Archrock, Inc. (NYSE: AROC) (“Archrock”) today reported results for
the second quarter of 2023.
Second Quarter 2023
Highlights
- Revenue for the second quarter of
2023 was $247.5 million compared to $215.8 million in the second
quarter of 2022.
- Net income for the second quarter
of 2023 was $24.7 million compared to $16.7 million in
the second quarter of 2022.
- Adjusted EBITDA (a non-GAAP measure
defined below) for the second quarter of 2023 was $112.8 million
compared to $99.5 million in the second quarter of 2022.
- Declared a quarterly dividend of
$0.155 per common share for the second quarter of 2023, an increase
of 3.3% compared to the prior quarter, resulting in dividend
coverage of 2.1x.
- Repurchased 222,250 common shares
at an average price of $9.33 per share for an aggregate of $2.1
million.
- Achieved record period-end utilization of 95% for the second
quarter of 2023 compared to 87% in the second quarter of 2022.
- Raised 2023 Adjusted EBITDA guidance to a range of $430 million
to $450 million from $400 million to $430
million.
Management Commentary and Outlook
“Exceptional execution drove Archrock’s outstanding second
quarter performance,” said Brad Childers, Archrock’s President and
Chief Executive Officer. “With unwavering customer demand for our
services, we achieved another all-time high fleet utilization of
95% at quarter end and record monthly revenue per horsepower in the
quarter. Higher pricing and our continued focus on cost management
drove an increase in our contract operations gross margin
percentage of 450 basis points compared to the first quarter of
2023. In aftermarket services, we delivered year-over-year gross
margin growth of more than 40%, the result of encouraging
outsourcing trends for equipment maintenance as well as meaningful
price increases.
“Our strong first half performance, the undersupplied
compression market and an early and elevated level of customer
bookings for 2024 give us confidence to raise expectations for the
full-year 2023 and to expect this robust market to continue well
into the future. Given the inflection point in our results, and
reflecting our commitment to creating and returning value to
our shareholders, we increased shareholder returns during the
second quarter by over 15% on an annual basis, through an
additional dividend increase and share repurchases.
“Looking ahead, we believe natural gas production fundamentals
remain durable and promising, particularly given our strong
leverage to associated gas plays. In addition, the compression
industry is as tight as we’ve ever seen, our competitive position
is as strong as it’s ever been and our balance sheet offers
distinctive flexibility within the compression sector. Based on our
current outlook for 2024, we expect to be in the enviable position
to grow our dividend, with a 2024 target of 5%, maintain a dividend
coverage ratio of approximately 2.0x, and concurrently drive our
leverage ratio even lower to a range of 3.0 to 3.5 times, all while
also funding our growth capital expenditures and preserving
optionality to buy back additional shares,” concluded
Childers.
Second Quarter 2023 Financial
Results
Archrock’s second quarter 2023 net income of
$24.7 million included a non-cash long-lived and other asset
impairment of $2.9 million and a non-cash unrealized change in the
fair value of our investment in an unconsolidated affiliate of $1.7
million. Archrock’s second quarter 2022 net income of $16.7 million
included a non-cash long-lived and other asset impairment of $4.6
million.
Adjusted EBITDA for the second quarter of 2023
and 2022 included $1.2 million and $18.9 million, respectively, in
net gains related to the sale of compression and other assets.
Contract Operations
For the second quarter of 2023, contract
operations segment revenue totaled $201.1 million, an increase of
21% compared to $166.3 million in the second quarter of 2022. Gross
margin (a non-GAAP measure defined below) was $125.1 million, up
28% from $97.9 million. Gross margin percentage of 62% for the
second quarter of 2023, compared to 59% in the second quarter of
2022. Total operating horsepower at the end of the second quarter
of 2023 was 3.6 million compared with 3.3 million at the end of the
second quarter of 2022. Utilization at the end of the second
quarter of 2023 was 95%, compared to 87% at the end of the second
quarter of 2022.
Aftermarket Services
For the second quarter of 2023, aftermarket
services segment revenue totaled $46.4 million, compared to $49.5
million in the second quarter of 2022. Gross margin of $11.1
million increased 42% compared to $7.8 million in the second
quarter of 2022. Gross margin percentage was 24%, up from 16% in
the prior year quarter.
Balance Sheet
Long-term debt was $1.6 billion at June 30, 2023
and our available liquidity totaled $403.7 million. Our leverage
ratio was 4.2x, compared to 4.4x as of June 30, 2022.
Shareholder Returns
Quarterly Dividend
Our Board of Directors recently declared a
quarterly dividend of $0.155 per share of common stock, or $0.62
per share on an annualized basis. Dividend coverage in the second
quarter of 2023 was 2.1x. The second quarter 2023 dividend will be
paid on August 15, 2023 to stockholders of record at the close of
business on August 8, 2023.
Share Repurchase Program
During the quarter ended June 30, 2023, Archrock
repurchased 222,250 common shares at an average price of
$9.33 per share, for an aggregate of approximately $2.1
million. Approximately $48 million remains available for future
common share repurchases under Archrock’s share repurchase
program.
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) |
|
$ |
93,800 |
|
$ |
113,800 |
|
Adjusted EBITDA(2) |
|
|
430,000 |
|
|
450,000 |
|
Cash available for
dividend(3)(4) |
|
|
227,000 |
|
|
247,000 |
|
|
|
|
|
|
|
|
|
Segment |
|
|
|
|
|
|
|
Contract operations revenue |
|
$ |
800,000 |
|
$ |
810,000 |
|
Contract operations gross margin percentage(5) |
|
|
60 |
% |
|
62 |
% |
Aftermarket services revenue |
|
$ |
175,000 |
|
$ |
185,000 |
|
Aftermarket services gross margin percentage |
|
|
20 |
% |
|
22 |
% |
|
|
|
|
|
|
|
|
Selling, general and
administrative(5) |
|
$ |
113,000 |
|
$ |
110,000 |
|
|
|
|
|
|
|
|
|
Capital
expenditures |
|
|
|
|
|
|
|
Growth capital expenditures |
|
$ |
200,000 |
|
$ |
200,000 |
|
Maintenance capital expenditures |
|
|
79,000 |
|
|
79,000 |
|
Other capital expenditures |
|
|
16,000 |
|
|
16,000 |
|
(1) |
2023 annual guidance for net income includes $5.5 million of
long-lived and other asset impairment as of June 30, 2023, but does
not include the impact of any such future costs, because due to
their nature, they cannot be accurately forecasted. Long-lived and
other asset impairment does not impact Adjusted EBITDA or cash
available for dividend (a non-GAAP measure defined below), 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 |
|
June 30, |
|
March 31, |
|
June 30, |
|
2023 |
|
|
2023 |
|
2022 |
|
Net income |
$ |
24,653 |
|
|
$ |
16,485 |
|
$ |
16,746 |
|
Adjusted EBITDA |
$ |
112,775 |
|
|
$ |
97,199 |
|
$ |
99,493 |
|
|
|
|
|
|
|
|
|
|
Contract operations
revenue |
$ |
201,120 |
|
|
$ |
187,745 |
|
$ |
166,298 |
|
Contract operations gross
margin |
$ |
125,087 |
|
|
$ |
108,263 |
|
$ |
97,943 |
|
Contract operations gross
margin percentage |
|
62 |
% |
|
|
58 |
% |
|
59 |
% |
|
|
|
|
|
|
|
|
|
Aftermarket services
revenue |
$ |
46,423 |
|
|
$ |
42,089 |
|
$ |
49,530 |
|
Aftermarket services gross
margin |
$ |
11,080 |
|
|
$ |
8,181 |
|
$ |
7,820 |
|
Aftermarket services gross
margin percentage |
|
24 |
% |
|
|
19 |
% |
|
16 |
% |
|
|
|
|
|
|
|
|
|
Selling, general, and
administrative |
$ |
28,649 |
|
|
$ |
26,425 |
|
$ |
27,691 |
|
|
|
|
|
|
|
|
|
|
Cash available for
dividend |
$ |
52,227 |
|
|
$ |
46,247 |
|
$ |
52,068 |
|
Cash available for dividend
coverage |
|
2.1 |
x |
|
|
2.0 |
x |
|
2.3 |
x |
|
|
|
|
|
|
|
|
|
Free cash flow |
$ |
(62,738 |
) |
|
$ |
30,190 |
|
$ |
3,576 |
|
Free cash flow after
dividend |
$ |
(86,242 |
) |
|
$ |
6,338 |
|
$ |
(18,918 |
) |
|
|
|
|
|
|
|
|
|
Total available horsepower (at
period end) |
|
3,770 |
|
|
|
3,729 |
|
|
3,810 |
|
Total operating horsepower (at
period end) |
|
3,578 |
|
|
|
3,504 |
|
|
3,322 |
|
Horsepower utilization spot
(at period end) |
|
95 |
% |
|
|
94 |
% |
|
87 |
% |
|
|
|
|
|
|
|
|
|
|
|
Conference Call Details
Archrock will host a conference call on Tuesday,
August 1, 2023, to discuss second quarter 2023 financial results.
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 2023
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 2023 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 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; 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; Archrock’s ability to develop and deploy
new technologies and services, including ECOTEC’s products and
services, and the expected results therefrom; 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, 2022, Archrock’s Quarterly
Report on Form 10-Q for the quarters ended March 31, 2023 and June
30, 2023 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 |
|
June 30, |
|
March 31, |
|
June 30, |
|
2023 |
|
2023 |
|
2022 |
Revenue: |
|
|
|
|
|
|
|
|
Contract operations |
$ |
201,120 |
|
|
$ |
187,745 |
|
|
$ |
166,298 |
|
Aftermarket services |
|
46,423 |
|
|
|
42,089 |
|
|
|
49,530 |
|
Total revenue |
|
247,543 |
|
|
|
229,834 |
|
|
|
215,828 |
|
|
|
|
|
|
|
|
|
|
Cost of sales (excluding
depreciation and amortization): |
|
|
|
|
|
|
|
|
Contract operations |
|
76,033 |
|
|
|
79,482 |
|
|
|
68,355 |
|
Aftermarket services |
|
35,343 |
|
|
|
33,908 |
|
|
|
41,710 |
|
Total cost of sales (excluding depreciation and amortization) |
|
111,376 |
|
|
|
113,390 |
|
|
|
110,065 |
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative |
|
28,649 |
|
|
|
26,425 |
|
|
|
27,691 |
|
Depreciation and
amortization |
|
41,210 |
|
|
|
40,181 |
|
|
|
41,356 |
|
Long-lived and other asset
impairment |
|
2,892 |
|
|
|
2,569 |
|
|
|
4,647 |
|
Restructuring charges |
|
(85 |
) |
|
|
1,047 |
|
|
|
— |
|
Interest expense |
|
28,630 |
|
|
|
26,581 |
|
|
|
24,456 |
|
Gain on sale of assets,
net |
|
(1,176 |
) |
|
|
(3,605 |
) |
|
|
(18,948 |
) |
Other (income) expense,
net |
|
1,463 |
|
|
|
603 |
|
|
|
497 |
|
Income before income
taxes |
|
34,584 |
|
|
|
22,643 |
|
|
|
26,064 |
|
Provision for income
taxes |
|
9,931 |
|
|
|
6,158 |
|
|
|
9,318 |
|
Net income |
$ |
24,653 |
|
|
$ |
16,485 |
|
|
$ |
16,746 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income
per common share (1) |
$ |
0.16 |
|
|
$ |
0.10 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
154,358 |
|
|
|
154,116 |
|
|
|
153,033 |
|
Diluted |
|
154,412 |
|
|
|
154,281 |
|
|
|
153,164 |
|
___________________
(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 |
|
June 30, |
|
March 31, |
|
June 30, |
|
2023 |
|
2023 |
|
2022 |
Revenue: |
|
|
|
|
|
|
|
|
Contract operations |
$ |
201,120 |
|
|
$ |
187,745 |
|
|
$ |
166,298 |
|
Aftermarket services |
|
46,423 |
|
|
|
42,089 |
|
|
|
49,530 |
|
Total revenue |
$ |
247,543 |
|
|
$ |
229,834 |
|
|
$ |
215,828 |
|
|
|
|
|
|
|
|
|
|
Gross margin (1): |
|
|
|
|
|
|
|
|
Contract operations |
$ |
125,087 |
|
|
$ |
108,263 |
|
|
$ |
97,943 |
|
Aftermarket services |
|
11,080 |
|
|
|
8,181 |
|
|
|
7,820 |
|
Total gross margin |
$ |
136,167 |
|
|
$ |
116,444 |
|
|
$ |
105,763 |
|
|
|
|
|
|
|
|
|
|
Gross margin percentage: |
|
|
|
|
|
|
|
|
Contract operations |
|
62 |
% |
|
|
58 |
% |
|
|
59 |
% |
Aftermarket services |
|
24 |
% |
|
|
19 |
% |
|
|
16 |
% |
Total gross margin percentage |
|
55 |
% |
|
|
51 |
% |
|
|
49 |
% |
|
|
|
|
|
|
|
|
|
Selling, general and
administrative |
$ |
28,649 |
|
|
$ |
26,425 |
|
|
$ |
27,691 |
|
% of revenue |
|
12 |
% |
|
|
11 |
% |
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (1) |
$ |
112,775 |
|
|
$ |
97,199 |
|
|
$ |
99,493 |
|
% of revenue |
|
46 |
% |
|
|
42 |
% |
|
|
46 |
% |
|
|
|
|
|
|
|
|
|
Capital expenditures |
$ |
103,084 |
|
|
$ |
84,392 |
|
|
$ |
61,208 |
|
Proceeds from sale of
property, plant and equipment and other assets |
|
(9,367 |
) |
|
|
(28,726 |
) |
|
|
(59,814 |
) |
Net capital expenditures |
$ |
93,717 |
|
|
$ |
55,666 |
|
|
$ |
1,394 |
|
|
|
|
|
|
|
|
|
|
Total available horsepower (at
period end) (2) |
|
3,770 |
|
|
|
3,729 |
|
|
|
3,810 |
|
Total operating horsepower (at
period end) (3) |
|
3,578 |
|
|
|
3,504 |
|
|
|
3,322 |
|
Average operating
horsepower |
|
3,549 |
|
|
|
3,475 |
|
|
|
3,297 |
|
Horsepower utilization: |
|
|
|
|
|
|
|
|
Spot (at period end) |
|
95 |
% |
|
|
94 |
% |
|
|
87 |
% |
Average |
|
95 |
% |
|
|
93 |
% |
|
|
86 |
% |
|
|
|
|
|
|
|
|
|
Dividend declared for the
period per share |
$ |
0.155 |
|
|
$ |
0.150 |
|
|
$ |
0.145 |
|
Dividend declared for the
period to all shareholders |
$ |
24,353 |
|
|
$ |
23,504 |
|
|
$ |
22,647 |
|
Cash available for dividend
coverage (4) |
|
2.1 |
x |
|
|
2.0 |
x |
|
|
2.3 |
x |
|
|
|
|
|
|
|
|
|
Free cash flow (1) |
$ |
(62,738 |
) |
|
$ |
30,190 |
|
|
$ |
3,576 |
|
Free cash flow after dividend
(1) |
$ |
(86,242 |
) |
|
$ |
6,338 |
|
|
$ |
(18,918 |
) |
______________________
(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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
March 31, |
|
June 30, |
|
|
2023 |
|
2023 |
|
2022 |
Balance
Sheet |
|
|
|
|
|
|
|
|
|
Long-term debt (1) |
|
$ |
1,639,239 |
|
$ |
1,547,274 |
|
$ |
1,532,438 |
Total equity |
|
|
855,533 |
|
|
853,050 |
|
|
873,918 |
_____________________
(1) |
Carrying values are shown net of unamortized premium and deferred
financing costs. |
|
|
Archrock, Inc. |
Unaudited Supplemental Information |
Reconciliation of Net Income to Adjusted EBITDA and Gross
Margin |
(in thousands) |
|
|
Three Months Ended |
|
June 30, |
|
March 31, |
|
June 30, |
|
2023 |
|
2023 |
|
2022 |
Net income |
$ |
24,653 |
|
|
$ |
16,485 |
|
|
$ |
16,746 |
|
Depreciation and
amortization |
|
41,210 |
|
|
|
40,181 |
|
|
|
41,356 |
|
Long-lived and other asset
impairment |
|
2,892 |
|
|
|
2,569 |
|
|
|
4,647 |
|
Unrealized change in fair
value of investment in unconsolidated affiliate |
|
1,742 |
|
|
|
254 |
|
|
|
— |
|
Restructuring charges |
|
(85 |
) |
|
|
1,047 |
|
|
|
— |
|
Interest expense |
|
28,630 |
|
|
|
26,581 |
|
|
|
24,456 |
|
Stock-based compensation
expense |
|
3,197 |
|
|
|
3,327 |
|
|
|
2,970 |
|
Amortization of capitalized
implementation costs (1) |
|
605 |
|
|
|
597 |
|
|
|
— |
|
Provision for income
taxes |
|
9,931 |
|
|
|
6,158 |
|
|
|
9,318 |
|
Adjusted EBITDA (2) |
|
112,775 |
|
|
|
97,199 |
|
|
|
99,493 |
|
Selling, general and
administrative |
|
28,649 |
|
|
|
26,425 |
|
|
|
27,691 |
|
Stock-based compensation
expense |
|
(3,197 |
) |
|
|
(3,327 |
) |
|
|
(2,970 |
) |
Amortization of capitalized
implementation costs |
|
(605 |
) |
|
|
(597 |
) |
|
|
— |
|
Unrealized change in fair
value of investment in unconsolidated affiliate |
|
(1,742 |
) |
|
|
(254 |
) |
|
|
— |
|
Gain on sale of assets,
net |
|
(1,176 |
) |
|
|
(3,605 |
) |
|
|
(18,948 |
) |
Other (income) expense,
net |
|
1,463 |
|
|
|
603 |
|
|
|
497 |
|
Gross margin (2) |
$ |
136,167 |
|
|
$ |
116,444 |
|
|
$ |
105,763 |
|
_____________________
(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 first and second quarters of 2023 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 Information |
Reconciliation of Net Income to Adjusted EBITDA and Cash
Available for Dividend |
(in thousands) |
|
|
Three Months Ended |
|
June 30, |
|
March 31, |
|
June 30, |
|
2023 |
|
2023 |
|
2022 |
Net income |
$ |
24,653 |
|
|
$ |
16,485 |
|
|
$ |
16,746 |
|
Depreciation and
amortization |
|
41,210 |
|
|
|
40,181 |
|
|
|
41,356 |
|
Long-lived and other asset
impairment |
|
2,892 |
|
|
|
2,569 |
|
|
|
4,647 |
|
Unrealized change in fair
value of investment in unconsolidated affiliate |
|
1,742 |
|
|
|
254 |
|
|
|
— |
|
Restructuring charges |
|
(85 |
) |
|
|
1,047 |
|
|
|
— |
|
Interest expense |
|
28,630 |
|
|
|
26,581 |
|
|
|
24,456 |
|
Stock-based compensation
expense |
|
3,197 |
|
|
|
3,327 |
|
|
|
2,970 |
|
Amortization of capitalized
implementation costs (1) |
|
605 |
|
|
|
597 |
|
|
|
— |
|
Provision for income
taxes |
|
9,931 |
|
|
|
6,158 |
|
|
|
9,318 |
|
Adjusted EBITDA (2) |
|
112,775 |
|
|
|
97,199 |
|
|
|
99,493 |
|
Less: Maintenance capital
expenditures |
|
(27,347 |
) |
|
|
(22,562 |
) |
|
|
(21,833 |
) |
Less: Other capital
expenditures |
|
(5,129 |
) |
|
|
(2,578 |
) |
|
|
(1,523 |
) |
Less: Cash tax payment |
|
(1,120 |
) |
|
|
(18 |
) |
|
|
(400 |
) |
Less: Cash interest
expense |
|
(26,952 |
) |
|
|
(25,794 |
) |
|
|
(23,669 |
) |
Cash available for dividend
(3) |
$ |
52,227 |
|
|
$ |
46,247 |
|
|
$ |
52,068 |
|
_____________________
(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 first and second quarters of 2023 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 Information |
Reconciliation of Cash Flows from Operating Activities to
Cash Available for Dividend |
(in thousands) |
|
|
Three Months Ended |
|
June 30, |
|
March 31, |
|
June 30, |
|
2023 |
|
|
2023 |
|
|
2022 |
|
Net cash provided by operating activities |
$ |
30,542 |
|
|
$ |
87,856 |
|
|
$ |
12,952 |
|
Inventory write-downs |
|
(143 |
) |
|
|
(216 |
) |
|
|
(427 |
) |
Provision for (benefit from)
credit losses |
|
(200 |
) |
|
|
340 |
|
|
|
(257 |
) |
Gain on sale of assets,
net |
|
1,176 |
|
|
|
3,605 |
|
|
|
18,948 |
|
Current income tax
provision |
|
395 |
|
|
|
277 |
|
|
|
731 |
|
Cash tax payment |
|
(1,120 |
) |
|
|
(18 |
) |
|
|
(400 |
) |
Amortization of operating
lease ROU assets |
|
(826 |
) |
|
|
(823 |
) |
|
|
(795 |
) |
Amortization of contract
costs |
|
(5,160 |
) |
|
|
(5,090 |
) |
|
|
(4,773 |
) |
Deferred revenue recognized in
earnings |
|
4,278 |
|
|
|
4,476 |
|
|
|
8,426 |
|
Cash restructuring
charges |
|
842 |
|
|
|
120 |
|
|
|
— |
|
Changes in assets and
liabilities |
|
54,919 |
|
|
|
(19,140 |
) |
|
|
41,019 |
|
Maintenance capital
expenditures |
|
(27,347 |
) |
|
|
(22,562 |
) |
|
|
(21,833 |
) |
Other capital
expenditures |
|
(5,129 |
) |
|
|
(2,578 |
) |
|
|
(1,523 |
) |
Cash available for dividend
(1) |
$ |
52,227 |
|
|
$ |
46,247 |
|
|
$ |
52,068 |
|
_____________________
(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 Information |
Reconciliation of Cash Flows From Operating Activities to
Free Cash Flow and Free Cash Flow After Dividend |
(in thousands) |
|
|
Three Months Ended |
|
June 30, |
|
March 31, |
|
June 30, |
|
2023 |
|
2023 |
|
2022 |
Net cash provided by operating activities |
$ |
30,542 |
|
|
$ |
87,856 |
|
|
$ |
12,952 |
|
Net cash used in investing
activities |
|
(93,280 |
) |
|
|
(57,666 |
) |
|
|
(9,376 |
) |
Free cash flow (1) |
|
(62,738 |
) |
|
|
30,190 |
|
|
|
3,576 |
|
Dividends paid to
stockholders |
|
(23,504 |
) |
|
|
(23,852 |
) |
|
|
(22,494 |
) |
Free cash flow after dividend
(1) |
$ |
(86,242 |
) |
|
$ |
6,338 |
|
|
$ |
(18,918 |
) |
_____________________
(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 Information |
Reconciliation of Net Income to Adjusted EBITDA and Cash
Available for Dividend |
(in thousands) |
|
|
Annual Guidance Range |
|
2023 |
|
Low |
|
High |
Net income (1) |
$ |
93,800 |
|
|
$ |
113,800 |
|
Interest expense |
|
111,000 |
|
|
|
111,000 |
|
Provision for income
taxes |
|
40,000 |
|
|
|
40,000 |
|
Depreciation and
amortization |
|
163,000 |
|
|
|
163,000 |
|
Stock-based compensation
expense |
|
13,000 |
|
|
|
13,000 |
|
Long-lived and other asset
impairment |
|
5,500 |
|
|
|
5,500 |
|
Amortization of capitalized
implementation costs |
|
2,700 |
|
|
|
2,700 |
|
Restructuring charges |
|
1,000 |
|
|
|
1,000 |
|
Adjusted EBITDA (2) |
|
430,000 |
|
|
|
450,000 |
|
Less: Maintenance capital
expenditures |
|
(79,000 |
) |
|
|
(79,000 |
) |
Less: Other capital
expenditures |
|
(16,000 |
) |
|
|
(16,000 |
) |
Less: Cash interest
expense |
|
(108,000 |
) |
|
|
(108,000 |
) |
Cash available for dividend
(3)(4) |
$ |
227,000 |
|
|
$ |
247,000 |
|
_____________________
(1) |
2023 annual guidance for net income includes $5.5 million of
long-lived and other asset impairment as of June 30, 2023, but does
not include the impact of any such future costs, because due to
their nature, they 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. |
|
|
Archrock (NYSE:AROC)
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Archrock (NYSE:AROC)
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