capacity for repurchases. Given our solid first quarter performance, we are reaffirmed our full year 2026 guidance with yesterday's earnings release.

Speaker #2: We remain on track to deliver our 2026 adjusted EBITDA guidance of $865 to $915 million. Segment performance in the first quarter was consistent with the basis of that guidance, with strength in the underlying business partially offset by higher SG&A.

Speaker #2: We do not expect a $3.7 million of long-term compensation expense acceleration to recur in future periods for the remainder of 2026. In contract operations, our outlook reflects year-over-year growth in horsepower revenue and profitability.

Douglas Aron: In contract operations, our outlook reflects year-over-year growth in horsepower, revenue, and profitability. In AMS, we expect revenue and profitability to remain strong. Turning to capital, on a full year basis, we continue to expect total 2026 capital expenditures to be approximately $400 to $445 million. Within that total, we reiterate growth CapEx of $250 to $275 million to support investment in new build horsepower and repackage CapEx to meet continued customer demand. Growth is expected to be funded by operations with additional support from non-strategic asset sale proceeds as we continue to high grade our fleet, including year-to-date proceeds totaling approximately $21 million. Maintenance CapEx is forecasted to be approximately $125 to $135 million, up versus 2025 due to increased planned overall activity.

Doug S. Aron: In contract operations, our outlook reflects year-over-year growth in horsepower, revenue, and profitability. In AMS, we expect revenue and profitability to remain strong. Turning to capital, on a full year basis, we continue to expect total 2026 capital expenditures to be approximately $400 to $445 million. Within that total, we reiterate growth CapEx of $250 to $275 million to support investment in new build horsepower and repackage CapEx to meet continued customer demand. Growth is expected to be funded by operations with additional support from non-strategic asset sale proceeds as we continue to high grade our fleet, including year-to-date proceeds totaling approximately $21 million. Maintenance CapEx is forecasted to be approximately $125 to $135 million, up versus 2025 due to increased planned overall activity.

Speaker #2: In AMS, we expect revenue and profitability to remain strong. Turning to capital, on a full year basis, we continue to expect total 2026 capital expenditures to be approximately $400 to $445 million.

Speaker #2: Within that total, we reiterate growth capex of $250 to $275 million to support investment in new-build horsepower and repackage capex to meet continued customer demand.

Speaker #2: Growth is expected to be funded by operations with additional support from non-strategic asset sale proceeds as we continue to high-grade our fleet including year-to-date proceeds totaling approximately $21 million.

Speaker #2: Maintenance capex is forecasted to be approximately $125 to $135 million, up versus 2025 due to increased planned overall activity. We also anticipate approximately $25 to $35 million in other capex, primarily for new vehicles.

Douglas Aron: We also anticipate approximately $25 to 35 million in other CapEx, primarily for new vehicles. In summary, we remain confident in the strength of our platform and in the long-term opportunity in front of us. The combination of a fully utilized fleet and the continued build-out of US midstream infrastructure to support both expected growth in LNG exports and rising power demand reinforces our view that the need for reliable compression remains strong. Against that backdrop, we are focused on excellent execution, delivering for our customers, advancing the technologies we've put in place, and adhering to a disciplined, returns-based approach to capital allocation to grow the business and create long-term value for our shareholders. With that, Carrie, I believe we are ready to open the line for questions.

Doug S. Aron: We also anticipate approximately $25 to 35 million in other CapEx, primarily for new vehicles. In summary, we remain confident in the strength of our platform and in the long-term opportunity in front of us. The combination of a fully utilized fleet and the continued build-out of US midstream infrastructure to support both expected growth in LNG exports and rising power demand reinforces our view that the need for reliable compression remains strong. Against that backdrop, we are focused on excellent execution, delivering for our customers, advancing the technologies we've put in place, and adhering to a disciplined, returns-based approach to capital allocation to grow the business and create long-term value for our shareholders. With that, Carrie, I believe we are ready to open the line for questions.

Speaker #2: In summary, we remain confident in the strength of our platform and in the long-term opportunity in front of us. The combination of a fully utilized fleet and the continued build-out of US midstream infrastructure to support both expected growth in LNG exports and rising power demand reinforces our view that the need for reliable compression remains strong.

Speaker #2: Against that backdrop, we are focused on excellent execution delivering for our customers advancing the technologies we've put in place and adhering to a disciplined returns-based approach to capital allocation to grow the business and create long-term value for our shareholders.

Speaker #2: With that, Carrie, I believe we are ready to open the line for questions.

Speaker #1: Thank you. At this time, if you would like to ask a question, please press stars and the number one on your telephone keypad. As a courtesy to all participants, we ask that you limit yourself to one question and one follow-up.

Operator: Thank you. As a courtesy to all participants, we ask that you limit yourself to 1 question and 1 follow-up. We'll pause for just a moment to compile the Q&A roster. Your first question will come from Michael Blum with Wells Fargo.

Speaker #1: We'll pause for just a moment to pile the Q&A roster. Your first question will come from Michael Bloom with Wells Fargo.

Speaker #3: Thanks, good morning, everyone. I wanted to start on the guidance. You made the comment that your first quarter underlying business performance is exceeding the basis for guidance, but you didn't raise guidance here.

Michael Blum: Thanks. Good morning, everyone. Wanted to start on the guidance. You know, you made the comment that your Q1 underlying business performance is exceeding the basis for guidance, but you didn't raise guidance here. Is that just a function of the higher SG&A in Q1 or conservatism or is there something else?

Speaker #3: So is that just a function of the higher SG&A in the Q1, or conservatism, or is there something else?

Speaker #4: Yeah, look, I would say, and I can't remember exactly what we did last year because I know we had an acquisition middle of the year, but it is for us, historically, to not do anything with guidance after only a quarter is not something that is unusual.

Douglas Aron: Yeah, look, I would say, and I can't remember exactly what we did last year because I know we had an acquisition middle of the year. It is, you know, for us historically to not do anything with guidance after only a quarter is not something that is unusual. I think that it just feels early in the year. We've given a guidance range that we feel comfortable with and we'll continue to look at that as we move through the year.

Doug S. Aron: Yeah, look, I would say, and I can't remember exactly what we did last year because I know we had an acquisition middle of the year. It is, you know, for us historically to not do anything with guidance after only a quarter is not something that is unusual. I think that it just feels early in the year. We've given a guidance range that we feel comfortable with and we'll continue to look at that as we move through the year.

Speaker #4: And I think that it just feels early in the year. We've given a guidance range that we feel comfortable with. And we'll continue to look at that as we move through the year.

Speaker #3: Okay, fair enough. Appreciate that. And then wondering if you can just give us your latest view on CAT equipment lead time and how the order book is shaping up for 2027.

Michael Blum: Okay, fair enough. Appreciate that. Then, wondering if you can just give us your latest view on Cat equipment lead time and how the order book is shaping up for 2027. Thanks.

Speaker #3: Thanks.

Speaker #5: Yes, CAT lead times continue to extend out as we're seeing an extreme tightness in the supply chain. I think CAT now we're out to close to 160 weeks.

D. Bradley Childers: Yes. Cat lead times continue to extend out as we're seeing an extreme tightness in the supply chain. I think at now we're out to close to 160 weeks, so it's meaningfully out there. The interpretation I'd offer that is interesting, though. This tightness in the market just reflects a market that I believe is coiled for growth. We see this in the overall burgeoning demand for natural gas. We see this in the amount of pipeline capacity expected to come online in 2026. The amount of LNG incrementally that's going to come online in 2026, we see it in the tightness in the supply chain, and candidly, we're seeing it in our bookings. This is a market that's just posed right now for that accelerated growth for the future and candidly for years.

Speaker #5: So it's meaningfully out there. The interpretation I'd offer that is interesting, though. This tightness in the market just reflects a market that I believe is coiled for growth.

Speaker #5: We see this in the overall burgeoning demand for natural gas. We see this in the amount of pipeline capacity expected to come online in 2026, the amount of LNG incrementally that's going to come online in 2026.

Speaker #5: We see it in the tightness in the supply chain and candidly, we're seeing it in our bookings. So this is a market that's just posed right now for that accelerated growth for the future and candidly for years.

Speaker #5: As far as 2027, we are definitely going to be placing orders and have placed orders to ensure we're positioned well to meet customer demand, but we're not yet giving guidance on capex for 2027.

D. Bradley Childers: As far as 2027, we are definitely going to be placing orders and have placed orders to ensure we're positioned well to meet customer demand, but we're not yet giving guidance on CapEx for 2027.

Speaker #3: Thank you.

James Rollyson: Thank you.

Michael Blum: Thank you.

Speaker #1: Your next question will come from Eli Dawson with JP Morgan.

Operator: Your next question will come from Jeremy Tonet with JP Morgan.

Speaker #6: Hey, good morning, everyone, and congrats to Doug and your retirement and next steps ahead. Maybe to take that last point a step further, I know some of your peers have signaled reserving slots even past '27 and '28 and '29.

Jeremy Tonet: Hey, good morning, everyone, and congrats to Doug in your retirement and next steps ahead. Maybe to take that last point a step further, I know some of your peers have signaled, reserving slots even past 2027 and 2028 and 2029, just given the aforementioned tightness. Can you give any color just in terms of how you're thinking, you know, even multiple years ahead and what kind of, you know, discussions you're having with your customers so that they can ensure they're getting the equipment they need? Thanks.

Speaker #6: Just given the aforementioned tightness, can you give any color just in terms of how you're thinking even multiple years ahead and what kind of discussions you're having with your customers so that they can ensure they're getting the equipment they need?

Speaker #6: Thanks.

Speaker #5: Yeah, thanks for the question. For the customers, we are working closely with our customers to advise as to where lead times are and to help them ensure that they're not caught short and without equipment to produce and compress the gas that they're going to have in the coming years.

D. Bradley Childers: Yeah. Thanks for the question. For the customers, we are working closely with our customers to advise as to what our lead times are and to help them ensure that they're not caught short and without equipment to produce and compress the gas that they're going to have in the coming years. When we think about our outlook for the business, we are seriously optimistic about the growth ahead. That does mean we're absolutely going to use our incredibly strong balance sheet that positions us well to capture market going forward to place orders and ensure that we're not caught without equipment to support our customers' needs.

Speaker #5: When we think about our outlook for the business, we are seriously optimistic about the growth ahead. And that does mean we are absolutely going to use our incredibly strong balance sheet that positions us well to capture market going forward to place orders and ensure that we're not caught without equipment to support our customers' needs.

Speaker #5: Thinking about years beyond 2026, we assess the market overall based on. And we're willing to place orders based on a contract in hand based upon good lead and intel with our customers as well as strong market signals.

D. Bradley Childers: Thinking about years beyond 2026, we assess the market overall based on and we're willing to place orders based on a contract in hand based upon a good lead and intel with our customers as well as strong market signals. We are going to be in the position to show up and have equipment for our customers and to move the market to capture market share in the future based upon the extreme tightness we see.

Speaker #5: And so we are going to be in the position to show up and have equipment for our customers and to move the market to capture market share in the future based upon the extreme tightness we see.

Speaker #6: Got it. And then maybe just thinking about some of the strong performance we saw this quarter, it looked like pricing jumped up a bit and just want to get a sense.

Jeremy Tonet: Got it. Maybe just thinking about some of the strong performance we saw this quarter. Looked like pricing jumped up a bit. Just wanna get a sense. I know that you need to balance kind of those price increases with your customers' needs, but can you just give us a signal to how you see price trending throughout the year and maybe also confirm the cadence for deployment of horsepower this year as well, how much we're expecting and when it should come on? Thanks.

Speaker #6: I know that you need to balance kind of those price increases with your customers' needs, but can you just give us a signal to how you see price trending throughout the year and maybe also confirm the cadence for deployment of horsepower this year as well?

Speaker #6: How much we're expecting and when it should come on? Thanks.

Speaker #5: On the second part of the question first, the deployment of horsepower, it is the case that in Q1 we took that was the lowest quarter for us of deliveries of new-built horsepower, and we expect future deliveries in future quarters of 2026 to continue to grow.

D. Bradley Childers: On the second part of the question first, the deployment of horsepower, it is the case that in Q1, we took That was the lowest quarter for us of deliveries of new build horsepower, and we expect future deliveries or deliveries in future quarters of 2026 to continue to grow, and it's more back half-weighted. You'll see that shape in the curve for new equipment deliveries. We expect that to translate to start activity for the same reason. As far as pricing goes, we are very happy to see the growth in revenue per horsepower that we delivered year over year on a sequential basis.

Speaker #5: And it's more back half weighted so that you'll see that shape in the curve for new equipment deliveries. We expect that to translate to start activity for the same reason.

Speaker #5: As far as pricing goes, we are very happy to see the growth in revenue per horsepower that we delivered year over year on a sequential basis.

Speaker #5: It shows the strength in our business. And I'm going to point out that at profitability above 70% now on a sustained period of time, we are very happy with the overall pricing in the market, the returns we're achieving, and expect to grow our business to achieve growing returns to our investors going forward.

D. Bradley Childers: It shows the strength in our business, and I'm gonna point out that at profitability above 70% now for a sustained period of time, we are very happy with the overall pricing in the market, the returns we're achieving, and expect to grow our business to achieve growing returns to our investors going forward. As far as particular pricing commentary right now, and other points of strategy for the company, let's just say that we're very invested in growing this profitable business for the benefit of our investors.

Speaker #5: As far as particular pricing commentary right now, and other points of strategy for the company, let's just say that we're very invested in growing this profitable business for the benefit of our investors.

Speaker #6: Understood. Thanks.

Jeremy Tonet: Understood. Thanks.

Speaker #1: Your next question will come from Jim Ralison with Raymond James.

Operator: Your next question will come from James Rollyson with Raymond James.

James Rollyson: Hey, good morning, Doug, Brad, and Megan. Congrats, Doug, on your pending retirement, and we'll send you off properly in Aspen this summer, I think.

Speaker #7: Hey, good morning, Doug, Brad, and Megan. Congrats, Doug, on your pending retirement, and we'll send you off properly in Aspen this summer, I think.

Speaker #5: Thanks, Jim.

D. Bradley Childers: Thanks, Jim.

Speaker #7: Brad, on the oil price side, obviously you guys have been in this kind of perfect environment until recently, where the gas outlook has been fantastic and you've been growing at a pretty rapid clip, and you've had somewhat muted oil prices that have kind of helped on the lube oil and fuel cost side of the equation.

D. Bradley Childers: Brad, on the oil price side, obviously you guys have been in this kind of perfect environment until recently where gas outlook has been fantastic and you've been growing at a pretty rapid clip and you've had, you know, somewhat muted oil prices that have kind of helped on the lube oil and fuel cost side of the equation, and that's obviously changed. I'm kind of curious what y'all are seeing there and, you know, how quickly can you pass those through so you can sustain these, you know, low 70% margins in that business?

James Rollyson: Brad, on the oil price side, obviously you guys have been in this kind of perfect environment until recently where gas outlook has been fantastic and you've been growing at a pretty rapid clip and you've had, you know, somewhat muted oil prices that have kind of helped on the lube oil and fuel cost side of the equation, and that's obviously changed. I'm kind of curious what y'all are seeing there and, you know, how quickly can you pass those through so you can sustain these, you know, low 70% margins in that business?

Speaker #7: And that's obviously changed. So I'm kind of curious what y'all are seeing there and how quickly can you pass those through so you can sustain these low 70% margins in that business?

Speaker #5: We do expect to have some oil price headwinds primarily in the back half of the year. As lube oil pricing for us adjusts quarterly.

D. Bradley Childers: We do expect to have some oil price headwinds primarily in the back half of the year, as lube oil pricing for us adjusts quarterly. There's definitely a lag time between when we experience an increase in our costs and when we can pass them on to customers. I am not gonna use the word transitory. However, what we see in the market today is that we are not willing to know or to guess where oil will ultimately resolve, and therefore, where base oil and lube oil pricing will ultimately resolve. What we see for this higher stock price, higher oil price environment today is it appears to be mostly driven by external events, notably hostility in the Middle East. We need to see where that resolves longer term.

Speaker #5: There's definitely a lag time between when we experience an increase in our costs and when we can pass them on to customers. And I am not going to use the word transitory.

Speaker #5: However, what we see in the market today is that we are not willing to know or to guess where oil will ultimately resolve and therefore we're basal and lube oil pricing will ultimately resolve.

Speaker #5: But what we see for this higher stock price, higher oil price environment today is it appears to be mostly driven by external events, notably hostility in the Middle East.

Speaker #5: And so we need to see where that resolves longer term. In the meantime, we did not change our guidance. That was standing what we see for risk on lube oil pricing for the back half of the year.

D. Bradley Childers: In the meantime, we did not change our guidance, notwithstanding what we see for risk on lube oil pricing for the back half of the year. We intend to mitigate that through the best cost management we can offer in the market to continue to deliver this high level of profitability and returns to our investors.

Speaker #5: We intend to mitigate that through the best cost management we can offer in the market to continue to deliver this high level of both profitability and returns to our investors.

Speaker #7: Got it. Appreciate that. And then just on the asset sale side, you guys have been basically great portfolio managers for a while now where you keep high grading assets and redeploying the capital.

James Rollyson: Got it. Appreciate that. Then just on the asset sales side, you know, you guys have been basically great portfolio managers for a while now, where you keep high-grading assets and redeploying the capital. Just curious, if you have any color or view and maybe you don't yet, but just on how we should think about incremental, you know, kind of older asset sales that you're looking to monetize just as we, you know, think about how that impacts the numbers and there's obviously a lag between getting the capital and redeploying it. Just wondering how do you think about that going forward?

Speaker #7: Just curious, if you have any color or view and maybe you don't yet, but just on how we should think about incremental kind of older asset sales that you're looking to monetize just as we think about how that impacts the numbers and there's obviously a lag between getting the capital and redeploying it.

Speaker #7: So just wondering how do you think about that going forward?

D. Bradley Childers: The fleet repositioning we've been engaged in for the last, just a number of years now, has been remarkably consistent. Just when I think that we actually have de-aged the fleet and we no longer have a lot of assets in that category for disposal, yet the calendar turns, another year passes, and we find that there's still an opportunity for some assets that we believe will not be as competitive for the future. This program on our asset management that we've implemented has some real benefits, and it's really important. First and foremost, in keeping our fleet as competitive as we can keep it and in providing the best service to our customers that we can deliver.

Speaker #5: Complete repositioning. We've been engaged in for the last number of years now. Has been remarkably consistent. And just when I think that we actually have de-aged the fleet and we no longer have a lot of assets in that category for disposal, yet the calendar turns another year passes and we find that there's still an opportunity for some assets that we believe will not be as competitive for the future.

Speaker #5: And so this program on our asset management that we've implemented has some real benefits and it's really important. And first and foremost, in keeping our fleet as competitive as we can keep it and in providing the best service to our customers that we can deliver.

D. Bradley Childers: You know, second, when we look at the total ownership of the life of a unit, it allows us to really think about how to optimize the total cash flow coming out of a unit, for its life and to sell units while they still have meaningful market value, which is why we've been able to generate nice gain on sell on a fairly consistent basis through our asset management program, you know, over that period of time. We take those proceeds and redeploy it into our new build program, which is a very efficient, you know, overall capital management program. The third benefit is that even though I know this is, this is a gain on sell income, in some ways it accelerates some of that EBITDA into the period.

Speaker #5: Second, when we look at the total ownership over the life of a unit, it allows us to really think about how to optimize the total cash flow coming out of a unit.

Speaker #5: For its life. And to sell units while they still have meaningful market value, which is why we've been able to generate nice gain on sale at a fairly consistent basis.

Speaker #5: Through our asset management program, over that period of time. And then we take those proceeds and redeploy it into our new build program, which is a very efficient overall capital management program.

Speaker #5: And so the third benefit is that even though I know this is a gain on sale income, in some ways it accelerates some of that EBITDA into the period.

D. Bradley Childers: It's a really effective program when you think about those three primary benefits. We're going to continue to engage in a very disciplined asset management approach. I do think that looking to our past levels is fairly indicative of what could happen in the future. It's very difficult to forecast this, but we're gonna continue. That said, it's gonna be consistent with past levels, but I do think it's going to ramp down a bit, potentially lower going forward only because of the amazing growth environment that we find ourselves in as an industry, in compression and for natural gas production, and because of the high quality and repositioning we've already accomplished on the fleet.

Speaker #5: So it's a really effective program when you think about those three primary benefits. So we're going to continue to engage in a very disciplined asset management approach.

Speaker #5: I do think that looking to our past levels is fairly indicative of what could happen in the future. It's very difficult to forecast this.

Speaker #5: But we're going to continue in that said, it's going to be consistent with past levels, but I do think it's going to ramp down a bit potentially lower going forward only because of the amazing growth environment that we find ourselves in as an industry.

Speaker #5: In compression and financial gas production. And because of the high quality and repositioning we've already accomplished on the fleet.

Speaker #7: Appreciate the color and thanks, you guys.

James Rollyson: Appreciate the color and thank you guys.

Speaker #1: Your next question will come from Nate Pendleton with Texas Capital.

Operator: Your next question will come from Nate Pendleton with Texas Capital.

Speaker #7: Good morning, Brad and Doug. Brad, in your prepared remarks, you called out improving compression demand outside of the Permian. Can you talk about where you see those opportunities geographically and maybe if there's any difference in the unit sizes needed for those opportunities?

Nate Pendleton: Good morning, Brad and Doug. Brad, in your prepared remarks, you called out improving compression demand outside of the Permian. Can you talk about where you see those opportunities geographically and maybe if there's any difference in the unit sizes needed for those opportunities?

D. Bradley Childers: Yes. Great question. What we saw in the quarter was that, and really beneficially, only about 35% of our bookings were in the Permian in the quarter. More were outside. They're spread, you know, fairly evenly between the Northeast, the Mid-Continent, the South, and that would be in East Texas, Haynesville and the Rockies. It's been a nice spread, but it's also been good to see units moving into other markets and other basins accomplishing some growth, especially on natural gas. The unit sizes are more diverse in the plays outside the Permian, especially in the electric motor drives that we're deploying, where we see a spread of horsepower more, you know, all the way from 400, 800, and moving up to 1,500.

Speaker #5: Yes. Great question. What we saw in the quarter was that and really beneficially, only about 35% of our bookings were in the Permian in the quarter.

Speaker #5: And so more were outside. And they're spread fairly evenly between the Northeast, the Midcontinent, the South, and that would be East Texas, Haynesville, and the Rockies.

Speaker #5: And so it's been a nice spread, but it's also been good to see units moving into other markets and other basins accomplishing some growth, especially on natural gas.

Speaker #5: And the unit sizes are more diverse in the plays outside the Permian. Especially in the electric motor drives that we're deploying. Where we see a spread of horsepower more all the way from 400, 800, and potentially moving up to 1500.

Speaker #5: So, we do see more diversity, but it's primarily within the electric motor drives that we're seeing the smaller horsepower go out into the marketplace.

D. Bradley Childers: We do see more diversity, but it's primarily within the electric motor drives that we're seeing the smaller horsepower go out into the marketplace.

Speaker #7: Got it. I appreciate that. And then as my follow-up, with the longer timelines for large horsepower units, it's been very topical so far. Can you talk about if those if that delay changes your procurement strategy with packagers?

Nate Pendleton: Got it. I appreciate that. As my follow-up, with the longer timelines for large horsepower units that's been very topical so far, can you talk about if that delay changes your procurement strategy with packagers? Do you have to put down a deposit for the full unit so far in advance? Maybe can you help us understand the cash flow implications of such a long lead time for just the engines?

Speaker #7: Do you have to put down a deposit for the full unit so far in advance? And maybe can you help us understand the cash flow implications of such a long lead time for just the engines?

Speaker #5: Well, without going into too much on our procurement strategy and the work we do with our packagers, I will say we're very aligned with our packagers in fulfillment and making sure we can manage the need it does not require a change in the overall kind of structure of the cash flows where we still expect to have very effective deployment of capital so that the unit revenue is recognized within two months to three months max of when the bulk of the capital goes out the door for a unit.

D. Bradley Childers: Well, without going into too much on our procurement strategy and the work we do with our packagers, I will say we're very aligned with our packagers in fulfillment and making sure we can manage the need. It does not require a change in the overall kind of structure of the cash flows, where we still expect to have very effective deployment of capital so that the unit revenue is recognized, you know, within 2 months to 3 months max of when the bulk of the capital goes out the door for a unit.

Speaker #7: Got it. Thanks for taking my questions.

Nate Pendleton: Got it. Thanks for taking my questions.

Speaker #5: Thank you.

D. Bradley Childers: Thank you.

Speaker #1: Your next question will come from Doug Irwin with Citi.

Operator: Your next question will come from Douglas Irwin with Citi.

Douglas Irwin: Hey, team. Thanks for the question. Brad, you made a comment in your prepared remarks about maintaining flexibility for both organic and inorganic growth. Just curious if inorganic growth becomes even more attractive here, just given where lead times are, as well as the fact that you have a much stronger equity currency compared to the last few acquisitions you did.

Speaker #7: Hey, team. Thanks for the question. Brad, you made a comment in your prepared remarks about maintaining flexibility for both organic and inorganic growth. I'm just curious if inorganic growth becomes even more attractive here just given where lead times are as well as the fact that you have a much stronger equity currency compared to the last few acquisitions you did.

Speaker #5: We are extremely well positioned both from a balance sheet perspective given our low leverage ratio now and our equity position with higher stock price.

D. Bradley Childers: We are, you know, extremely well-positioned both from a balance sheet perspective, given our low leverage ratio now, and our equity position with higher stock price. We're definitely really well-positioned to finance any growth going forward, including inorganic growth. I would say that it doesn't make the targets look more attractive. We're still gonna be very disciplined in how we evaluate the opportunity set going forward. We wanna make sure that if we, if we see an opportunity that we know why we can add value to that opportunity or why that opportunity adds value to us. So the discipline's gonna remain outstanding, the really strong financial position we're in. We do see that there are a number of opportunities in the marketplace that could develop over the coming years.

Speaker #5: We're definitely really well positioned to finance any growth going forward, including inorganic growth. But I would say that it's not going to it doesn't make the targets look more attractive and we're still going to be very disciplined in how we evaluate the opportunities set going forward.

Speaker #5: We want to make sure that if we see an opportunity that we know why we can use why we can add value to that opportunity or why that opportunity adds value to us.

Speaker #5: So the discipline is going to remain. They're not withstanding the really strong financial position we're in. But we do see that there are a number of opportunities in the marketplace that could develop over the coming years.

Speaker #5: And we're optimistic that just like our track record of having grown through acquisition with tops, with NGCSI, that there will be opportunities for us to deploy capital into the market through both means.

D. Bradley Childers: We're optimistic that just like our track record of having grown through acquisition with TOPS, with NGCSi, that there will be opportunities for us to deploy capital into the market through both means.

Speaker #7: Got it. Thanks for that. And then maybe just a higher level one as a follow-up here. Sounds like you're working pretty closely with your own customers to make sure they have enough supply over the next year or so.

Douglas Irwin: Got it. Thanks for that. Then maybe just a higher level one as a follow-up here. Sounds like you're working pretty closely with your own customers to make sure they have enough supply over the next year or so. It's obviously a pretty dynamic market, so just curious to get your view on the balance of the broader market here going forward. I guess, is there a potential scenario where we could see compression become kind of a real near-term bottleneck if we see producers look to start accelerating activity into the back half of the year? Just curious kinda how much slack you see there being in broader compression market here.

Speaker #7: But it's obviously a pretty dynamic market. So, just curious to get your view on the balance of the broader market here going forward, I guess.

Speaker #7: Is there a potential scenario where we could see compression become kind of a real near-term bottleneck if we see producers look to start accelerating activity into the back half of the year?

Speaker #7: Just curious kind of how much slack you see there being in broader compression market here.

Speaker #5: I don't know that I have enough visibility into the market to be able to answer the question accurately, but I would step back and pose the following.

D. Bradley Childers: I don't know that I have enough visibility into the market to be able to answer the question accurately. I would step back and pose the following, that for the United States to deliver all of the LNG we're targeting to export and all the power we expect to fuel through natural gas. I'm gonna stick to that. It's in our lane. That we have a lot of power capacity, power plants, and power generation to build. We have a lot of lines to lay. We have a lot of pipelines to lay. We have a lot of gas plants to go in, and we have a lot of compression to go into the market. It is not all going to happen without some bottlenecks and delays along that entire supply chain.

Speaker #5: That for the United States, to deliver all of the LNG we're targeting to export and all the power we expect to fuel through natural gas.

Speaker #5: I'm going to stick to that. It's in our lane. That we got we have a lot of power capacity, power plants, power generation to build.

Speaker #5: We have a lot of lines to lay. We have a lot of pipelines to lay. We have a lot of gas plants to go in.

Speaker #5: And we have a lot of compression to go into the market. It is not all going to happen without some bottlenecks and delays, along that entire supply chain.

Speaker #5: At Archrock, we're very invested to not being one of them.

D. Bradley Childers: At Archrock, we're very invested to not being one of them.

Speaker #7: Yeah. And look, I think I'd just add, like with our utilization, as high as it is, the industry, at tight utilization, as Brad pointed out, there are a lot of macro factors we saw a large ENP make a pretty aggressive announcement earlier in the week about their ability to grow even this year.

Douglas Aron: Yeah. Look, I think I'd just add, like, with, you know, our utilization as high as it is, the industry at tight utilization. As Brad pointed out, you know, there are a lot of macro factors. You know, we saw large E&P make a pretty aggressive announcement earlier in the week about their ability to grow even this year. I think we're gonna do everything we can to continue to make sure we have equipment for our customers and support this growth for compression.

Doug S. Aron: Yeah. Look, I think I'd just add, like, with, you know, our utilization as high as it is, the industry at tight utilization. As Brad pointed out, you know, there are a lot of macro factors. You know, we saw large E&P make a pretty aggressive announcement earlier in the week about their ability to grow even this year. I think we're gonna do everything we can to continue to make sure we have equipment for our customers and support this growth for compression.

Speaker #7: And I think we're going to do everything we can to continue to make sure we have equipment for our customers. And support this growth for compression.

Speaker #7: Understood. Thanks for the time.

Douglas Irwin: Understood. Thanks for the time.

Speaker #1: Your final question will come from Steve Ferrazzani with Sothe.

Operator: Your final question will come from Stephen Ferazani with Sidoti.

Speaker #8: Good morning, everyone. Thanks for taking my questions. Brad and Doug, when I think about your fleet, which you've obviously spent several years high grading, it's larger horsepower units.

Stephen Ferazani: Morning, everyone. Thanks for taking my questions. Brad and Doug, when I think about your fleet, which you've obviously spent several years high grading, its larger horsepower units, it's a younger fleet. How do you think about changes in annual maintenance and other CapEx, particularly in a quarter where it looks like a lot of your guidance for the full year, other CapEx was taken in Q1?

Speaker #8: It's a younger fleet. How do you think about changes in annual maintenance and other capex, particularly in a quarter where it looks like a lot of your guidance for the full year other capex was taken in Q1?

Speaker #5: A few things you're seeing in our capex. Number one, our capex is typically dictated by what the units tell us they need from the time on location, time in operation, and hours perspective.

D. Bradley Childers: A few things you're seeing in our CapEx. Number one, our CapEx is typically dictated by what the units tell us they need from a time on location, time in operation, and hours perspective. We are seeing an incremental uptick in our maintenance CapEx right now because of the time at which we added the horsepower in prior years. We just have more large horsepower due for major maintenance this year than we have in the most recent couple of years. That's what you're gonna see in major maintenance in particular is just going to be exactly that, the timing required for the units based upon, you know, hours of operations in the field, and that's what we're experiencing.

Speaker #5: We are seeing an incremental uptick in our maintenance capex right now because of the time at which we added the horsepower in prior years.

Speaker #5: We just have more large horsepower due for major maintenance this year than we have in most recent in the most recent couple of years.

Speaker #5: So that's what you're going to see in major maintenance in particular is just going to be exactly that, the timing required for the units based upon hours of operation in the field.

Speaker #5: And that's what we're experiencing. And even though we've de-aged the fleet nicely, we've standardized the mix of fleet really well. And we've increased the average size of horsepower and added in electric motor drives.

D. Bradley Childers: Even though we've de-aged the fleet nicely, we've standardized the mix of fleet really well, and we've increased the average size of horsepower and added in electric motor drives. The other aspect that you're seeing is that we grew through acquisition, some of what we're seeing for the year includes the NGCSi units coming into our fleet. Finally, we did go through a period of inflation that was pretty steep. Just the maintenance investment required for the same work has increased over time. That's what you're seeing in our maintenance activity overall. That said, we're very dedicated to ensuring we spend the maintenance capital required by the units to deliver superior customer service over time.

Speaker #5: The other aspect that you're seeing is that we've grown through acquisition. And so some of what we're seeing for the year includes the NGCSI units coming into our fleet.

Speaker #5: And finally, we did go through a period of inflation that was pretty steep. And so just the maintenance investment required for the same work has increased over time.

Speaker #5: So that's what you're that's what you're seeing in our maintenance activity overall. That said, we're very dedicated to ensuring we spend the maintenance capital required by the units to deliver superior customer service over time.

Speaker #8: And when we think about your other capex guidance for the year, it looks like you spent about half of it in Q1. Was there anything particular, any reason to think that number could end up higher?

Stephen Ferazani: When we think about your other CapEx guidance for the year, it looks like you spent about half of it in Q1. Was there anything particular, any reason to think that number could end up higher?

Speaker #5: Like we just timing, the other capex is primarily trucks and computers. And so that would just mostly be the timing of delivery to our truck fleet.

D. Bradley Childers: Likely just timing. The other CapEx.

Stephen Ferazani: Yeah

D. Bradley Childers: primarily trucks and computers. That would just mostly be the timing of delivery of our truck fleet to support the growth that we're seeing in the marketplace and making sure we have the right transportation for our mechanics.

Speaker #5: Support the growth that we're seeing in the marketplace, and make sure we have the right transportation for our mechanics.

Speaker #8: Got it. That's helpful. And then just, I mean, you almost doubled your available liquidity sequentially with the asset sales. When you think about returning capital to shareholders, does that mean you can get more aggressive, or do you have to carefully think about the multi-year likely expansion of your fleet given the expected demand growth?

Stephen Ferazani: Got it. That's helpful. Just, I mean, you almost doubled your available liquidity sequentially with the asset sales. When you think about returning capital to shareholders, does that mean you can get more aggressive, or do you have to carefully think about the multiyear likely expansion of your fleet given the expected demand growth?

Speaker #5: Fortunately, we're in the position to be able to pay attention to both these key drivers for value creation for our investors. First and foremost, given the market we're in, as you just highlighted, growth.

D. Bradley Childers: Fortunately, we're in the position to be able to pay attention to both these key drivers for value creation for our investors. First and foremost, given the market we're in, as you just highlighted, growth. Poised for growth in maintaining some dry powder for growth is absolutely strategically something we wanna make sure we have done. We do expect to continue to grow our cash returns to our investors over time as we grow our business. We certainly have the financial strength to do that comfortably.

Speaker #5: Poise for growth and maintaining some dry powder for growth is absolutely strategically something we want to make sure we have done. But we do expect to continue to grow our cash returns to our investors over time.

Speaker #5: As we grow our business, we certainly have the financial strength to do that comfortably.

Speaker #8: Okay. Thanks, everyone.

Stephen Ferazani: Great. Thanks, everyone.

Operator: There are no more questions. Now I'd like to turn the call back over to Mr. Childers for final remarks.

Speaker #1: And there are no more questions. Now I'd like to turn the call back over to Mr. Childers for a final remarks.

Operator: There are no more questions. Now I'd like to turn the call back over to Mr. Childers for final remarks.

Speaker #5: Thank you for joining us today. We're pleased with our strong start to 2026 and remain focused on execution, profitable growth, and returning capital to shareholders.

D. Bradley Childers: Thank you for joining us today. We're pleased with our strong start to 2026 and remain focused on execution, profitable growth, and returning capital to shareholders. We appreciate your support and look forward to updating you on our progress next quarter. Thank you.

Speaker #5: We appreciate your support and look forward to updating you on our progress next quarter. Thank you.

Operator: Thank you for your participation. This does conclude today's conference. You may now disconnect.