Executive Summary

Q2 2025 delivered record adjusted EBITDA ($178.2M) and free cash flow ($70.3M), but GAAP diluted EPS ($0.43) and total revenue ($322.8M) came in below Wall Street consensus; EBITDA was modestly above consensus based on company’s adjusted definition . EPS consensus was ~$0.46*, revenue ~$332.6M*, EBITDA ~$177.6M*; EPS and revenue missed, adjusted EBITDA slightly beat .*
Contract Services margins expanded for the fourth consecutive quarter to 68.3% (+430 bps YoY) on high utilization (97.2%) and pricing discipline; Other Services margins improved to 24.5% despite lower revenues .
Guidance raised: FY25 adjusted EBITDA to $700–$725M (+$5M to low end) and discretionary cash flow to $445–$465M; Contract Services revenue/margin raised, Other Services revenue lowered .
Capital return accelerated: share repurchase authorization increased by $100M (total remaining $115M), dividend maintained at $0.45/share; added to S&P SmallCap 600 effective Aug 6, a potential index inflow catalyst .
Management highlighted structural demand tailwinds (Permian gas growth, data-center power, LNG build-out) and cost/efficiency gains from technology and ERP implementation as drivers of sustained margin expansion .

What Went Well and What Went Wrong

What Went Well

Record adjusted EBITDA ($178.2M, +15.5% YoY) and record free cash flow ($70.3M), driven by pricing, fleet optimization, and technology-enabled reliability .
Contract Services adjusted gross margin reached 68.3%, fourth straight sequential increase; fleet utilization rose to 97.2% (+290 bps YoY) .
Strategic capital return and index inclusion: $100M buyback increase (remaining authorization $115M) and addition to S&P SmallCap 600 effective Aug 6 . CEO: “record quarterly adjusted EBITDA… strategic focus on large horsepower compression, fleet optimization and significant investments in both technology and our people” .

What Went Wrong

Top-line softness versus Street: revenue ($322.8M) and EPS ($0.43 diluted) were below consensus; Other Services revenue fell sequentially and YoY, prompting a full-year reduction .*
Sequential revenue decline (-$6.8M vs Q1) due to lower Other Services activity and timing of unit deliveries, with management signaling heavier unit additions in Q3 (partial-quarter revenue effect risk) .
Continued macro and operational constraints: tight Permian labor markets and unchanged 40–45 week OEM lead times for engines (Cat/Aerial) could limit pace/efficiency of deployments .

Financial Results

Metric	Q2 2024	Q1 2025	Q2 2025	Q2 2025 Consensus*
Total Revenue ($USD Millions)	$309.7	$329.6	$322.8	$332.6*
Diluted EPS ($USD)	$0.06	$0.33	$0.43	$0.46*
Adjusted EBITDA ($USD Millions)	$154.3	$177.7	$178.2	$177.6*
Adjusted EBITDA Margin (%)	49.8%	53.9%	55.2%	—
Contract Services Adjusted GM (%)	64.0%	67.7%	68.3%	—

Segment breakdown

Segment	Q2 2024	Q1 2025	Q2 2025
Contract Services Revenue ($USD Millions)	$276.3	$289.0	$293.5
Contract Services Adjusted GM ($USD Millions)	$176.9	$195.7	$200.4
Contract Services Adjusted GM (%)	64.0%	67.7%	68.3%
Other Services Revenue ($USD Millions)	$33.4	$40.7	$29.3
Other Services Adjusted GM ($USD Millions)	$5.5	$5.5	$7.2
Other Services Adjusted GM (%)	16.4%	13.4%	24.5%

KPIs and cash metrics

KPI	Q2 2024	Q1 2025	Q2 2025
Fleet Utilization (%)	94.3%	96.9%	97.2%
New Horsepower Deployed (HP)	41,500	48,900	31,800
Discretionary Cash Flow ($USD Millions)	$90.6	$116.1	$116.4
Free Cash Flow ($USD Millions)	$0.6	$47.2	$70.3
Total Debt ($USD Billions)	$2.5	$2.6	$2.6
Leverage Ratio (Credit Agreement) (x)	—	3.7x	3.6x

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA ($USD Millions)	FY 2025	$695–$725 (Q1 2025 update)	$700–$725	Raised low end
Discretionary Cash Flow ($USD Millions)	FY 2025	$430–$455 (Q1 2025 update)	$445–$465	Raised
Contract Services Revenue ($USD Millions)	FY 2025	$1,150–$1,200	$1,160–$1,200	Raised low end
Contract Services Adjusted GM (%)	FY 2025	66.5–68.5	67.0–69.0	Raised both ends
Other Services Revenue ($USD Millions)	FY 2025	$160–$180	$120–$140	Lowered
Other Services Adjusted GM (%)	FY 2025	14–17	14–17	Maintained
Maintenance Capex ($USD Millions)	FY 2025	$75–$85	$75–$85	Maintained
Growth Capex ($USD Millions)	FY 2025	$180–$205	$180–$205	Maintained
Other Capex ($USD Millions)	FY 2025	$60–$65	$60–$65	Maintained
Share Repurchase Authorization ($USD Millions)	Through 12/31/2026	$15 remaining prior	+$100 increase; $115 remaining	Raised and extended
Dividend ($/share)	Quarterly	$0.45 (raised earlier in 2025)	$0.45 declared	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Demand Drivers (Permian gas, LNG, data-center power)	Record year; Permian focus; strong outlook; raised FY25 EBITDA	Reinforced robust demand; producers increasing Permian gas; LNG train start at Golden Pass; EU energy purchase deal cited	Strengthening
Pricing/Margins	Contract Services margin 66.7% in Q4; 67.7% in Q1	Contract Services margin 68.3%; mgmt aims for upper range; tech efficiencies driving cost down	Improving
Technology/AI/ERP	Integration in progress (CSI); systems consolidation planned	ERP went live Aug 1; AI/ML predictive maintenance at reliability center lowering repairs	Execution milestone
Supply Chain/Lead Times	Not highlighted	Cat/Aerial engine lead times ~40–45 weeks unchanged; shop capacity constraints	Persistent bottleneck
Labor Availability	Not highlighted	Permian labor remains tight; training pipeline (Kodiak Academy)	Ongoing constraint
Capital Allocation	Q4: buybacks/dividends; Q1: +10% dividend, ~$10M repurchases	+$100M buyback, $0.45 dividend; leverage target ~3.5x maintained	Aggressive returns
EMD vs Gas Compression	Not highlighted	Continued strong EMD demand; adoption constrained by power access/location	Mixed by geography
M&A/Asset Optimization	2024: divested small HP, exited geographies	Pruning non-core small HP; tuck-in acquisitions of ~30k working HP in Q3	Ongoing portfolio high-grading

Management Commentary

CEO: “Our fourth consecutive quarterly increase in Contract Services adjusted gross margin percentage and our record quarterly adjusted EBITDA are the product of our strategic focus on large horsepower compression, fleet optimization and significant investments in both technology and our people.”
CEO: “Highly visible Permian Basin natural gas production growth combined with strong demand outlook driven by power demand for data centers and domestic LNG projects… reinforce our confidence in the long-term growth prospects for contract compression.”
CFO: “Adjusted EBITDA for the second quarter was $178.2 million… Contract Services revenue per ending horsepower was $22.77… significant increase in margin reflects higher average pricing, fleet high-grading and new technology.”
CFO: “Passage of the One Big Beautiful Bill… will reduce our cash tax burden by roughly $60 million over the next five years,” enabling DCF guidance raise to $445–$465 million .

Q&A Highlights

Pricing and margins trajectory: Management expects margins to continue trending toward the high end of guidance, aided by ERP-driven efficiency and AI/ML-enabled maintenance, acknowledging near-term learning-curve effects .
Growth cadence and asset deals: 3–4% annual horsepower growth comprised of opportunistic tuck-ins (economics ~$200–$400/HP) and larger joint projects with customers, targeting margin accretion rather than outsized M&A .
Buyback pacing: Program use will be opportunistic, sensitive to share price, while keeping leverage near ~3.5x target .
2026 outlook confidence: Backlog contracting underway; management feels “really good” about capital plan, but withheld precise numbers pending budgeting and potential larger deals .
Electric motor-driven compression: Sustained demand among top customers; adoption constrained by power access; Kodiak leaning in to supply both EMD and gas-driven solutions .

Estimates Context

Q2 2025 vs consensus: EPS $0.43 vs ~$0.46* (miss); Revenue $322.8M vs ~$332.6M* (miss); Adjusted EBITDA $178.2M vs ~$177.6M* (beat on company-adjusted basis) .*
Prior quarters: Q1 2025 revenue beat ($329.6M vs ~$325.9M*), EPS miss ($0.33 vs ~$0.38*), EBITDA beat ($177.7M vs ~$172.1M*) .*
YoY comp: Q2 2024 revenue slight miss ($309.7M vs ~$311.4M*); EPS large miss given CSI-related SG&A/transaction/severance; adjusted EBITDA delivered $154.3M vs ~$155.4M* .*

Consensus detail (S&P Global)

Metric	Q2 2024	Q1 2025	Q2 2025	FY 2025
Primary EPS Consensus Mean	$0.55*	$0.38*	$0.46*	$1.94*
Revenue Consensus Mean ($USD)	$311.4M*	$325.9M*	$332.6M*	$1.31B*
EBITDA Consensus Mean ($USD)	$155.4M*	$172.1M*	$177.6M*	$713.8M*
EPS # of Estimates	4*	3*	4*	5*
Revenue # of Estimates	5*	5*	5*	8*

Values retrieved from S&P Global.*

Implications: Expect modest upward adjustments to EBITDA forecasts (company-adjusted), and recalibration of revenue/EPS expectations to reflect Other Services softness and timing of horsepower additions .

Key Takeaways for Investors

Quality beat under the surface: While revenue/EPS missed consensus, core Contract Services pricing/margins and adjusted EBITDA outperformed, supported by technology-driven cost efficiencies—supportive for multiple and estimate stability .
Guidance credibility strengthened: Raised FY25 adjusted EBITDA and DCF with tax tailwinds and higher Contract Services revenue/margin; lower Other Services revenue is a manageable mix shift given margin/visibility in the core .
Near-term setup: Heavier Q3 unit deliveries can create partial-quarter revenue optics; watch Street interpretations of $/HP metrics to avoid misreads of pricing vs timing (mgmt flagged explicitly) .
Structural tailwinds: Permian gas growth, data-center power demand, and LNG ramp underpin multi-year compression demand; index inclusion can bring incremental buy-side attention and passive flows .
Capital return and leverage: With $115M authorization remaining and well-covered $0.45 dividend (2.9x coverage), expect opportunistic buybacks particularly on share price weakness while targeting ~3.5x leverage .
Watch constraints: Tight Permian labor and unchanged OEM lead times could moderate deployment cadence; ERP learning curve near term, but net efficiency gains medium term .
Monitoring points: Q3 unit addition timing, Contract Services margin trajectory toward 69%, DCF realization versus higher guidance, and any additional tuck-in acquisitions of working horsepower .

Kodiak Gas Services, Inc. (KGS)·Q2 2025 Earnings Summary