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HOUSTON, Feb. 24, 2025 (GLOBE NEWSWIRE) -- Archrock, Inc. (NYSE: AROC) ("Archrock”) today reported results for the fourth quarter and full year 2024.
Fourth Quarter and Full Year 2024 Highlights
- Revenue for the fourth quarter of 2024 was $326.4 million compared to $259.6 million in the fourth quarter of 2023. Revenue for 2024 was $1,157.6 million compared to $990.3 million in 2023.
- Net income for the fourth quarter of 2024 was $59.8 million and EPS was $0.34, compared to $33.0 million and $0.21, respectively, in the fourth quarter of 2023. Net income for 2024 was $172.2 million and EPS was $1.05, compared to $105.0 million and $0.67, respectively, in 2023.
- Adjusted net income (a non-GAAP measure defined below) for the fourth quarter of 2024 was $61.5 million and adjusted EPS (a non-GAAP measure defined below) was $0.35, compared to $33.0 million and $0.21, respectively, in the fourth quarter of 2023. Adjusted net income for 2024 was $185.2 million and adjusted EPS was $1.13 compared to $105.0 million and $0.67, respectively, in 2023.
- Adjusted EBITDA (a non-GAAP measure defined below) for the fourth quarter of 2024 was $183.8 million compared to $120.3 million in the fourth quarter of 2023. Adjusted EBITDA for 2024 was $595.4 million compared to $450.4 million in 2023.
- Declared a quarterly dividend of $0.19 per common share for the fourth quarter of 2024, approximately 15% higher compared to the fourth quarter of 2023, resulting in dividend coverage of 3.5x.
Management Commentary and Outlook
"Archrock's outstanding fourth quarter performance rounded out a record-setting year of robust utilization and profitability,” said Brad Childers, Archrock's President and Chief Executive Officer. "For 2024, we increased our contract operations adjusted gross margin by 500 basis points, improved our net income by over 60% and grew our adjusted EBITDA by more than 30% year over year. We maintained a prudent balance sheet, ending the year with a leverage ratio of 3.3x, and returned $124 million in capital to our shareholders through dividends and share buybacks. We achieved these milestones while concurrently completing a transformative acquisition that established our leadership position in electric motor drive compression.
"We are even more excited about what we are positioned to deliver in 2025. Archrock continues to perform at an exceptional level, reflecting consistent operational execution and the successful progression of our strategic initiatives. Our investment in high-quality assets, excellent customer service and implementation of innovative technology and processes are driving value for our customers and our shareholders.
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"Moreover, we see the market opportunities provided by rising energy demand, and in particular, the natural gas required to support growing LNG exports and power generation, continuing into the foreseeable future. With sustained high utilization levels and a large and contracted backlog for 2025, we are booking units for 2026 delivery and believe we will continue to see strong customer demand for new equipment well into next year.
"This impressive and durable investment outlook for Archrock is further underpinned by our financial flexibility and returns-based capital allocation. We are investing in profitable, high-return growth in large midstream and electric motor drive compression to support our high-quality customers in premier, primarily associated gas, plays like the Permian. We also remain committed to consistent growth in shareholder returns and started the year with a 15% year-over-year increase to our quarterly dividend per share, while maintaining prudent dividend coverage and leverage ratios,” concluded Childers.
Fourth Quarter and Full Year 2024 Financial Results
Archrock's fourth quarter 2024 net income of $59.8 million included a non-cash long-lived and other asset impairment of $1.2 million, transaction-related costs totaling $2.2 million and a non-cash unrealized decrease in the fair value of our investment in an unconsolidated affiliate of $1.5 million. Archrock's fourth quarter 2023 net income of $33.0 million included a non-cash long-lived and other asset impairment of $3.7 million and a non-cash unrealized increase in the fair value of our investment in an unconsolidated affiliate of $1.0 million.
Fourth quarter 2024 selling, general, and administrative expenses of $42.2 million compared to $33.0 million for the fourth quarter of 2023 primarily reflect the increase in stock price throughout the year, which drove higher long-term incentive compensation, as well as other increases in performance-based short-term and long-term incentive compensation expense given the outperformance relative to earlier expectations in 2024.
Adjusted EBITDA for the fourth quarter of 2024 and 2023 included $12.7 million and $2.2 million, respectively, in net gains related to the sale of compression and other assets.
Archrock's full year 2024 net income of $172.2 million included the following items: transaction-related costs totaling $13.2 million, a non-cash long-lived and other asset impairment of $10.7 million, a debt extinguishment loss of $3.2 million, and a non-cash unrealized decrease in the fair value of our investment in an unconsolidated affiliate of $1.5 million. Archrock's full year 2023 net income of $105.0 million included the following items: a non-cash long-lived and other asset impairment of $12.0 million, restructuring charges of $1.8 million and a non-cash unrealized decrease in the fair value of our investment in an unconsolidated affiliate of $1.0 million.
Adjusted EBITDA for the full year 2024 and 2023 included $17.9 million and $10.2 million, respectively, in net gains related to the sale of compression and other assets.
Contract Operations
For the fourth quarter of 2024, contract operations segment revenue totaled $286.5 million, an increase of 34% compared to $213.0 million in the fourth quarter of 2023. Adjusted gross margin for the fourth quarter of 2024 was $200.2 million, up 46% from $137.1 million. Adjusted gross margin percentage for the fourth quarter of 2024 was 70%, compared to 64% in the fourth quarter of 2023. Total operating horsepower at the end of the fourth quarter of 2024 was 4.2 million compared to 3.6 million at the end of the fourth quarter of 2023. Utilization at the end of the fourth quarter of 2024 was 96%, consistent with the fourth quarter of 2023.
Aftermarket Services
For the fourth quarter of 2024, aftermarket services segment revenue totaled $40.0 million, compared to $46.6 million in the fourth quarter of 2023 due to seasonal delay in service activity. Adjusted gross margin for the fourth quarter of 2024 was $9.1 million, compared to $10.2 million in the fourth quarter of 2023. Adjusted gross margin percentage for the fourth quarter of 2024 was 23%, compared to 22% for the fourth quarter of 2023.
Balance Sheet
Long-term debt was $2.2 billion and our available liquidity totaled $688 million at December 31, 2024. Our leverage ratio was 3.3x as of December 31, 2024, down from 3.5x as of December 31, 2023.
Quarterly Dividend
Our Board of Directors recently declared a quarterly dividend of $0.19 per share of common stock, or $0.70 per share on an annualized basis for the year ended December 31, 2024. Dividend coverage in the fourth quarter of 2024 was 3.5x. The fourth quarter 2024 dividend was paid on February 19, 2025 to stockholders of record at the close of business on February 12, 2025.
2025 Annual Guidance
(in thousands, except percentages, per share amounts, and ratios)
| Full Year 2025 Guidance | |||||||
| Low | High | ||||||
| Net income (1) (2) | $ | 253,000 | $ | 293,000 | |||
| Adjusted EBITDA(3) | 750,000 | 790,000 | |||||
| Cash available for dividend(4) (5) | 456,000 | 471,000 | |||||
| Segment | |||||||
| Contract operations revenue | $ | 1,200,000 | $ | 1,235,000 | |||
| Contract operations adjusted gross margin percentage | 68 | % | 71 | % | |||
| Aftermarket services revenue | $ | 190,000 | $ | 210,000 | |||
| Aftermarket services adjusted gross margin percentage | 22 | % | 24 | % | |||
| Selling, general and administrative | $ | 147,000 | $ | 142,000 | |||
| Capital expenditures | |||||||
| Growth capital expenditures | $ | 330,000 | $ | 370,000 | |||
| Maintenance capital expenditures | 105,000 | 115,000 | |||||
| Other capital expenditures | 35,000 | 50,000 | |||||
| __________________________________ | |||||||
| (1) 2025 annual guidance for net income does not include the impact of long-lived and other asset impairment 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 2024 and 2023 was $10.7 million and $12.0 million, respectively. | |||||||
| (2) Reflects an estimate of expenses to be incurred related to the acquisition of Total Operations and Production Services, LLC (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 $(25.8) million and $(28.0) million for the years 2024 and 2023, respectively. | |||||||
Summary Metrics
(in thousands, except percentages, per share amounts and ratios)
| Three Months Ended | Year Ended | |||||||||||||||||||||
| December 31, | September 30, | December 31, | December 31, | December 31, | ||||||||||||||||||
| 2024 | 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||
| Net income | $ | 59,758 | $ | 37,516 | $ | 33,002 | $ | 172,231 | $ | 104,998 | ||||||||||||
| Adjusted net income (1) | $ | 61,533 | $ | 47,313 | $ | 33,002 | $ | 185,211 | $ | 104,998 | ||||||||||||
| Adjusted EBITDA (1) | $ | 183,844 | $ | 150,854 | $ | 120,263 | $ | 595,434 | $ | 450,387 | ||||||||||||
| Contract operations revenue | $ | 286,466 | $ | 245,420 | $ | 213,022 | $ | 980,405 | $ | 809,439 | ||||||||||||
| Contract operations adjusted gross margin | $ | 200,245 | $ | 165,610 | $ | 137,062 | $ | 657,353 | $ | 502,691 | ||||||||||||
| Contract operations adjusted gross margin percentage | 70 | % | 67 | % | 64 | % | 67 | % | 62 | % | ||||||||||||
| Aftermarket services revenue | $ | 39,950 | $ | 46,741 | $ | 46,571 | $ | 177,186 | $ | 180,898 | ||||||||||||
| Aftermarket services adjusted gross margin | $ | 9,054 | $ | 12,346 | $ | 10,239 | $ | 41,737 | $ | 38,627 | ||||||||||||
| Aftermarket services adjusted gross margin percentage | 23 | % | 26 | % | 22 | % | 24 | % | 21 | % | ||||||||||||
| Selling, general, and administrative | $ | 42,234 | $ | 34,059 | $ | 33,007 | $ | 139,121 | $ | 116,639 | ||||||||||||
| Net cash provided by operating activities | $ | 124,338 | $ | 96,900 | $ | 71,719 | 429,591 | 310,187 | ||||||||||||||
| Cash available for dividend(1) | $ | 118,089 | $ | 92,887 | $ | 71,484 | $ | 364,595 | $ | 232,979 | ||||||||||||
| Cash available for dividend coverage (2) | 3.5 | x | 3.0 | x | 2.8 | x | 3.1 | x | 2.4 | x | ||||||||||||
| Adjusted free cash flow (1) (3) | $ | 68,945 | $ | (834,282 | ) | $ | 47,385 | (730,472 | ) | 77,696 | ||||||||||||
| Adjusted free cash flow after dividend (1) (3) | $ | 38,255 | $ | (862,147 | ) | $ | 23,195 | (840,846 | ) | (18,100 | ) | |||||||||||
| Total available horsepower (at period end) (4) | 4,401 | 4,418 | 3,759 | 4,401 | 3,759 | |||||||||||||||||
| Total operating horsepower (at period end) (5) | 4,227 | 4,179 | 3,607 | 4,227 | 3,607 | |||||||||||||||||
| Horsepower utilization spot (at period end) (6) | 96 | % | 95 | % | 96 | % | 96 | % | 96 | % | ||||||||||||
| __________________________________ | ||||||||||||||||||||||
| (1) Management believes adjusted net income, adjusted EBITDA, cash available for dividend, adjusted free cash flow and adjusted free cash flow after dividend provide useful information to investors because these non-GAAP measures, when viewed with our GAAP results and accompanying reconciliations, provide a more complete understanding of our performance than GAAP results alone. Management uses these non-GAAP measures as supplemental measures to review current period operating performance, comparability measures and performance measures for period-to-period comparisons. | ||||||||||||||||||||||
| (2) Defined as cash available for dividend divided by dividends declared for the period. | ||||||||||||||||||||||
| (3) Reflects $866.2 million cash paid in TOPS Acquisition, net of cash acquired. | ||||||||||||||||||||||
| (4) Defined as idle and operating horsepower and includes new compressor units completed by a third-party manufacturer that have been delivered to us. | ||||||||||||||||||||||
| (5) Defined as horsepower that is operating under contract and horsepower that is idle but under contract and generating revenue such as standby revenue. | ||||||||||||||||||||||
| (6) Defined as total available horsepower divided by total operating horsepower at period end. | ||||||||||||||||||||||
Conference Call Details
Archrock will host a conference call on February 25, 2025, to discuss fourth quarter and full year 2024 financial results. The call will begin at 9:00 a.m. Eastern Time.
To listen to the call via a live webcast, please visit Archrock's website at www.archrock.com. The call will also be available by dialing 1 (800) 715-9871 in the United States or 1 (646) 307-1963 for international calls. The access code is 4749623.
A replay of the webcast will be available on Archrock's website for 90 days following the event.
Adjusted net income, a non-GAAP measure, is defined as net income (loss) excluding transaction-related costs and debt extinguishment loss adjusted for income taxes. A reconciliation of adjusted net income to net income, the most directly comparable GAAP measure, and a reconciliation of adjusted earnings per share to basic and diluted earnings per common share, the most directly comparable GAAP measure, appear below.
Adjusted EBITDA, a non-GAAP measure, is defined as net income (loss) excluding interest expense, income taxes, depreciation and amortization, long-lived and other asset impairment, unrealized change in fair value of investment in unconsolidated affiliate, restructuring charges, de
