Executive Summary

Q4 2024 delivered record profitability: revenue $326.4M (+25.8% y/y, +11.7% q/q), adjusted EBITDA $183.8M (+52.8% y/y, +21.8% q/q), and contract operations adjusted gross margin reached 70% (vs. 64% LY, 67% Q3), supported by higher pricing, efficiency, and $12.7M net asset sale gains .
EPS was $0.34 (adjusted EPS $0.35) and dividend was raised to $0.19/share; leverage improved to 3.3x with $688M liquidity as of 12/31/24 .
2025 guidance implies another step-up: adjusted EBITDA $750–$790M (midpoint ~+30% vs. 2024), cash available for dividend $456–$471M, and contract ops margins 68–71%, underpinned by tight utilization and a large contracted backlog; bookings already extend into 2026 .
Stock reaction catalysts: strong margin durability, increased dividend, visible growth from electric motor drive compression leadership and Permian exposure, and new ventures (methane detection) plus technology/telemetry-driven efficiency .

What Went Well and What Went Wrong

What Went Well

Margin expansion and pricing power: “We posted record results… quarterly high for 2024 of 70% [contract operations adjusted gross margin] during the fourth quarter,” driven by standardization, digitization, and automation, with revenue/HP up ~15% y/y .
Backlog visibility and demand: “Sustained high utilization levels and a large and contracted backlog for 2025… booking units for 2026 delivery” supporting continued rate increases and profitability .
Balance sheet and returns: leverage at 3.3x, $688M liquidity, cash available for dividend coverage of 3.5x; fifth dividend increase since Jan 2023 underscores cash flow durability .

What Went Wrong

SG&A step-up: $42.2M vs. $33.0M LY (+$9.2M), largely higher incentive comp tied to stock price outperformance; sequential increase of ~$8M called out on the call .
Aftermarket Services seasonal softness: revenue fell to $40.0M (vs. $46.7M Q3 and $46.6M LY) with margin % dipping to 23% from 26% Q3 (still above LY 22%) due to delayed service work into H1’25 .
Macro/supply risks: management flagged possible tariff impacts and power availability gating electric deployments in Permian (not material currently), with long-lead items at 42–44 weeks possibly drifting; inflation pressure expected in maintenance CapEx .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Total Revenue ($USD Millions)	$259.6	$292.2	$326.4
Net Income ($USD Millions)	$33.0	$37.5	$59.8
Diluted EPS ($)	$0.21	$0.22	$0.34
Adjusted Net Income ($USD Millions)	$33.0	$47.3	$61.5
Adjusted EPS ($)	$0.21	$0.28	$0.35
Adjusted EBITDA ($USD Millions)	$120.3	$150.9	$183.8
Total Adjusted Gross Margin %	57%	61%	64%
SG&A ($USD Millions)	$33.0	$34.1	$42.2

Segment breakdown:

Segment Metric	Q4 2023	Q3 2024	Q4 2024
Contract Operations Revenue ($USD Millions)	$213.0	$245.4	$286.5
Contract Operations Adjusted Gross Margin ($USD Millions)	$137.1	$165.6	$200.2
Contract Operations Adjusted Gross Margin %	64%	67%	70%
Aftermarket Services Revenue ($USD Millions)	$46.6	$46.7	$40.0
Aftermarket Services Adjusted Gross Margin ($USD Millions)	$10.2	$12.3	$9.1
Aftermarket Services Adjusted Gross Margin %	22%	26%	23%

KPIs:

KPI	Q4 2023	Q3 2024	Q4 2024
Total Available Horsepower (thousands)	3,759	4,418	4,401
Total Operating Horsepower (thousands)	3,607	4,179	4,227
Horsepower Utilization (Spot, %)	96%	95%	96%
Net Cash Provided by Operating Activities ($USD Millions)	$71.7	$96.9	$124.3
Cash Available for Dividend ($USD Millions)	$71.5	$92.9	$118.1
Dividend Declared per Share ($)	$0.165	$0.175	$0.190
Adjusted Free Cash Flow ($USD Millions)	$47.4	$(834.3) (TOPS cash paid)	$68.9
Dividend Coverage (x)	2.8x	3.0x	3.5x

Notes: Q4 adjusted EBITDA benefited from $12.7M net asset sale gains; CFO rounded this to ~$13M on the call .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Income ($USD Millions)	FY 2025	N/A	$253–$293	New
Adjusted EBITDA ($USD Millions)	FY 2025	N/A	$750–$790	New
Cash Available for Dividend ($USD Millions)	FY 2025	N/A	$456–$471	New
Contract Ops Revenue ($USD Millions)	FY 2025	N/A	$1,200–$1,235	New
Contract Ops Adj. Gross Margin %	FY 2025	N/A	68–71%	New
AMS Revenue ($USD Millions)	FY 2025	N/A	$190–$210	New
AMS Adj. Gross Margin %	FY 2025	N/A	22–24%	New
SG&A ($USD Millions)	FY 2025	N/A	$142–$147	New
Growth CapEx ($USD Millions)	FY 2025	N/A	$330–$370	New
Maintenance CapEx ($USD Millions)	FY 2025	N/A	$105–$115	New
Other CapEx ($USD Millions)	FY 2025	N/A	$35–$50	New
Dividend per Share ($)	Q4 2024	$0.175 (Q3 2024 actual)	$0.19 declared	Raised

Management highlighted CapEx seasonality (Q1 likely largest due to 2024 carryover ~$15M) and potential non-strategic asset sale proceeds support .

Earnings Call Themes & Trends

Topic	Q2 2024 (7/30)	Q3 2024 (11/12)	Q4 2024 (2/25)	Trend
AI/data centers demand	Called out AI/data center-driven power demand augmentation alongside LNG, sustaining compression bookings	Reinforced expanding opportunity set from LNG and AI/power demand; transformation boosts earnings power	Expect onshoring of AI data centers to increase call on U.S. gas; partnering with customers to supply projects	Strengthening tailwind
Supply chain / lead times	Notable packager delays led to growth CapEx carryforward	Integration of TOPS supply chain; bookings rising; visibility improving	Long-lead items ~42–44 weeks; risk could drift modestly	Normalizing with vigilance
Tariffs / macro	N/A	N/A	Steel tariff risk noted but not material currently; vendors primarily U.S.-sourced	Watchful; limited impact today
Product performance	Record average revenue per horsepower; margins strong in both segments	Record adjusted gross margins; sustainability improved with TOPS	Contract ops margin hit 70%; AMS healthy despite seasonal softness	Upward trajectory
Regional trends	Permian strength; fully utilized fleet 95%	Operating HP up to 4.2MM; Permian and electric fleet expansion	60–70% of new build capital to Permian; incremental growth in Haynesville, Bakken, NE; Eagle Ford stable	Permian-led growth
Technology initiatives	Telemetry and standardization driving efficiency	Digitization/automation advancing margins; electric motor drive leadership	Continued tech/process adoption to maximize reliability and profitability	Deepening adoption
Contracting terms	N/A	Longer-term contracts in midstream applications gaining; price traction	Seeking longer terms for new builds; portfolio remains mixed duration	Longer duration for growth
New ventures / ESG	N/A	N/A	Methane detection, measurement, capture solutions advancing from pilots	Emerging adjacent growth

Management Commentary

“We are even more excited about what we are positioned to deliver in 2025… sustained high utilization levels and a large and contracted backlog for 2025, we are booking units for 2026 delivery” – Brad Childers, CEO .
“We expect 2025 contract operations adjusted gross margin percentage to be in a range between 68% and 71%… leveraging technology and focusing on controlling expenses” – Doug Aron, CFO .
“We are the leader in electric motor drive compression… expansion not only provides environmental benefits, but should also augment customer uptime and Archrock’s operational efficiency” – Brad Childers .
“Lead times remain… 42–44 weeks… tariffs could impact longer term… we don’t see it as material at this time” – Brad Childers .
“Revenue per horsepower is up approximately 15% [Q4’23 vs Q4’24] as well as [we] extend the terms of our contracts” – Brad Childers .

Q&A Highlights

Margin durability: Management expects margins to remain strong and expand, driven by price increases, tech-enabled efficiency, and TOPS integration; Q4 contract ops margin hit 70% and total adjusted gross margin 64% .
2025 growth CapEx and horsepower: >200,000 HP expected to be taken delivery in 2025; ~80% large midstream gas drive, ~20–25% electric motor drive (mostly gas lift); ~$15M CapEx carryover from 2024 .
Contract duration: Longer terms sought for new builds, especially large units; overall portfolio remains a mix by customer/project requirements .
Electric vs. gas pricing: Returns compete head-to-head; no pricing premium difference noted; Archrock agnostic and able to grow in both .
Risks and gating factors: Permian power availability can gate electric deployments but customers largely align power plans; tariffs monitored; lead times normalized .

Estimates Context

Wall Street consensus from S&P Global for Q4 2024 EPS/revenue/EBITDA was unavailable at time of writing due to request limits, so we cannot quantify beats/misses versus consensus. The recap anchors to company-reported results and explicit guidance ranges .

Key Takeaways for Investors

Margin story intact: Pricing momentum, tech-enabled efficiency, and portfolio high-grading pushed contract ops margin to 70% in Q4; management guides 68–71% for FY 2025, signaling durable earnings power .
Visible growth runway: Tight utilization (96%), contracted backlog through 2025, and bookings extending into 2026 underpin revenue and EBITDA growth; 2025 adjusted EBITDA midpoint implies ~30% y/y growth .
Electric motor drive leadership: TOPS integration plus continued investment positions Archrock to capture low-carbon compression demand in Permian and beyond; mix still balanced with large gas-drive midstream .
Cash returns and balance sheet: Dividend raised to $0.19/share with 3.5x coverage in Q4; leverage at 3.3x and liquidity $688M provide flexibility to fund growth and shareholder returns .
CapEx cadence: 2025 total CapEx $470–$535M (growth $330–$370M) with Q1 skew from 2024 carryover; potential support from non-strategic asset sales as in prior years .
Watch items: SG&A trending higher with incentive comp tied to stock performance; AMS seasonal timing; potential tariff/supply chain/power gating risks (currently limited) .
Strategic M&A momentum: Post-quarter NGCS acquisition (Mar 10, 2025) adds ~351k HP (incl. backlog) and expands electric footprint; expected to be immediately accretive by end of 2025 .

Archrock, Inc. (AROC)·Q4 2024 Earnings Summary