Archrock, Inc. (NYSE: AROC) (“Archrock”) today reported results for
the fourth quarter and full year 2022 and provided 2023 financial
guidance.
Fourth Quarter and Full Year 2022
Highlights
- Revenue for the fourth quarter of
2022 was $218.9 million compared to $195.2 million in the fourth
quarter of 2021. Revenue for 2022 was $845.6 million compared to
$781.5 million in 2021.
- Net income for the fourth quarter
of 2022 was $10.5 million compared to $6.0 million in the
fourth quarter of 2021. Net income for 2022 was $44.3 million
compared to $28.2 million in 2021.
- Adjusted EBITDA (a non-GAAP measure
defined below) for the fourth quarter of 2022 was $89.0 million
compared to $83.5 million in the fourth quarter of 2021. Adjusted
EBITDA for 2022 was $363.3 million compared to $360.8 million in
2021.
- Declared a quarterly dividend of
$0.15 per common share for the fourth quarter of 2022, an increase
of 3 percent over the third quarter 2022 level. Dividend coverage
for 2022 was 1.9x compared to 2.2x in 2021.
- Achieved record period-end utilization of 93% for the fourth
quarter of 2022 compared to 84% in the fourth quarter of 2021.
Management Commentary and Outlook
“We closed out 2022 with significant operating
momentum and solid financial performance,” said Brad Childers,
Archrock’s President and Chief Executive Officer. “For the full
year 2022, we grew operating horsepower by approximately 375,000
horsepower, excluding non-strategic asset sales, drove a 900 basis
point increase in our period-end utilization to 93% and generated
net income and earnings per share growth. We also continued to
divest small, non-strategic compressors, and, as a result, large
horsepower now represents 84% of our total fleet.
“Our 2023 outlook reflects progress on our
strategic transformation and market fundamentals for the
compression industry that are as exciting as I have ever seen. This
includes record utilization, significantly higher pricing and
enhanced profitability, which at the midpoint of our guidance
translates into adjusted EBITDA growth of more than $50 million
compared to 2022. Our focus in the coming year will be on
demonstrating our earnings power through excellent operating
execution – efficiently and profitably capturing robust demand for
compression, continuing to deliver a first-rate customer
experience, harnessing our upgraded technology platform and
high-graded asset base and prioritizing opportunities to help our
customers with emissions management.
“Turning to capital allocation, our conviction
in a multi-year upcycle for compression and Archrock’s strategy
drove the decision to resume dividend growth, beginning with the
February 2023 payment. With proactive debt reduction of more than
$300 million since the end of 2019 and a visible inflection point
in our financial performance, we expect to achieve a leverage ratio
of below 4.0 times as well as dividend coverage of approximately
2.0 times during 2023. At the same time, as the demand for
compression exceeds available equipment, we plan to capitalize on
the opportunity to redeploy the proceeds received from
non-strategic asset sales for investment in large horsepower
compression units. I am confident that the strength of our people,
assets and strategy will drive continued and increased shareholder
value and returns in 2023 and beyond,” concluded
Childers.
Fourth Quarter and Full Year 2022
Financial Results
Archrock’s fourth quarter 2022 net income of
$10.5 million included a non-cash long-lived and other asset
impairment of $5.2 million and a non-cash unrealized change in the
fair value of our investment in an unconsolidated affiliate of $1.9
million. Archrock’s fourth quarter 2021 net income of $6.0 million
included a non-cash long-lived and other asset impairment of $6.2
million and restructuring costs of $950,000, partially offset by an
insurance settlement related to damages to facilities and
compressors caused by Hurricane Ida of $2.8 million.
Adjusted EBITDA for the fourth quarter of 2022
and 2021 included $6.7 million and $0.7 million, respectively, in
net gains related to the sale of compression and other assets.
Archrock’s full year 2022 net income of $44.3
million included the following items: non-cash long-lived and other
asset impairment of $21.4 million and a non-cash unrealized change
in the fair value of our investment in an unconsolidated affiliate
of $1.9 million. Archrock’s full year 2021 net income of $28.2
million included the following items: non-cash long-lived and other
asset impairment of $21.4 million, restructuring costs related to
severance and property exit and disposals totaling $2.9 million, a
non-cash write-off of unamortized deferred financing costs of $4.9
million, non-cash depreciation expense from the write-off of assets
damaged in Hurricane Ida of $2.0 million and a non-income-based tax
benefit of $2.5 million.
Adjusted EBITDA for the full year 2022 and 2021
included $40.5 million and $30.3 million, respectively, in net
gains related to the sale of compression and other assets.
Contract Operations
For the fourth quarter of 2022, contract
operations segment revenue totaled $177.4 million, an increase of
11% compared to $159.5 million in the fourth quarter of 2021. Gross
margin was $103.0 million, up from $99.0 million in the fourth
quarter of 2021. This reflected a gross margin percentage of 58%,
compared to 62% in the fourth quarter of 2021. Total operating
horsepower at the end of the fourth quarter of 2022 was 3.4 million
compared with 3.2 million at the end of the fourth quarter of 2021,
and reflected the sale of 176,000 active horsepower as part of our
ongoing fleet high-grading initiative. Utilization at the end of
the fourth quarter of 2022 was 93%, compared to 84% at the end of
the fourth quarter of 2021.
Aftermarket Services
For the fourth quarter of 2022, aftermarket
services segment revenue totaled $41.5 million, an increase of 16%
compared to $35.7 million in the fourth quarter of 2021, driven by
higher parts sales and service activity. Gross margin of $7.1
million increased 36% compared to $5.2 million in the fourth
quarter of 2021. Gross margin percentage was 17%, up from 15% in
the prior year quarter.
Balance Sheet
Long-term debt was $1.5 billion at December 31,
2022 and our available liquidity totaled $487.6 million. Our
leverage ratio was 4.4x, compared to 4.3x as of December 31,
2021.
Quarterly Dividend
Our Board of Directors recently declared an
increased quarterly dividend of $0.15 per share of common stock, or
$0.60 per share on an annualized basis. The fourth quarter 2022
dividend per share amount represents an increase of 3 percent over
the Archrock third quarter 2022 dividend level. Dividend coverage
in the fourth quarter of 2022 was 1.5x and for the full-year 2022
was 1.9x. The fourth quarter 2022 dividend was paid on February 14,
2023 to stockholders of record at the close of business on February
7, 2023.
2023 Annual Guidance
Archrock is providing annual guidance as listed
below. All figures are in thousands, except percentages and
ratios:
|
Full Year 2023 Guidance |
|
Low |
|
High |
Net income (1) |
$ |
75,000 |
|
|
$ |
105,000 |
|
Adjusted EBITDA(2) |
|
400,000 |
|
|
|
430,000 |
|
Cash available for
dividend(3)(4) |
|
202,000 |
|
|
|
227,000 |
|
|
|
|
|
|
|
|
|
Segment |
|
|
|
|
|
|
|
Contract operations revenue |
$ |
775,000 |
|
|
$ |
800,000 |
|
Contract operations gross margin percentage(5) |
|
60 |
% |
|
|
62 |
% |
Aftermarket services revenue |
$ |
170,000 |
|
|
$ |
180,000 |
|
Aftermarket services gross margin percentage |
|
17 |
% |
|
|
18.5 |
% |
|
|
|
|
|
|
|
|
Selling, general and
administrative(5) |
$ |
106,000 |
|
|
$ |
104,000 |
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
|
|
|
|
|
Growth capital expenditures |
$ |
180,000 |
|
|
$ |
200,000 |
|
Maintenance capital expenditures |
|
75,000 |
|
|
|
80,000 |
|
Other capital expenditures |
|
15,000 |
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
_______________(1) 2023 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 both 2022 and 2021 was $21.4
million.(2) 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.(3) Management uses cash
available for dividend as a supplemental performance measure to
compute the coverage ratio of estimated cash flows to planned
dividends.(4) 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 $(24.5) million
and $(9.5) million for 2022 and 2021, respectively.(5) 2023
annual guidance reflects the change in tax compliance for
approximately $10 million of sales taxes associated with contract
operations cost of sales; these costs will be accounted for in
contract operations cost of sales in 2023 but were accounted for in
selling, general and administrative costs during 2022 and 2021.
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, |
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net income |
$ |
10,458 |
|
|
$ |
15,371 |
|
|
$ |
5,992 |
|
|
$ |
44,296 |
|
|
$ |
28,217 |
|
Adjusted EBITDA |
$ |
89,040 |
|
|
$ |
91,919 |
|
|
$ |
83,499 |
|
|
$ |
363,325 |
|
|
$ |
360,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract operations
revenue |
$ |
177,350 |
|
|
$ |
170,497 |
|
|
$ |
159,501 |
|
|
$ |
677,801 |
|
|
$ |
648,311 |
|
Contract operations gross
margin |
$ |
103,002 |
|
|
$ |
98,803 |
|
|
$ |
99,047 |
|
|
$ |
398,903 |
|
|
$ |
403,825 |
|
Contract operations gross
margin percentage |
|
58 |
% |
|
|
58 |
% |
|
|
62 |
% |
|
|
59 |
% |
|
|
62 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aftermarket services
revenue |
$ |
41,521 |
|
|
$ |
43,171 |
|
|
$ |
35,748 |
|
|
$ |
167,767 |
|
|
$ |
133,150 |
|
Aftermarket services gross
margin |
$ |
7,116 |
|
|
$ |
7,338 |
|
|
$ |
5,242 |
|
|
$ |
27,181 |
|
|
$ |
18,719 |
|
Aftermarket services gross
margin percentage |
|
17 |
% |
|
|
17 |
% |
|
|
15 |
% |
|
|
16 |
% |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general, and
administrative |
$ |
31,220 |
|
|
$ |
30,500 |
|
|
$ |
27,167 |
|
|
$ |
117,184 |
|
|
$ |
107,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash available for
dividend |
$ |
34,898 |
|
|
$ |
41,354 |
|
|
$ |
45,545 |
|
|
$ |
170,908 |
|
|
$ |
199,838 |
|
Cash available for dividend
coverage |
|
1.5 |
x |
|
|
1.8 |
x |
|
|
2.0 |
x |
|
|
1.9 |
x |
|
|
2.2 |
x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
$ |
(27,252 |
) |
|
$ |
56,296 |
|
|
$ |
6,928 |
|
|
|
72,534 |
|
|
|
253,507 |
|
Free cash flow after
dividend |
$ |
(49,841 |
) |
|
$ |
33,737 |
|
|
$ |
(15,423 |
) |
|
|
(17,781 |
) |
|
|
164,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available horsepower (at
period end) |
|
3,726 |
|
|
|
3,747 |
|
|
|
3,878 |
|
|
|
|
|
|
|
|
Total operating horsepower (at
period end) |
|
3,448 |
|
|
|
3,353 |
|
|
|
3,247 |
|
|
|
|
|
|
|
|
Horsepower utilization spot
(at period end) |
|
93 |
% |
|
|
89 |
% |
|
|
84 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conference Call Details
Archrock will host a conference call on
Wednesday, February 22, 2023, to discuss fourth quarter and full
year 2022 financial results and 2023 guidance. The call will begin
at 12:00 p.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 1-888-440-5667 in the United States and Canada
or 1-646-960-0476 for international calls. The access code is
4749623.
A replay of the webcast will be available on Archrock’s website
for 90 days following the event.
Adjusted EBITDA, a non–GAAP measure, is defined as net income
(loss) excluding interest expense, income taxes, depreciation and
amortization, long–lived and other asset impairment, unrealized
change in fair value of investment in unconsolidated affiliate,
restructuring charges, non–cash stock–based compensation expense,
amortization of capitalized implementation costs and other items. A
reconciliation of Adjusted EBITDA to net income, the most directly
comparable GAAP measure, and a reconciliation of our full year 2022
Adjusted EBITDA guidance to net income appear below.
Gross margin, a non–GAAP measure, is defined as revenue less
cost of sales (excluding depreciation and amortization). Gross
margin percentage is defined as gross margin divided by revenue. A
reconciliation of gross margin to net income, the most directly
comparable GAAP measure, appears below.
Cash available for dividend, a non–GAAP measure, is defined
as net income (loss) excluding interest expense, income taxes,
depreciation and amortization, long–lived and other asset
impairment, unrealized change in fair value of investment in
unconsolidated affiliate, restructuring charges, non–cash
stock–based compensation expense, amortization of capitalized
implementation costs and other items, less maintenance capital
expenditures, other capital expenditures, cash taxes and cash
interest expense. Reconciliations of cash available for dividend to
net income and net cash provided by operating activities, the most
directly comparable GAAP measures, and a reconciliation of our
updated full year 2022 cash available for dividend guidance to net
income appear below.
Free cash flow, a non–GAAP measure, is defined as net cash
provided by operating activities plus net cash provided by (used
in) investing activities. A reconciliation of free cash flow to net
cash provided by operating activities, the most directly comparable
GAAP measure, appears below.
Free cash flow after dividend, a non–GAAP measure, is defined as
net cash provided by operating activities plus net cash provided by
(used in) investing activities less dividends paid to stockholders.
A reconciliation of free cash flow after dividend to net cash
provided by operating activities, the most directly comparable GAAP
measure, appears below.
About Archrock
Archrock is an energy infrastructure company with a primary
focus on midstream natural gas compression and a commitment to
helping its customers produce, compress and transport natural
gas in a safe and environmentally responsible way. Headquartered
in Houston, Texas, Archrock is the leading provider of
natural gas compression services to customers in the energy
industry throughout the U.S. and a leading supplier of
aftermarket services to customers that own compression equipment.
For more information on how Archrock embodies its purpose, WE POWER
A CLEANER AMERICA, visit www.archrock.com.
Forward–Looking Statements
All statements in this release (and oral statements made
regarding the subjects of this release) other than historical facts
are forward–looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended. These
forward–looking statements rely on a number of assumptions
concerning future events and are subject to a number of
uncertainties and factors that could cause actual results to differ
materially from such statements, many of which are outside the
control of Archrock, Inc. Forward–looking information includes, but
is not limited to statements regarding: guidance or estimates
related to Archrock’s results of operations or of financial
condition; fundamentals of Archrock’s industry, including the
attractiveness of returns and valuation, stability of cash flows,
demand dynamics and overall outlook, and Archrock’s ability to
realize the benefits thereof; Archrock’s expectations regarding
future economic, geopolitical and market conditions and trends;
Archrock’s operational and financial strategies, including planned
growth, coverage and leverage reduction strategies, Archrock’s
ability to successfully effect those strategies and the expected
results therefrom; Archrock’s development and deployment of new
technologies and the expected results therefrom; Archrock’s
financial and operational outlook; demand and growth opportunities
for Archrock’s services; structural and process improvement
initiatives, the expected timing thereof, Archrock’s ability to
successfully effect those initiatives and the expected results
therefrom; the operational and financial synergies provided by
Archrock’s size; Archrock’s ability to integrate ECOTEC’s products
and services into its business and offer them to its customers; and
statements regarding Archrock’s dividend policy.
While Archrock believes that the assumptions concerning future
events are reasonable, it cautions that there are inherent
difficulties in predicting certain important factors that could
impact the future performance or results of its business. The
factors that could cause results to differ materially from those
indicated by such forward–looking statements include, but are not
limited to: changes in customer, employee or supplier
relationships; local, regional and national economic and financial
market conditions and the impact they may have on Archrock and its
customers; changes in tax laws; conditions in the oil and gas
industry, including a sustained decrease in the level of supply or
demand for oil or natural gas or a sustained decrease in the price
of oil or natural gas; changes in economic conditions in key
operating markets; impacts of world events; the financial condition
of Archrock’s customers; the failure of any customer to perform its
contractual obligations; changes in safety, health, environmental
and other regulations; and the effectiveness of Archrock’s control
environment, including the identification of control
deficiencies.
These forward–looking statements are also affected by the risk
factors, forward–looking statements and challenges and
uncertainties described in Archrock’s Annual Report on Form 10–K
for the year ended December 31, 2021, Archrock’s Quarterly
Reports on Form 10–Q for the quarters ended March 31, 2022, June
30, 2022 and September 30, 2022, and those set forth from time to
time in Archrock’s filings with the Securities and Exchange
Commission, which are available at www.archrock.com. Except as
required by law, Archrock expressly disclaims any intention or
obligation to revise or update any forward–looking statements
whether as a result of new information, future events or
otherwise.
SOURCE: Archrock, Inc.
For information, contact:
Megan RepineVP of Investor
Relations281–836–8360investor.relations@archrock.com
Archrock, Inc.Unaudited
Condensed Consolidated Statements of Operations(in
thousands, except per share amounts)
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract operations |
$ |
177,350 |
|
|
$ |
170,497 |
|
|
$ |
159,501 |
|
|
$ |
677,801 |
|
|
$ |
648,311 |
|
Aftermarket services |
|
41,521 |
|
|
|
43,171 |
|
|
|
35,748 |
|
|
|
167,767 |
|
|
|
133,150 |
|
Total revenue |
|
218,871 |
|
|
|
213,668 |
|
|
|
195,249 |
|
|
|
845,568 |
|
|
|
781,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (excluding
depreciation and amortization): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract operations |
|
74,348 |
|
|
|
71,694 |
|
|
|
60,454 |
|
|
|
278,898 |
|
|
|
244,486 |
|
Aftermarket services |
|
34,405 |
|
|
|
35,833 |
|
|
|
30,506 |
|
|
|
140,586 |
|
|
|
114,431 |
|
Total cost of sales (excluding depreciation and amortization) |
|
108,753 |
|
|
|
107,527 |
|
|
|
90,960 |
|
|
|
419,484 |
|
|
|
358,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative |
|
31,220 |
|
|
|
30,500 |
|
|
|
27,167 |
|
|
|
117,184 |
|
|
|
107,167 |
|
Depreciation and
amortization |
|
39,911 |
|
|
|
39,953 |
|
|
|
43,761 |
|
|
|
164,259 |
|
|
|
178,946 |
|
Long-lived and other asset
impairment |
|
5,225 |
|
|
|
4,154 |
|
|
|
6,243 |
|
|
|
21,442 |
|
|
|
21,397 |
|
Restructuring charges |
|
— |
|
|
|
— |
|
|
|
950 |
|
|
|
— |
|
|
|
2,903 |
|
Interest expense |
|
26,380 |
|
|
|
25,177 |
|
|
|
25,424 |
|
|
|
101,259 |
|
|
|
108,135 |
|
Gain on sale of assets,
net |
|
(6,739 |
) |
|
|
(12,695 |
) |
|
|
(709 |
) |
|
|
(40,494 |
) |
|
|
(30,258 |
) |
Other (income) expense,
net |
|
1,897 |
|
|
|
(585 |
) |
|
|
(3,073 |
) |
|
|
1,845 |
|
|
|
(4,707 |
) |
Income before income
taxes |
|
12,224 |
|
|
|
19,637 |
|
|
|
4,526 |
|
|
|
60,589 |
|
|
|
38,961 |
|
Provision for (benefit from)
income taxes |
|
1,766 |
|
|
|
4,266 |
|
|
|
(1,466 |
) |
|
|
16,293 |
|
|
|
10,744 |
|
Net income |
$ |
10,458 |
|
|
$ |
15,371 |
|
|
$ |
5,992 |
|
|
$ |
44,296 |
|
|
$ |
28,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income
per common share (1) |
$ |
0.07 |
|
|
$ |
0.10 |
|
|
$ |
0.04 |
|
|
$ |
0.28 |
|
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
153,554 |
|
|
|
153,550 |
|
|
|
152,320 |
|
|
|
153,281 |
|
|
|
151,684 |
|
Diluted |
|
153,682 |
|
|
|
153,687 |
|
|
|
152,442 |
|
|
|
153,410 |
|
|
|
151,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________(1) Basic and diluted net income per common
share is computed using the two–class method to determine the net
income per share for each class of common stock and participating
security (restricted stock and stock–settled restricted stock units
that have non–forfeitable rights to receive dividends or dividend
equivalents) according to dividends declared and participation
rights in undistributed earnings. Accordingly, we have excluded net
income attributable to participating securities from our
calculation of basic and diluted net income per common share.
Archrock, Inc.Unaudited
Supplemental Information(in thousands, except percentages,
per share amounts and ratios)
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract operations |
$ |
177,350 |
|
|
$ |
170,497 |
|
|
$ |
159,501 |
|
|
$ |
677,801 |
|
|
$ |
648,311 |
|
Aftermarket services |
|
41,521 |
|
|
|
43,171 |
|
|
|
35,748 |
|
|
|
167,767 |
|
|
|
133,150 |
|
Total revenue |
$ |
218,871 |
|
|
$ |
213,668 |
|
|
$ |
195,249 |
|
|
$ |
845,568 |
|
|
$ |
781,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract operations |
$ |
103,002 |
|
|
$ |
98,803 |
|
|
$ |
99,047 |
|
|
$ |
398,903 |
|
|
$ |
403,825 |
|
Aftermarket services |
|
7,116 |
|
|
|
7,338 |
|
|
|
5,242 |
|
|
|
27,181 |
|
|
|
18,719 |
|
Total gross margin |
$ |
110,118 |
|
|
$ |
106,141 |
|
|
$ |
104,289 |
|
|
$ |
426,084 |
|
|
$ |
422,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin percentage: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract operations |
|
58 |
% |
|
|
58 |
% |
|
|
62 |
% |
|
|
59 |
% |
|
|
62 |
% |
Aftermarket services |
|
17 |
% |
|
|
17 |
% |
|
|
15 |
% |
|
|
16 |
% |
|
|
14 |
% |
Total gross margin percentage |
|
50 |
% |
|
|
50 |
% |
|
|
53 |
% |
|
|
50 |
% |
|
|
54 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative |
$ |
31,220 |
|
|
$ |
30,500 |
|
|
$ |
27,167 |
|
|
$ |
117,184 |
|
|
$ |
107,167 |
|
% of revenue |
|
14 |
% |
|
|
14 |
% |
|
|
14 |
% |
|
|
14 |
% |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (1) |
$ |
89,040 |
|
|
$ |
91,919 |
|
|
$ |
83,499 |
|
|
$ |
363,325 |
|
|
$ |
360,809 |
|
% of revenue |
|
41 |
% |
|
|
43 |
% |
|
|
43 |
% |
|
|
43 |
% |
|
|
46 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
$ |
68,835 |
|
|
$ |
64,966 |
|
|
$ |
27,004 |
|
|
$ |
239,867 |
|
|
$ |
97,885 |
|
Proceeds from sale of
property, plant and equipment and other assets |
|
(7,132 |
) |
|
|
(44,262 |
) |
|
|
(5,149 |
) |
|
|
(120,265 |
) |
|
|
(112,907 |
) |
Net capital expenditures |
$ |
61,703 |
|
|
$ |
20,704 |
|
|
$ |
21,855 |
|
|
$ |
119,602 |
|
|
$ |
(15,022 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available horsepower (at
period end) (2) |
|
3,726 |
|
|
|
3,747 |
|
|
|
3,878 |
|
|
|
3,726 |
|
|
|
3,878 |
|
Total operating horsepower (at
period end) (3) |
|
3,448 |
|
|
|
3,535 |
|
|
|
3,247 |
|
|
|
3,448 |
|
|
|
3,247 |
|
Average operating
horsepower |
|
3,394 |
|
|
|
3,355 |
|
|
|
3,220 |
|
|
|
3,328 |
|
|
|
3,282 |
|
Horsepower utilization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spot (at period end) |
|
93 |
% |
|
|
89 |
% |
|
|
84 |
% |
|
|
93 |
% |
|
|
84 |
% |
Average |
|
91 |
% |
|
|
88 |
% |
|
|
83 |
% |
|
|
87 |
% |
|
|
82 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend declared for the
period per share |
$ |
0.150 |
|
|
$ |
0.145 |
|
|
$ |
0.145 |
|
|
$ |
0.580 |
|
|
$ |
0.580 |
|
Dividend declared for the
period to all shareholders |
$ |
23,614 |
|
|
$ |
22,645 |
|
|
$ |
22,598 |
|
|
$ |
91,340 |
|
|
$ |
89,590 |
|
Cash available for dividend
coverage (4) |
|
1.5 |
x |
|
|
1.8 |
x |
|
|
2.0 |
x |
|
|
1.9 |
x |
|
|
2.2 |
x |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow (1) |
$ |
(27,252 |
) |
|
$ |
56,296 |
|
|
$ |
6,928 |
|
|
$ |
72,534 |
|
|
$ |
253,507 |
|
Free cash flow after dividend
(1) |
$ |
(49,841 |
) |
|
$ |
33,737 |
|
|
$ |
(15,423 |
) |
|
$ |
(17,781 |
) |
|
$ |
164,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________(1) Management believes gross margin,
Adjusted EBITDA, free cash flow and 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 idle
and operating horsepower, and includes new compressor units
completed by a third party manufacturer that have been delivered to
us.(3) Defined as horsepower that is operating under contract
and horsepower that is idle but under contract and generating
revenue such as standby revenue.(4) Defined as cash available
for dividend divided by dividends declared for the period.
|
December 31, |
|
September 30, |
|
December 31, |
|
2022 |
|
2022 |
|
2021 |
Balance Sheet |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt (1) |
$ |
1,548,334 |
|
|
$ |
1,498,895 |
|
|
$ |
1,530,825 |
|
Total equity |
|
860,693 |
|
|
|
869,816 |
|
|
|
891,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________(1) Carrying values are shown net of
unamortized premium and deferred financing costs.
Archrock, Inc.Unaudited
Supplemental InformationReconciliation of Net
Income to Adjusted EBITDA and Gross Margin(in
thousands)
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net income |
$ |
10,458 |
|
|
$ |
15,371 |
|
|
$ |
5,992 |
|
|
$ |
44,296 |
|
|
$ |
28,217 |
|
Depreciation and
amortization |
|
39,911 |
|
|
|
39,953 |
|
|
|
43,761 |
|
|
|
164,259 |
|
|
|
178,946 |
|
Long-lived and other asset
impairment |
|
5,225 |
|
|
|
4,154 |
|
|
|
6,243 |
|
|
|
21,442 |
|
|
|
21,397 |
|
Unrealized change in fair
value of investment in unconsolidated affiliate |
|
1,864 |
|
|
|
— |
|
|
|
— |
|
|
|
1,864 |
|
|
|
— |
|
Restructuring charges |
|
— |
|
|
|
— |
|
|
|
950 |
|
|
|
— |
|
|
|
2,903 |
|
Interest expense |
|
26,380 |
|
|
|
25,177 |
|
|
|
25,424 |
|
|
|
101,259 |
|
|
|
108,135 |
|
Stock-based compensation
expense |
|
2,893 |
|
|
|
2,998 |
|
|
|
2,595 |
|
|
|
11,928 |
|
|
|
11,336 |
|
Amortization of capitalized
implementation costs (1) |
|
543 |
|
|
|
— |
|
|
|
— |
|
|
|
1,984 |
|
|
|
— |
|
Indemnification income,
net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(869 |
) |
Provision for (benefit from)
income taxes |
|
1,766 |
|
|
|
4,266 |
|
|
|
(1,466 |
) |
|
|
16,293 |
|
|
|
10,744 |
|
Adjusted EBITDA (2) |
|
89,040 |
|
|
|
91,919 |
|
|
|
83,499 |
|
|
|
363,325 |
|
|
|
360,809 |
|
Selling, general and
administrative |
|
31,220 |
|
|
|
30,500 |
|
|
|
27,167 |
|
|
|
117,184 |
|
|
|
107,167 |
|
Stock-based compensation
expense |
|
(2,893 |
) |
|
|
(2,998 |
) |
|
|
(2,595 |
) |
|
|
(11,928 |
) |
|
|
(11,336 |
) |
Amortization of capitalized
implementation costs |
|
(543 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,984 |
) |
|
|
— |
|
Unrealized change in fair
value of investment in unconsolidated affiliate |
|
(1,864 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,864 |
) |
|
|
— |
|
Indemnification income,
net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
869 |
|
Gain on sale of assets,
net |
|
(6,739 |
) |
|
|
(12,695 |
) |
|
|
(709 |
) |
|
|
(40,494 |
) |
|
|
(30,258 |
) |
Other (income) expense,
net |
|
1,897 |
|
|
|
(585 |
) |
|
|
(3,073 |
) |
|
|
1,845 |
|
|
|
(4,707 |
) |
Gross margin (2) |
$ |
110,118 |
|
|
$ |
106,141 |
|
|
$ |
104,289 |
|
|
$ |
426,084 |
|
|
$ |
422,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________(1) The amortization of capitalized
implementation costs is a new adjustment beginning in the fourth
quarter of 2022; as such, only the amounts for the fourth quarter
of 2022 and full year 2022 have been included.(2) Management
believes Adjusted EBITDA and gross margin 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.
Archrock, Inc.Unaudited
Supplemental InformationReconciliation of Net
Income to Adjusted EBITDA and Cash Available for
Dividend(in thousands)
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net income |
$ |
10,458 |
|
|
$ |
15,371 |
|
|
$ |
5,992 |
|
|
$ |
44,296 |
|
|
$ |
28,217 |
|
Depreciation and
amortization |
|
39,911 |
|
|
|
39,953 |
|
|
|
43,761 |
|
|
|
164,259 |
|
|
|
178,946 |
|
Long-lived and other asset
impairment |
|
5,225 |
|
|
|
4,154 |
|
|
|
6,243 |
|
|
|
21,442 |
|
|
|
21,397 |
|
Unrealized change in fair
value of investment in unconsolidated affiliate |
|
1,864 |
|
|
|
— |
|
|
|
— |
|
|
|
1,864 |
|
|
|
— |
|
Restructuring charges |
|
— |
|
|
|
— |
|
|
|
950 |
|
|
|
— |
|
|
|
2,903 |
|
Interest expense |
|
26,380 |
|
|
|
25,177 |
|
|
|
25,424 |
|
|
|
101,259 |
|
|
|
108,135 |
|
Stock-based compensation
expense |
|
2,893 |
|
|
|
2,998 |
|
|
|
2,595 |
|
|
|
11,928 |
|
|
|
11,336 |
|
Amortization of capitalized
implementation costs (1) |
|
543 |
|
|
|
— |
|
|
|
— |
|
|
|
1,984 |
|
|
|
— |
|
Indemnification income,
net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(869 |
) |
Provision for (benefit from)
income taxes |
|
1,766 |
|
|
|
4,266 |
|
|
|
(1,466 |
) |
|
|
16,293 |
|
|
|
10,744 |
|
Adjusted EBITDA (2) |
|
89,040 |
|
|
|
91,919 |
|
|
|
83,499 |
|
|
|
363,325 |
|
|
|
360,809 |
|
Less: Maintenance capital
expenditures |
|
(24,695 |
) |
|
|
(24,084 |
) |
|
|
(11,883 |
) |
|
|
(84,158 |
) |
|
|
(47,346 |
) |
Less: Other capital
expenditures |
|
(3,849 |
) |
|
|
(2,091 |
) |
|
|
(1,789 |
) |
|
|
(9,446 |
) |
|
|
(13,376 |
) |
Less: Cash tax payment |
|
(4 |
) |
|
|
— |
|
|
|
358 |
|
|
|
(407 |
) |
|
|
(247 |
) |
Less: Cash interest
expense |
|
(25,594 |
) |
|
|
(24,390 |
) |
|
|
(24,640 |
) |
|
|
(98,406 |
) |
|
|
(100,002 |
) |
Cash available for dividend
(3) |
$ |
34,898 |
|
|
$ |
41,354 |
|
|
$ |
45,545 |
|
|
$ |
170,908 |
|
|
$ |
199,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________(1) The amortization of capitalized
implementation costs is a new adjustment beginning in the fourth
quarter of 2022; as such, only the amounts for the fourth quarter
of 2022 and full year 2022 have been included.(2) 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.(3) Management uses cash available for dividend as
a supplemental performance measure to compute the coverage ratio of
estimated cash flows to planned dividends.
Archrock, Inc.Unaudited
Supplemental InformationReconciliation of Cash
Flows from Operating Activities to Cash Available for
Dividend(in thousands)
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net cash provided by operating activities |
$ |
37,118 |
|
|
$ |
76,808 |
|
|
$ |
28,675 |
|
|
$ |
203,450 |
|
|
$ |
237,400 |
|
Inventory write-downs |
|
(600 |
) |
|
|
(319 |
) |
|
|
(376 |
) |
|
|
(1,640 |
) |
|
|
(997 |
) |
Provision for (benefit from)
credit losses |
|
(234 |
) |
|
|
393 |
|
|
|
241 |
|
|
|
(206 |
) |
|
|
90 |
|
Gain on sale of assets,
net |
|
6,739 |
|
|
|
12,695 |
|
|
|
709 |
|
|
|
40,494 |
|
|
|
30,258 |
|
Current income tax provision
(benefit) |
|
161 |
|
|
|
115 |
|
|
|
(67 |
) |
|
|
1,064 |
|
|
|
365 |
|
Cash tax refund (payment) |
|
(4 |
) |
|
|
— |
|
|
|
358 |
|
|
|
(407 |
) |
|
|
(247 |
) |
Amortization of operating
lease ROU assets |
|
(799 |
) |
|
|
(832 |
) |
|
|
(958 |
) |
|
|
(3,206 |
) |
|
|
(3,880 |
) |
Amortization of contract
costs |
|
(4,951 |
) |
|
|
(4,962 |
) |
|
|
(4,467 |
) |
|
|
(19,162 |
) |
|
|
(19,990 |
) |
Deferred revenue recognized in
earnings |
|
5,247 |
|
|
|
4,168 |
|
|
|
2,301 |
|
|
|
20,956 |
|
|
|
10,382 |
|
Cash restructuring
charges |
|
— |
|
|
|
— |
|
|
|
950 |
|
|
|
— |
|
|
|
2,903 |
|
Indemnification income,
net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(869 |
) |
Changes in assets and
liabilities |
|
20,765 |
|
|
|
(20,537 |
) |
|
|
32,958 |
|
|
|
24,503 |
|
|
|
9,535 |
|
Maintenance capital
expenditures |
|
(24,695 |
) |
|
|
(24,084 |
) |
|
|
(11,883 |
) |
|
|
(84,158 |
) |
|
|
(47,346 |
) |
Other capital
expenditures |
|
(3,849 |
) |
|
|
(2,091 |
) |
|
|
(1,789 |
) |
|
|
(9,446 |
) |
|
|
(13,376 |
) |
Payments for settlement of
interest rate swaps that include financing elements |
|
— |
|
|
|
— |
|
|
|
(1,107 |
) |
|
|
(1,334 |
) |
|
|
(4,390 |
) |
Cash available for dividend
(1) |
$ |
34,898 |
|
|
$ |
41,354 |
|
|
$ |
45,545 |
|
|
$ |
170,908 |
|
|
$ |
199,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________(1) Management uses cash available for
dividend as a supplemental performance measure to compute the
coverage ratio of estimated cash flows to planned dividends.
Archrock, Inc.Unaudited
Supplemental InformationReconciliation of Cash
Flows From Operating Activities to Free Cash Flow and Free Cash
Flow After Dividend(in thousands)
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2022 |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net cash provided by operating activities |
$ |
37,118 |
|
|
$ |
76,808 |
|
|
$ |
28,675 |
|
|
$ |
203,450 |
|
|
$ |
237,400 |
|
Net cash used in investing
activities |
|
(64,370 |
) |
|
|
(20,512 |
) |
|
|
(21,747 |
) |
|
|
(130,916 |
) |
|
|
16,107 |
|
Free cash flow (1) |
|
(27,252 |
) |
|
|
56,296 |
|
|
|
6,928 |
|
|
|
72,534 |
|
|
|
253,507 |
|
Dividends paid to
stockholders |
|
(22,589 |
) |
|
|
(22,559 |
) |
|
|
(22,351 |
) |
|
|
(90,315 |
) |
|
|
(89,343 |
) |
Free cash flow after dividend
(1) |
$ |
(49,841 |
) |
|
$ |
33,737 |
|
|
$ |
(15,423 |
) |
|
$ |
(17,781 |
) |
|
$ |
164,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_______________(1) Management believes free cash flow and
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.
Archrock, Inc.Unaudited
Supplemental InformationReconciliation of Net
Income to Adjust EBITDA and Cash Available for Dividend(in
thousands)
|
Annual Guidance Range |
|
2023 |
|
Low |
|
High |
Net income (1) |
$ |
75,000 |
|
|
$ |
105,000 |
|
Interest expense |
|
111,000 |
|
|
|
111,000 |
|
Provision for income
taxes |
|
33,000 |
|
|
|
33,000 |
|
Depreciation and
amortization |
|
167,000 |
|
|
|
167,000 |
|
Stock-based compensation
expense |
|
12,000 |
|
|
|
12,000 |
|
Amortization of capitalized
implementation costs |
|
2,000 |
|
|
|
2,000 |
|
Adjusted EBITDA (2) |
|
400,000 |
|
|
|
430,000 |
|
Less: Maintenance capital
expenditures |
|
(75,000 |
) |
|
|
(80,000 |
) |
Less: Other capital
expenditures |
|
(15,000 |
) |
|
|
(15,000 |
) |
Less: Cash interest
expense |
|
(108,000 |
) |
|
|
(108,000 |
) |
Cash available for dividend
(3)(4) |
$ |
202,000 |
|
|
$ |
227,000 |
|
|
|
|
|
|
|
|
|
_______________(1) 2022 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 both 2021 and 2020 was $21.4
million.(2) 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.(3) Management uses cash
available for dividend as a supplemental performance measure to
compute the coverage ratio of estimated cash flows to planned
dividends.(4) 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 $(24.5) million
and $(9.5) million for 2022 and 2021, respectively.
Archrock (NYSE:AROC)
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