Executive Summary

Q4 2024 delivered durable margin strength despite lower total revenue: Adjusted EBITDA was $169.1M (54.6% margin), up slightly q/q, while total revenue of $309.5M declined 4.7% sequentially due to divestitures and seasonality; Contract Services adjusted gross margin rose to a record 66.7% .
Management raised the midpoint of FY2025 Adjusted EBITDA guidance versus its early outlook and added full segment guidance: $685–$725M Adj. EBITDA (vs prior $675–$725M), Contract Services revenue $1.15–$1.20B at 66–68% margin; growth capex $240–$280M, maintenance capex $75–$85M .
Strategic fleet high-grading continued: ~33,000 hp of non-core assets divested in Q4; 129,000 hp divested in 2024 with exits from four countries, pushing average hp/unit to ~926 and utilization to ~97% on a near-full core fleet .
Call commentary pointed to predictive maintenance/AI telemetry, pricing discipline, and sticky large-hp contracts (3–5 year terms), supporting multi-year margin expansion and cash generation .
Wall Street consensus (S&P Global) for Q4 EPS/revenue was unavailable at time of analysis; investors should anchor on internal guidance and margin trajectory until estimates can be refreshed (values retrieved from S&P Global were unavailable).

What Went Well and What Went Wrong

What Went Well

Margin execution: Contract Services adjusted gross margin reached a record 66.7% on pricing, synergies and asset sales; Adj. EBITDA rose to $169.1M with margin 54.6% .
Fleet optimization: Divested ~33,000 hp of non-core units in Q4 and ~129,000 hp in 2024; exited South America and four countries total, raising average hp/unit and simplifying operations .
Strategic outlook and guidance: FY2025 Adj. EBITDA range raised at the midpoint vs prior outlook, with clear segment targets and disciplined capital allocation (return ~35%+ of DCF) .

Quote: “Our Contract Services segment delivering a record adjusted gross margin percentage in the fourth quarter” — Mickey McKee, CEO .

What Went Wrong

Sequential revenue decline: Total revenue fell to $309.5M (from $324.6M in Q3) due to asset divestitures and expected seasonal slowdown in Other Services .
Other Services margin compression: Adjusted gross margin percentage decreased to 14.5% in Q4 (from 19.0% in Q3), reflecting seasonality and project timing .
Macro and tariff uncertainty: Management noted potential inflationary pressure from new tariffs and macro volatility; expects ~2.5–3% annualized capex cost pressure, primarily raw steel .

Financial Results

Consolidated P&L and Key Metrics (Quarterly)

Metric	Q4 2023	Q3 2024	Q4 2024
Total Revenues ($USD Millions)	$225.98	$324.65	$309.52
Net Income attributable to common ($USD Millions)	$(6.87)	$(5.65)	$19.08
Diluted EPS ($)	$0.09	$(0.07)	$0.21
Adjusted EBITDA ($USD Millions)	$113.88	$168.37	$169.07
Adjusted EBITDA Margin (%)	50.4%	51.9%	54.6%
Free Cash Flow ($USD Millions)	$10.45	$52.50	$56.66

Management context: Q4 sequential revenue decline reflects divestitures of low-margin horsepower and seasonal slowdown; margins improved on pricing and synergies .

Segment Breakdown (Quarterly)

Segment	Metric	Q4 2023	Q3 2024	Q4 2024
Contract Services	Revenue ($USD Millions)	$189.62	$284.31	$280.21
Contract Services	Adjusted Gross Margin ($USD Millions)	$125.78	$187.70	$187.03
Contract Services	Adjusted Gross Margin (%)	66.3%	66.0%	66.7%
Other Services	Revenue ($USD Millions)	$36.36	$40.33	$29.31
Other Services	Adjusted Gross Margin ($USD Millions)	$8.49	$7.66	$4.24
Other Services	Adjusted Gross Margin (%)	23.4%	19.0%	14.5%

Capital & Cash Metrics (Quarterly)

Metric	Q4 2023	Q3 2024	Q4 2024
Maintenance Capex ($USD Millions)	$8.93	$21.55	$14.86
Growth Capex ($USD Millions)	$60.47	$65.12	$71.09
Discretionary Cash Flow ($USD Millions)	$70.53	$103.05	$107.69
Free Cash Flow ($USD Millions)	$10.45	$52.50	$56.66

KPIs and Operating Data

KPI	Q4 2023	Q3 2024	Q4 2024
Fleet Horsepower	3,261,661	4,417,687	4,402,747
Revenue-Generating Horsepower	3,258,951	4,259,843	4,250,499
Fleet Compression Units	3,078	5,297	5,069
Revenue-Generating Compression Units	3,062	4,757	4,592
Fleet Utilization (%)	99.9%	96.4%	96.5%
Avg. hp per unit (commentary)	—	895 (approx.)	926 (year-end commentary)

Balance sheet context: Year-end total debt ~$2.6B; credit agreement leverage 3.9x; ABL availability ~$322.5M at 12/31/24 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Adjusted EBITDA ($USD Millions)	FY 2025	$675–$725	$685–$725	Raised midpoint
Discretionary Cash Flow ($USD Millions)	FY 2025	Not provided	$425–$450	New metric provided
Contract Services Revenue ($USD Millions)	FY 2025	Not provided	$1,150–$1,200	New metric provided
Contract Services Adjusted GM (%)	FY 2025	Not provided	66–68%	New metric provided
Other Services Revenue ($USD Millions)	FY 2025	Not provided	$160–$180	New metric provided
Other Services Adjusted GM (%)	FY 2025	Not provided	14–17%	New metric provided
Growth Capex ($USD Millions)	FY 2025	Not provided	$240–$280	New metric provided
Maintenance Capex ($USD Millions)	FY 2025	Not provided	$75–$85	New metric provided

Capital allocation: Expect to return ~35% or more of DCF to shareholders in 2025, mainly via dividends and opportunistic buybacks; delever toward 3.5x by YE25 .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q4 2024)	Trend
AI/technology initiatives	Initiated deployment of AI/predictive analytics; electrification mix rising; training academy discussed	Expanded telemetry-based predictive maintenance; testing condition-based PM intervals to extend cycles and reduce costs	Strengthening execution, margin tailwind
Supply chain/lead times	New unit lead times ~9 months; customer contracting well in advance	Engine deliveries ~45 weeks; shop space constrained; no disruption expected	Tight, manageable
Tariffs/macro	Not emphasized	New tariffs could raise steel/input costs (~2.5–3% annualized); OPEC volatility likely favors outsourcing compression for cash-constrained customers	Modest cost pressure; demand intact
Pricing & margins	Leading-edge pricing premium ~20–25% vs fleet; Contract Services margin at high end (66%)	Leading-edge premium ~15–20%; Contract Services adj. GM 66.7%; sequential revenue per hp noise from asset sales	Premium durable; margins expanding
Regional focus	Permian/Eagle Ford-centric; electrification projects (Midland)	~70–80% fleet in Permian/Eagle Ford; exiting foreign ops; LNG/data-center demand tailwinds	Increased concentration
Regulatory/tax items	Texas sales tax accrual impacts (Q2)	Residual emissions/safety upgrades; ERP implementation; continued tax audit accrual noted earlier	Clean-up and systems investment
Contracts/tenor	3–5 year terms typical [—]	3–5 year terms continue on new and recontracting assets	Stable

Management Commentary

“Kodiak had a transformative year… set new records in revenue, adjusted EBITDA and free cash flow… Contract Services segment delivering a record adjusted gross margin percentage in the fourth quarter.” — Mickey McKee, CEO .
“Adjusted gross margin percentage increased to ~67%… evidence of success in raising prices, capturing CSI synergies and exiting lower-margin assets/geographies.” — John Griggs, CFO .
“We’ve deployed AI machine learning through telemetry analysis… identifying and predicting failures… enhancing uptime and service capabilities.” — Mickey McKee .
“We expect to return about 35% or more of discretionary cash flow to shareholders… and continue to delever with a direct line of sight to 3.5x leverage by the end of this year.” — John Griggs .

Q&A Highlights

Pricing and revenue per horsepower: Slight q/q dip driven by removal of sold working hp; underlying pricing continued to step up; leading-edge pricing remains ~15–20% above fleet average .
Cost and margin roadmap: Predictive maintenance/condition-based cycles expected to extend intervals and reduce costs; path to “upper 60%” Contract Services margins over time .
Macro/tariffs: New tariffs expected to modestly increase capex costs (steel) but not back to COVID-era inflation; OPEC-driven oil volatility could support outsourcing compression .
Capex mix and timing: ~2/3 of FY2025 growth capex for ~150–155k new hp (40% electric); front-half loaded spend for ERP, safety upgrades, emissions, AI projects .
Lead times and supply chain: Engine deliveries ~45 weeks; shop capacity tight but managed; no expected equipment delays .
Contracts: Tenor remains 3–5 years on new deployments and recontracting .

Estimates Context

S&P Global consensus for Q4 2024 EPS/revenue/EBITDA was unavailable at the time of analysis; as such, we cannot characterize beat/miss vs Street for this quarter. Investors should calibrate near-term models to internal guidance and documented margin trajectory until estimates refresh (values retrieved from S&P Global were unavailable).

Key Takeaways for Investors

Margin story intact: Record 66.7% Contract Services adjusted gross margin and 54.6% total adjusted EBITDA margin underscore durable pricing power in large-hp compression and realized CSI synergies .
Quality over quantity: Sequential revenue decline was driven by shedding low-margin horsepower; margin expansion and FCF improvement indicate positive mix shift .
2025 visibility improved: Raised midpoint for Adj. EBITDA and provided comprehensive segment guidance; expect continued repricing of renewing fleet (~30% of hp) and contracted new hp sets .
Execution levers: Predictive maintenance/AI telemetry, training academy, ERP and emissions projects should provide operating leverage and margin tailwinds over the medium term .
Capital allocation discipline: Plan to return ~35%+ of DCF, maintain dividend and opportunistic buybacks, and delever to ~3.5x by YE25; FCF supports shareholder returns .
Macro demand drivers: LNG ramp and data-center/AI power demand point to multi-year natural gas growth, supporting compression needs in Permian/Eagle Ford; lead times likely remain elongated .
Watch items: Tariff-related input cost inflation (~2.5–3%/yr), shop capacity constraints, and cadence of redeploying legacy CSI units; these are manageable but worth monitoring .

Kodiak Gas Services, Inc. (KGS)·Q4 2024 Earnings Summary