Earnings call transcript: USA Compression Q1 2025 misses EPS forecast

USA Compression Partners (USAC) reported its first-quarter 2025 earnings, revealing a miss on earnings per share (EPS) compared to market expectations. The company posted an EPS of $0.14, falling short of the forecasted $0.23. Despite this, revenue slightly exceeded expectations, coming in at $245.2 million against a forecast of $244.78 million. The market reacted negatively, with USAC shares dropping 3.49% in pre-market trading. According to InvestingPro data, the company maintains a solid market capitalization of $2.74 billion and has demonstrated strong revenue growth of 12.32% over the last twelve months.

Key Takeaways

• EPS of $0.14 missed the forecast of $0.23.
• Revenue of $245.2 million slightly exceeded expectations.
• Stock price fell 3.49% in pre-market trading.
• Strong operational performance with 94.4% fleet utilization.
• 2025 guidance remains unchanged despite market uncertainties.

Company Performance

USA Compression demonstrated robust operational performance in Q1 2025, with a net income of $20.5 million and operating income of $69.4 million. The company’s fleet utilization averaged 94.4%, reflecting strong demand in the compression market. InvestingPro analysis reveals the company maintains a GOOD Financial Health Score, with particularly strong momentum metrics. Two analysts have recently revised their earnings estimates upward for the upcoming period, suggesting potential resilience despite softened commodity prices and tariff uncertainties.

Financial Highlights

• Revenue: $245.2 million, a slight increase over forecasts.
• Earnings per share: $0.14, below the forecast of $0.23.
• Net Cash from Operating Activities: $54.7 million.
• Adjusted Gross Margins: Nearly 67%.

Earnings vs. Forecast

USA Compression’s reported EPS of $0.14 was 39% below the expected $0.23, marking a significant miss. Revenue, however, slightly surpassed expectations, which suggests stable demand despite broader market challenges.

Market Reaction

Following the earnings release, USAC’s stock fell by 3.49% in pre-market trading to $23.45. This decline reflects investor concerns over the earnings miss and broader market conditions. The stock remains closer to its 52-week low of $21.06, indicating potential investor caution. Notable for income investors, InvestingPro data shows USAC offers an attractive 8.64% dividend yield and has maintained dividend payments for 8 consecutive years. The stock’s low beta of 0.51 suggests lower volatility compared to the broader market. Based on InvestingPro’s Fair Value analysis, the stock appears slightly overvalued at current levels.

Outlook & Guidance

The company maintains its 2025 guidance, projecting adjusted EBITDA between $590 million and $610 million and distributable cash flow ranging from $350 million to $370 million. Get deeper insights into USAC’s valuation and growth prospects with InvestingPro, which offers exclusive access to 12+ additional ProTips and comprehensive financial analysis through the Pro Research Report. Expansion capital is expected to be between $120 million and $140 million, with maintenance capital at $38 million to $42 million.

Executive Commentary

CEO Clint Green emphasized, "We are actively monitoring the daily movement on tariffs," highlighting the company’s vigilance in navigating market uncertainties. CFO Chris Paulson noted, "The market is in far better shape than we were in during the last downturn," suggesting confidence in the company’s resilience.

Risks and Challenges

• Tariff impacts on parts and materials could affect cost structures.
• Commodity price fluctuations may influence revenue stability.
• Potential refinancing needs in the second half of 2025.
• Maintaining high fleet utilization amidst market uncertainties.
• Competitive pressures from other energy firms.

Q&A

During the earnings call, analysts inquired about the impact of tariffs and the company’s plans for potential asset-backed loan refinancing. Executives confirmed that they are evaluating proposals for 2026 and are committed to maintaining their current guidance despite external pressures.

Full transcript - USA Compression Partners LP (USAC) Q1 2025:

Conference Operator: Good morning. Welcome to USA Compression Partners First Quarter twenty twenty five Earnings Conference Call. During today’s call, all parties will be in a listen only mode. At the conclusion of management’s prepared remarks, there will be a the call will be open for Q Q This conference is being recorded today, 05/06/2025. I now would like to turn the call over to Chris Porter, Vice President, General Counsel and Secretary.

Chris Porter, Vice President, General Counsel and Secretary, USA Compression Partners: Good morning, everyone, and thank you for joining us. This morning, we released our operational and financial results for the quarter ending 03/31/2025. You can find a copy of our earnings release as well as a recording of this call in the Investor Relations section of our website at usacompression.com. During this call, our management will reference certain non GAAP measures. You will find definitions and reconciliations of these non GAAP measures to the most comparable U.

S. GAAP measures in our earnings release. As a reminder, our conference call will include forward looking statements. These statements are based on management’s current beliefs and include projections and expectations regarding our future performance and other forward looking matters. Actual results may differ materially from these statements.

Please review the risk factors included in this morning’s earnings release and in other public filings. Please note that information provided on this call speaks only to management’s views as of today, 05/06/2025, and may no longer be accurate at the time of a replay. I will now turn the call over to Clint Green, President and CEO of USA Compression.

Clint Green, President and CEO, USA Compression Partners: Thank you, Chris. Good morning, everyone, and thank you for joining our call. This morning, we released our first quarter twenty twenty five results. We are extremely pleased that we were once again able to deliver revenues, adjusted gross margin and average horsepower utilization, leading to a record average revenue per horsepower per month for the quarter. On the operational front, we continue to improve top line revenue per generating horsepower with new and recontracted rates moving higher, benefiting from continued tightness in the market.

In Q1, we ordered approximately 40,000 new horsepower, the majority of which will be delivered before year end. We are also evaluating opportunities for the remaining new horsepower to be delivered before year end. Additionally, we are actively responding to 2026 proposals and anticipate more ratable quarterly increases to new horsepower next year. Finally, we have completed the idle to active initiative that commenced early last year. Although our total active horsepower was essentially flat on a sequential quarter basis, our large horsepower continues to be close to fully utilized.

Going forward, we expect our most significant gains in horsepower will occur as we continue our disciplined growth strategy of acquiring large horsepower, barring significant changes in small horsepower utilization. Since our last call in February, commodity prices have softened considerably tied to tariff driven market uncertainty. However, thus far in Q1, we have seen key upstream companies in the Permian and the Northeast reaffirm their full year capital production targets, but also provide the market capital allocation options in the case that low commodity prices persist. On the gas demand side, Amazon, Microsoft and Nvidia reaffirmed that the data center market remains strong and both Range and EQT highlighted incremental power demand growth in the Northeast, where USA holds the largest contract compression fleet totaling around 900,000 horsepower. At USAC, we are actively monitoring the daily movement on tariffs and see a potential for minimal impacts to our parts and materials business once we begin to work through current inventories.

On the capital front, we do not anticipate a tariff impact to our twenty twenty five new horsepower costs as costs were locked in at the time of

Conference Operator: order

Clint Green, President and CEO, USA Compression Partners: placement. Looking forward, it is too early to tell many of the capital components of our business are tied directly to U. S. Manufacturing entities who source steel evenly from both international and domestic markets. We would expect those entities to work through inventories and then decide if a contract rate in excess of historical increases is reasonable and justified if a tempered market outlook exists.

As our investors know, the compression business is sustained by long term agreements and is less susceptible to short term commodity prices. Nonetheless, we keep a watchful eye on our industry and the potential impacts to slow production from current market uncertainty given the natural gas and crude oil are a feedstock for so many things that we use every day. At this time, we believe we can maintain our adjusted operating margins for the foreseeable future, which have consistently been around 67%, remaining an even handed partner for our customers to enhance their value and ours. On the personnel front, I want to highlight Chris Wasson’s promotion to Chief Operating Officer, a recognition that is well deserved given his long standing leadership in our Permian operations and twenty six years experience in the compression industry. Chris is joining us on the call today.

On to the shared services front, we have fully transitioned IT and HR functions in Q1 and remain on track for a Q1 twenty twenty six ERP implementation that should yield meaningful improvements in daily management of the business. With that, I will turn the call over to Chris Paulson, our Chief Financial Officer, to discuss our first quarter highlights and 2025 guidance in more detail.

Chris Paulson, Chief Financial Officer, USA Compression Partners: Thanks, Clint. In the quarter, our sales team continued to build upon pricing improvements up to an all time high of $21.6 per average horsepower for the first quarter, a 1% increase in sequential quarters and 6% compared to a year ago. Average active horsepower remained flattish at $3,560,000 Our first quarter adjusted gross margins were nearly 67%. Regarding the consolidated financial results, our first quarter twenty twenty five net income was $20,500,000 operating income was $69,400,000 net cash provided by operating activities was $54,700,000 and cash interest expense net was $45,100,000 Our leverage ratio is currently at 4.08 times. Turning to operational results.

Our total fleet horsepower at the end of the quarter was approximately 3,900,000 horsepower, essentially unchanged to the prior quarter. Our revenue generating horsepower also was flat on a sequential quarter basis and up 2% from a year ago. Our average utilization for the first quarter was 94.4%, in line with the prior quarter of 94.5%. First quarter twenty twenty five expansion expenditures were $22,200,000 and our maintenance capital expenditures were 10,900,000 Expansion capital spending primarily consisted of reconfiguration and make ready of idle units, while maintenance capital increased to a level consistent with regular minor overhaul cycles that had previously been deferred during twenty twenty four’s make ready efforts. For the remainder of the year, most capital will be focused on reconfigurations and new horsepower.

We maintain our adjusted EBITDA range of $590,000,000 to $610,000,000 distributable cash flow range of $350,000,000 to $370,000,000 expansion capital range of 120,000,000 to $140,000,000 and maintenance capital between 38,000,000 and $42,000,000 As a reminder, the expansion capital budget will be back end loaded with much of the new horsepower delivery in Q4. To the extent deliveries move into Q1, capital may be deferred and our expansion capital budget will be updated accordingly. As stated in Q4 twenty twenty four, the company made great progress in steadily reducing its leverage ratio over the last several years, and we remain committed to that in 2025. As previously discussed, our leverage ratio will largely be maintained and then marginally increase later in the year as we fund new growth projects that are back end loaded. These project returns substantially exceed our cost of capital and are anticipated to pay back within the contract term.

In the near term, this means our target at or below four times debt to EBITDA is a reasonable metric by which to aspire. We will continue to revisit this metric as market dynamics change, but don’t anticipate a meaningful change. Finally, I want to address debt refinancing in light of the recent market fundamentals in the high yield market. Since Liberation Day, the high yield market has settled, though pricing is considerably higher than prior to April 2. We are in no hurry to rush into a notes market where both spreads and yields have pushed higher, and we’ll remain patient until borrowing costs improve.

That being said, the market for asset backed credit facilities has remained very strong and has been unimpacted by the near term volatility tied to tariffs. As a result, we expect to move forward with refinancing our ABL in the near term. And with that, I’ll turn the call back to Clint for concluding remarks.

Clint Green, President and CEO, USA Compression Partners: Thanks, Chris. I have been outspoken about disciplined growth and at times of uncertainty, this approach should resonate with the investment community, along with our industry leading return of capital framework. Equity volatility is also mitigated by a large shareholder in Energy Transfer, who has partnered through shared services to ensure our business is cost efficient and capable through cycles. USAC is characterized by world class customers and employees who value safety as our top priority. It is important that we reiterate the safety commitment to our employees, our contractors and our customers’ employees daily, and we make it a part of all we do.

And I want to thank each and every employee that makes that happen. And with that, I will open the call up to questions.

Conference Operator: Your first question comes from the line of Doug Irwin with Citi. Please go ahead.

Doug Irwin, Analyst, Citi: Hey, thanks for the question. Just trying to start with the ’25 guidance range here. Just looking at the first quarter run rate, it seems like it’s putting you pretty well on pace for the midpoint of the range. Just given some of the fleet additions you talked about coming in the second half of the year, is it fair to say you’re probably trending towards the upper half of that range today?

Chris Paulson, Chief Financial Officer, USA Compression Partners: Yes. Doug, thanks for the question. This is Chris Paulson. We set forth the range of $590,000,000 to $610,000,000 We’re maintaining that range today. As you pointed to, the Q1 annualized number would put us right in the middle of that.

Our horsepower overall is, as noted, largely back end loaded. And most of that horsepower will come in into Q4. And we expect for it to come in Q4. We don’t expect for that to materially slip, but its impact on Q4 will likely be minimal. So, therefore, maintaining the guidance in the 5.9 to $6.1 range.

Doug Irwin, Analyst, Citi: Understood. That’s helpful. And then just trying to ask about the growth outlook kind of beyond $25 Great to see you highlight some of these orders coming on in the fourth quarter. Just curious how your conversations are progressing into 2026, particularly given the current macro environment. Have you still seen strong interest or discussions maybe kind of slowed near term given uncertainty?

Chris Paulson, Chief Financial Officer, USA Compression Partners: Yes, we noted that we’ve ordered 40,000 horsepower in Q1. We expect to order additionally into Q2 and we’re starting to undertake RFPs for 2026. So the interest is there. We are digesting the market real time as is everyone else. It’s interesting, I think the market is in far better shape than we were in during the last downturn.

We’ve seen a lot of consolidation in the market. I think that consolidation has brought with it far stronger balance sheets and production growth in fewer hands, production growth in larger companies, production growth housed within the major oils who really look towards this time to really differentiate themselves and have been built for uncertain markets. What we’ve seen generally is that while those companies have reaffirmed their growth targets, we’ve also seen the independents largely reaffirm those targets as well. I know Diamondback had some softer guide yesterday, don’t see it being a real impact on production overall. We’ve seen, by contrast, some of the companies in the Northeast really reaffirm those targets and really lean into potential for growth in next several years.

I think that’s a difference maker for our company in particular. We’ve noted 900,000 horsepower there in the Northeast. And we’ve even seen as early as this morning, companies like Cotera look to move some of their rig count over to the Northeast. So overall, we’re digesting things real time as you are, but we’re continuing to take RFPs and there is continual interest for 2026. How that ultimately plays out for 2026, it’s too early to tell.

Doug Irwin, Analyst, Citi: Great. That’s helpful. That’s all for me. Thanks.

Conference Operator: Your next question comes from the line of Robert Mosca with Mizuho Securities. Please go ahead.

Robert Mosca, Analyst, Mizuho Securities: Hi, morning everyone. Thanks for taking my question. So on your last call, I think you said you were looking to grow operating horsepower by about 1%. So the 40,000 horsepower of new addition seems a little bit lower than what’s implied by that metric. So is that a function of just having some remaining units that you plan to activate or maybe a little bit of pullback in terms of customer demand and how you’re staging those new units that you’re going to order in 2Q?

Chris Paulson, Chief Financial Officer, USA Compression Partners: Yes. Thanks for the question, Robert. The 40,000 is below our full year forecast for new compression. As noted, that 1.5% would imply something more akin to 52,000 to probably 55,000 horsepower. I think we’re very pleased that we’ve been able to move forward with as much as 40,000 horsepower in the quarter and anticipate that the remainder will be satisfied through year end, hopefully as early as Q2.

We’re well on our way towards that end.

Robert Mosca, Analyst, Mizuho Securities: Got it. That’s helpful. And maybe asking about the growth outlook beyond ’25 in a different way. How are you approaching those commercial discussions with the macro backdrop and perhaps the need to wait out the high yield market a little bit longer for attractive refinancing terms? Is that affecting your growth outlook on ’26 at all?

Chris Paulson, Chief Financial Officer, USA Compression Partners: Yes. The high yield market today is still open. And in fact, I think there within the last several weeks, there’s been quite a bit of interest in the market. The market has moved up overall. Our cost to issue notes, for instance, has probably moved up 50 basis points since prior deliberation day.

That number at one point was probably 150 basis points higher. So it’s come back in by quite a bit. You’ve seen new issuances here recently. You’ve seen our bonds in particular trading much tighter here in the last several weeks. So we could go out today probably 50 basis points higher than where we were a few months ago.

That’s less interesting frankly. I think we can be patient here. There’s no need to rush. We really have quite a bit of time as it relates to our node issuances. As I mentioned though, on the ABL side, I think we’ll continue with the plans that we had prior to tariff discussion.

We’ll really embark upon refinancing our ABL in the second half of this year. From what I’ve seen from initial offerings and proposals there, we have really, really strong commitments from our banks. We have more banks that are interested and I’m hopeful that that will mean, at the end of the day, lower financing costs. But, we’ll let the process play out and then come back to you guys in the second half once that process is played out.

Robert Mosca, Analyst, Mizuho Securities: Great. Appreciate the time today.

Conference Operator: Your next question comes from the line of Jeremy Tonet with JPMorgan. Please go ahead.

Eli Jocelyn, Analyst, JPMorgan: Hey, this is Eli Jocelyn on for Jeremy. Just maybe wanted to think about a little bit more of the contracting environment. In your discussions with customers, are you seeing more opt for term? I think that’s been topical in recent conversations. Or are you seeing longer term contracts?

And how have pricing discussions gone relative historical just again weighing kind of some of the more macroeconomic volatility that we’ve been seeing?

Chris Paulson, Chief Financial Officer, USA Compression Partners: I’m not sure we’ve seen anything really different in terms of duration or term in those contracts. From a USAA perspective, I think we ultimately would like to re term as much as we possibly can. I think we’ll continue to move towards that end, make sure that we have as much on term, especially in the event of softening of the cycle. I think it makes sense for all parties to do that. I think if you have a movement in a cycle, I think most parties want to have their economics locked in and understood to continue investments.

And that’s, I think, generally what we’re seeing. And that’s been pretty consistent over the course of the last many years, but really haven’t seen any change in discussion at this point in time.

Eli Jocelyn, Analyst, JPMorgan: Got you. And then maybe just thinking about lead times, which have been topical recently, maybe, I don’t know if tariffs or other sort of manufacturing changes have impacted the OEM market as you see it. But where do you see lead times right now? And kind of what’s your view on that part of the market?

Clint Green, President and CEO, USA Compression Partners: Yes. Hey, this is Clint. So lead times still stay around the same as they have been. We’re seeing cat at about forty eight weeks, walk shaw at about twenty five, aerial at twenty four to 20 six. Those haven’t really pushed out yet.

And then from packagers, it’s running between thirty and forty weeks. So it it really hasn’t changed yet. Now depending on what happens to the tariffs, you know, it could, but our stuff’s locked in for most of it for the end of the year delivery. And and as these RFPs come through for ’26, we’ll continue to try and get those orders in in place, you know, in time to to make deliveries.

Robert Mosca, Analyst, Mizuho Securities: Great. I’ll leave it there. Thanks.

Conference Operator: Your next question comes from the line of Connor Jensen with Raymond James. Please go ahead.

Connor Jensen, Analyst, Raymond James: Hey, guys. Thanks for taking my call today. I just had one quick one. Looks like you had some modest asset sales or retirements in the quarter. How should we think about this trending for the rest of the year as opposed to the assets you’re bringing online?

Thanks.

Chris Paulson, Chief Financial Officer, USA Compression Partners: Yes. So we continue to look at ways to optimize our portfolio. As you mentioned, those were relatively modest sales and or asset swaps as well. So to the degree that we can optimize our portfolio in various ways, we’ll do it and undertake those to the degree that we have certain assets have been sitting on the fence for a long portion of time. We’ll also look at a disposition there.

So, we’re going to continue to find ways to really improve the overall efficiency of our horsepower.

Connor Jensen, Analyst, Raymond James: Perfect. Thanks.

Conference Operator: There are no further questions at this time. Ladies and gentlemen, this concludes today’s call. Thank you all for joining and you may now disconnect.

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