USA Compression Partners LP Aktie

Good morning. Welcome to USA Compression Partners First Quarter 2026 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, May 5, 2026.

I would now like to turn the call over to Clint Green, President and CEO. You may begin.

Good morning, everyone, and thank you for joining us. With me today is Chris Paulsen, Senior Vice President and CFO; Chris Wauson, Senior Vice President and COO; and other members of our leadership team. This morning, we released our operational and financial results for quarter ending March 31, 2026.

Today's call will contain forward-looking statements based on our current beliefs and certain non-GAAP measures. Please refer to our earnings release and SEC filings for reconciliations and definitions of non-GAAP measures and related risk factors. As we discuss performance, please note that JW acquisition closed on January 12. And therefore, Q1 earnings excludes the impact of revenues and expenses for JW Power for the first 11 days of the quarter.

Before we get into the quarter, I want to take a moment to recognize our team on safety. Our people go to work in the field every day, working around complex equipment, driving millions of miles a month, and the way they return to their family matters more than any financial metric we report. In 2025, our combined TRIR finished at 0.39, a 50% reduction from 2024 and well below the BLS industry average of 0.70, a benchmark, we have now beaten for 12 consecutive years. We are proud of these results, and we remain committed to continuous improvement.

Moving to the quarter, which included 2 integrations that established upward momentum for the company. First, we kicked off the integration of J-W Power at the time when horsepower lead times continue to extend. Customer discussions commenced immediately upon closing, starting the process of onboarding new customers to the U.S. compression platform. As of early March, we have integrated the combined operations organization and established a new reporting structure.

Second, on February 1, our integration of legacy USA Compression data into a new ERP systems completed. Our respective integration teams work long hours to enable a smooth transition of both, and I can't be more appreciative of their efforts. Throughout it all, we have maintained our operational momentum while delivering DCF and leverage metrics that show meaningful year-over-year improvement to our unitholders. The company is now broadly diversified across every major basin, horsepower class and customer type. In the last few months, we have contracted over 90% of our 2026-horsepower we will more than double the new horsepower deployed in 2025.

Additionally, we have continued the momentum in our small horsepower class with utilization up nearly 10% year-over-year. The introduction of J-W Power's manufacturing capabilities is enabling us to manage a dynamic compression market differently than the past. Certain new engine lead times have recently tripled from 50 weeks to approximately 150 weeks. And while historically, we might hesitate to commit to the full horsepower cost that far in advance, we are now able to directly acquire highly marketable engines with optionality to package for our own internal contract compress needs or future resale to third parties.

Engine costs represent approximately 25% to 40% of the total skid costs with just a fraction of that cost provided as the deposits. In the event of an unexpected contract compression market shift over the next several years, we believe we could also divest those engines for other use cases, further reducing any unlikely downside exposure. Additionally, the diversity of manufactured compression products, including midsized large horsepower electric and high-pressure gas lift supports more competitive pricing for our customers. while enabling us to adapt to the ever-changing marketplace.

So far, the oil-directed rig count remains flat this year, but producers are showing more optimism looking out over a 12-month horizon than we have seen for some time. reflecting a much improved commodity backdrop. The 12-month oil strip has significantly lagged physical spot prices and arguably is underpriced for an immediate and permanent ceasefire, much less a long-term conflict. We believe spot natural gas prices do not reflect the LNG risk associated with the [indiscernible]. Finally, [indiscernible] pricing is anticipated to materially improve with export capacities increasing in Q4 of 2026.

I will now turn the call over to Chris Wauson, our Chief Operating Officer, who will provide additional insights to our current operations and our out-year growth plan.

Thanks, Clint. As of today, the operations and commercial organizations have been integrated with both J-W employees and legacy USA employees under new reporting structures, consistent with the best-in-class approach. The longer-term result will be streamlined route optimization, customer contracts, vendors, inventory, safety protocols and systems debt. As discussed in the prior quarter, we expect approximately $10 million to $20 million of annual run rate synergies by year-end 2027, and we are still tracking towards those estimates.

The current new compression lead times have presented a new challenge for near-term business continuity and long-term planning for both contract compression and manufacturing. As a result, we have already placed orders for engines and package components for 2027 and engines for 2028 and a portion of 2029. Package component lead times remain well inside of engine lead times will continue to monitor and place these orders when needed. These advanced planning efforts should enable new contract compression growth to stay largely consistent with 2026, in excess of 100,000 horsepower each year.

As far as our manufacturing book is concerned, we have some specialty horsepower slate for resale, but the vast majority is expected to go into our fleet. Our 2028 orders are nearly entirely weighted to large 3600 series engines which are the most desired by our compression customers while also having substantial optionality for sale [indiscernible]. We continue to have robust conversations across our diverse customer portfolio, and as Clint mentioned, we have contracted more than 90% of nearly 110,000 new horsepower expected to be added to the fleet in 2026. And are presently in the middle of multiyear strategic planning discussions with some of our strongest customers to shore up our 2027 book.

Notably, we experienced lower churn rates than expected in Q1, and which is a reflection of the tightness in the current market. This backdrop, coupled with the idle units acquired from J-W positions us for outsized horsepower growth in the back half of the year and into early 2027. Finally, while oil prices have moved up significantly in the last month, we are focused on minimizing cost increases tied to lubricants. If oil prices were to remain at current levels, we would expect much of that increase to show up in the second half of the year as our lubricant contracts renewed.

I will now turn the call over to Chris Paulsen to discuss our financial results in detail.

Thanks, Chris. For basis in comparison, our quarter and year ago financials exclude the benefit of J-W that closed on January 12. For Q1 2026, our income statement reflects the results of JW's contributions for 79 days in the quarter and therefore, are non-GAAP financial numbers, including EBITDA and DCF reflect the same. By contrast, our non-GAAP operating metrics tied to horsepower, including utilization, average revenue per horsepower per month, an average active horsepower calculated based on month end, and therefore, fully reflect J-W's horsepower contribution for the quarter.

As we highlighted in our December 1 deal announcement, while J-W provides meaningful near-term accretion and immediate deleveraging, the company in aggregate also has lower gross margin than our legacy asset base, in part due to the manufacturing and AMS operations that contributed approximately 10% of legacy EBITDA.

Turning the page to Q1 results. We increased pricing to an all-time high, averaging $22.73 per horsepower, a 5% increase in sequential quarters and an 8% increase compared to a year ago. Average active horsepower ended at 4.438 million. Our first quarter adjusted gross margins came in at 64.4%. Regarding the consolidated financial results, our first quarter 2026 net income was $38.3 million, operating income was $91.4 million. Net cash provided by operating activities was $86.1 million and cash interest expense net was $47.1 million. Our leverage ratio at the end of the fourth quarter was 3.74x.

Turning to operational results. Our total fleet horsepower at the end of the quarter was approximately 4.931 million horsepower, adding approximately 1.037 million horsepower as compared to the prior quarter, largely tied to the J-W acquisition. Our average utilization for the first quarter was 91.9%, a decrease compared to the prior quarter after incorporating J-W. First quarter 2026 expansion capital expenditures were $26.4 million and our maintenance capital expenditures were $9.2 million.

Expansion capital spending in Q1 primarily consisted of new units, while maintenance capital activity was deferred for a few weeks in February due to the implementation of SAP on February 1. For the remainder of the year, most growth capital will be focused on new horsepower and reconfigurations while maintenance capital will normalize towards our full year projections. We continue to maintain our full year adjusted EBITDA range of $770 million to $800 million, distributable cash flow range of $480 million to $510 million, maintenance capital range of $60 million to $70 million and expansion capital range of $230 million to $250 million.

As Chris Wauson noted, we are nearly fully contracted for 2026 and replacing advanced orders to maintain full utilization of our manufacturing complex for several years. As stated in February, our near-term target is to maintain a 3.75x debt-to-EBITDA and we made significant progress towards this goal in Q1. While we hit this target for the quarter, we anticipate it will tick higher in Q2 as we take delivery of new horsepower that trend back lower by year-end. Energy high-yield market has remained open and very resilient throughout the Iran conflict. Our improved leverage metrics put the company in a strong position to access capital markets later this year to the extent we want to provide more consistency in our debt tranche sizing and duration.

This quarter was the world end of activity for our operations and finance teams as we implement new systems with new assets and new faces. The execution was nothing short of exceptional as we laid the foundation for more acquisition opportunities to come. We will stay disciplined and evaluate opportunities that fit with our financial goals and core competencies. In the near term, our business will be improved through a gross margin push, working to improve structural cost and the efficiency of the J-W organization in the face of an inflationary oil environment.

And with that, I'll turn the call back to Clint for concluding remarks.

Thanks, Chris. This business demands that we stay close to our customers every single day, understanding their needs, anticipating where they're headed and making sure we're ready when they call. The discipline doesn't change with the commodity cycle. What is changing is the opportunity in front of us, the demand for natural gas, both to move it and to power the infrastructure around it. continues to grow, and we feel very good about our position in that story. The relationships we've built with our suppliers, combined with our manufacturing capabilities, gives us a real advantage in an environment where equipment lead times remain extended. We intend to use that advantage. We're bullish on contract compression overall, and I'm excited about where we're headed.

I will now open up the call to questions.

[Operator Instructions] Your first question comes from the line of Nate Pendleton with Texas Capital.

Congrats on the record results. You had a really strong quarter across the board. Can you talk for a moment how this compared to your internal expectations following the J-W integration? And then maybe your decision to keep the guidance the same here in low those results.

Yes, Nate, thank you for that. Yes. I mean I feel like we're in line with where we thought we would be as we put this model together late last year and decided to move forward with the acquisition. We're working through -- we've already worked through some of the operational changes in the structure. We're working hard on our routing and ways to save going forward, but we're -- overall, we're really happy with where we're at in the process and excited about where we're headed by year-end and then through the future.

Got it. And as my follow-up maybe for Chris. I believe last call, you talked about looking for distribution coverage expanding beyond the 1.6x marker as sparking some conversations. With coverage now over 1.7x, can you talk about how you weigh adding to an already strong distribution versus other uses of capital?

Sure, Nate. Just before that, just to add a little bit to Glen's comments as it relates to JW transaction as well. I think we mentioned this before, but I think we've been generally very pleased with the sophistication of their operations. as we start to embark upon another SAP implementation for their operations in particular, we're seeing some things that we want to adopt in our own, which is fantastic and which is probably expected from a company that's been doing it for 60 years.

So there are areas of manufacturing that are done exceptionally well areas as it relates to customer interaction and outreach that have been done exceptionally well, the retail side of the business. So I'll just point to that as well. But as it relates to your distribution question, we were pleased to see that number tick up to 1.72x. The part of that relates to the fact that we kind of had a bit of a partial quarter. We ultimately had lower maintenance expenditures that was part -- that was due to the SAP implementation itself.

We did a couple of weeks of paper stacking as it related to the transition. We really had kind of a quiet period for about 1.5 weeks where we really told our folks to limit their maintenance expenditures. And so as a result, our maintenance expenditures were down, and therefore, DCF ticked up. But that being said, we also did not account for the DCF over those 11 days, while fully accounting for maintenance capital.

So I think net-net, we feel really good about setting up for a durable and really a disciplined approach to our distribution over time in our distribution policy. We want to see something sustained for a period of time and continue to hit both our financial metrics in terms of leverage, but also continue to see and repeat kind of these type of numbers, before I think we would begin to approach the conversation about any change in distribution policy.

Understood. I really appreciate all the detail.

The next question comes from the line of Jim Rosen with Raymond James.

Clint, you talked about lead times stretching out. Again, it's pretty remarkable to see how quickly that is spread to numbers we've never seen before. And it seems to be you guys are pretty well ahead of the game by placing orders for engines out multiple years. I'm curious how you're seeing your customers and maybe even competitors in terms of how they are set for planning out this far in advance because it wasn't long ago that customers were kind of caught by surprise when a couple of years ago, lead times were beyond a year, and now we're almost 3 years. And so I'm just kind of curious how do you think the customer base and the industry is set for planning on these extended time horizons?

Yes. It was a little bit of a surprise at one point of the lead times. We were running around 55 to 70 weeks, just depending on the day. And then overnight, cat went to 100 weeks or 108 weeks. And that's when we got a gear pretty quickly to try and figure out how we were going to cover that. So we got creative for '27, and we're able to pull some stuff in. And then '28, we decided to go ahead and make that engine order for '28. The customers, I think they're dealing with it just like we are. Thankfully, we're able to provide for our customers with our plans for the future. And competition, I haven't really heard what they're doing on any front.

I'm sure they're trying to figure it out just like we are. I think our capital program has gone from a 1-year program to probably a 3-year outlook and taking pieces of it at a time as we have to order engines. Now a lot of it is driven by the generation. It's the generator orders because you see that aerial and cooler manufacturers, those lead times are still at 25 to 30 weeks. They're not stretched way out. So I think everybody is taking it in stride and -- and we're trying to make sure our customers are taking care of.

Yes. Well, kudos for being ahead of the game. And then I guess as a follow-up, maybe you guys -- Chris, you talked about OpEx or mainly higher oil prices that will drive lube oil and fuel costs up to some extent in the second half if oil prices stay up here, Curious how you think about your ability to pass that on given how tight the market is and maybe the lag effect of being able to price that on. Obviously, you didn't change your guidance, so it's not impacting your margins at this point. But just kind of curious how you're all thinking about that.

Yes. No, thanks for that. It's Chris Wauson. One thing with inflation with oil prices everything -- every -- all of our costs are going up. So we're continuing to drive efficiencies in the organization to protect that margin. And as contracts expire and renewals come up, we do plan to address that accordingly. So it's kind of twofold. So we're going to manage it as best we can and continue to drive for efficiencies. That's the biggest win there.

The next question comes from the line of Elias Jossen with JPMorgan.

Just wanted to start on the outlook for new unit procurement. It seems like you've got orders placed for the next several years. So how should we think about the cadence of unit additions over these next couple of years? I know some of your peers have given an outlook through the decade. But just curious how we should think about new units in the fleet.

One thing we're trying to do is stick to that 100,000-ish horsepower of growth year-over-year. So with maybe even up to 125, just depending on how things shake out. But -- that's the beauty of our manufacturing business. So we can control that a whole lot better now. It's a lot more optionality. It enables us to really make those decisions and do what's best for our customers and the organization.

This is Clint. I want to add on that. I talked about a 3-year capital program and we're really only talking about the cost of the engine for that 3 years. we have the in order, but we will wait until -- and we'll monitor lead times on compressors and coolers. And that way, we can order those at 40 weeks or something like that to have them in time for the engines to arrive. So I want to make sure we're not commit -- everybody understands we're not committed to the full compressor cost going out 3 years. It's just the deposit on engine so far.

Got it. That's a helpful clarification. And then maybe shifting over to some of the stronger pricing we saw this quarter as well as the utilization noise from the J-W integration. Can we help frame run rate levels on both of those metrics going forward? Should we expect continued pricing growth? And how will fleet utilization, do you think ultimately shake out once you're fully integrated?

Chris Paulsen. So as it relates to the first part of that question on the utilization front, the utilization is reflective of the fact that we brought in over 1 million-horsepower and essentially got that optionality, I think, on the chip. As we mentioned in our acquisition call, we noted that we felt like there were 900,000-plus really deployable. We've taken the initial pass through on that fleet, and that's why you see in the over 1 million-horsepower that's within our total count. We'll continue to review that and look more deeply into that total [indiscernible].

And part of that will be, as we continue to increase orders, increase our small horsepower utilization, as we noted, we increased it over 10% year-over-year we see that potential to potentially improve from here. And those are some of those units that we'll evaluate. So presently, the horsepower utilization that you see, I think, is a baseline for a new run rate. And I think it can only improve from here, both in terms of small horsepower utilization, but also as we dig deeper into some of that capacity. We may ultimately decide that, that capacity is no longer deployable within our operations but can be used on other operations elsewhere.

As it relates to the revenue side of the question, the revenue has continued to improve, as we noted, 5% and 8% in terms of revenue relative improvement. We see that continuing to improve consistent kind of with the way in which we've approached in the past. I think as we see cost increase, many of our contracts, and I should say most are CPIU based, we've seen CPIU tick up almost 100 bps from not very long ago. So one, we'll have the CPIU support as it relates to revenue. But two, we are partnering with our with our upstream and midstream companies. We always do just that.

And so they understand through any cycle that there's a give and take, and we recognize that, too. And it's partnered as it relates to the business and would anticipate that as our cost increase, that there will be some relative cost increase on the other side of that and just need to have constructive conversations. And that's a big part of having great relationships within the business and being around since '98 and having nearly 2 decades of relationships with our top 10 customers.

[Operator Instructions] The next question comes from the line of Doug Irwin with Citi.

On J-W Power here. It sounds like the manufacturing business is already maybe changing the way you approach your growth backlog a little bit. Just curious now that you've had a bit more time with these assets under your belt, if there maybe been any other opportunities or surprises you've been able to uncover with regard to synergy opportunities that maybe you hadn't fully appreciated beforehand.

Yes. This is Clint. Doug, thanks for your question. Yes. I mean we fully expect to -- or we hope to find some diamonds in or up that we weren't expecting. Definitely, the manufacturing business, the capacity there is between 100,000 and 125,000 horsepower in that facility, which is kind of what we expect to grow or plan to grow and maybe a little north of that over the next few years. But -- so we feel like that will give us a lot of flexibility. The operations side of it being in every basin now and having facilities that are that are across the road from each other in several spots. There may be some synergy opportunity there. We think there's more to come. We're just trying to dig through the -- all the opportunities and figure out which ones really come to life.

Got it. That makes sense. And then maybe just a higher level 1 as a follow-up. -- looking at Slide 4 here in your slide deck. You call up a need for over $10 million incremental horsepower by 2030, which is obviously a huge number. Just curious what you see is your role in meeting that demand here moving forward? Do you potentially see any delay even further into growth kind of relative to what you already messaged here over the next couple of years? And if you can maybe talk about maybe what basins on that map, you see yourselves as having the biggest advantage in.

Yes. This is Chris. Great question. So as it relates to that, part of it is what is that right forecast. And so we are always -- we are actively reviewing kind of the overall forecast for natural gas understanding the LNG markets, the data center markets, they're exceptionally fluid, as you all know. I think ultimately, we feel really good about kind of the forecast that was put forth on that particular slide. and the forecast as it relates to those basins. And I think it's all related to the relative natural gas price as well. Ultimately, I think the Rockies for instance, is an area that we would say at a higher gas price, that would probably most certainly be kind of a flattish range, whereas I think those rest of those areas are well established in terms of their growth trajectories at current pricing if not above.

And so ultimately, as we think about our place in this trajectory, I mean we want to be in a position to maintain our current standing and our current market share, if you will. We know that in areas like the Northeast, we have an outsized market share and it's an area that has returned to growth. And there's really fundamentally sound measures that support that 5 to 7 Bcf. I think if we see cold gas switching that number increases from here, and that's really based on announced projects. I mean -- and there's still probably more to come there.

As it relates to the Gulf Coast and the Permian that are going to make up more than half of that. We're well situated there. We have -- we're a big player in the Permian. We're a huge player in the Gulf Coast and Mid-Con and we want to maintain our market share, if not grow it in those respective areas as well.

And the next question comes from the line of Selman Akyol with Stifel.

I just kind of wanted to follow up on that last question. And listening to the energy transfer call, they're certainly talking about the U.S. when everything settles out from at least the U.S. becomes certainly a preferred supplier to the global outlook. And so as you think about that, should we expect to see an acceleration of your business?

We fully expect so, this is Clint. I'm sorry. We -- if you look at the whole -- the market, there's 15% to 20% of the LNG capacity locked in the [indiscernible] locked in because of the [indiscernible] right now. JKM prices are yesterday, they were at $16 and U.S. gas prices were at $2.80 to $3. If you back up to March -- January -- January and February of this year, JKM was $9 to $10, and U.S. -- Henry up pricing was $280 to $320. So we haven't -- even though JKM has gone up, we haven't seen the pricing increase here in the U.S. Part of that is takeaway capacity, right?

The -- I guess the major driver of it is -- but by the end of the year, we're going to have a lot more capacity coming out of the Permian. There are several LNG facilities either expanding now under construction or completely being built under construction. But if you look at the U.S. Department of Energy's website, they show 5 of those facilities will be online within the next 24 months. So with all that said, if gas takeaway is able to get out of the Permian and to the facilities on the Gulf Coast or -- and are able to get on boats and go across the ocean, the demand for U.S. natural gas is going to go up. We couldn't be more excited about the natural gas story right now, whether it's drop Basin or the Permian or wherever. And any of that growth with us being in all the basins means that we have to grow with it. So we're super excited about the prospects of the future here.

All right. I appreciate that. And then let me just ask you about the extended lead times. And I guess when you look at the 3600s and you're talking, I believe, 2,500 horsepower and up. Is that all just being driven by, I guess, sort of AI backup power or primary power, and so you're competing against that? Is that what's really taking the lead times up? Or is it something else?

Well, it's both. It's natural gas-driven engines or generators that are driving -- that market is increased extremely, right? So a lot of people order in generation and then you have folks ordering natural gas compression engines that -- to supply the gas to the generators. And cat is -- really doesn't have a lot of big plans to expand their manufacturing facility in the near future for the 3,600 series, which is the 2,000, 2,500 up to 5,000 horsepower. So those are the drivers behind it. I mean, I think we're to the point now where we're starting to look at other engine manufacturers as options, whether it's domestic or international, because I believe there's a hole that we've got to start filling in the future. If this is going to continue out.

There are no further questions at this time. I would like to turn it back to Clint Green for closing remarks.

Yes. Thank you all for joining our call today. As always, we're deeply appreciative of our employees and the stakeholders that enable us to conduct our business every day. With that, we want you all to have a great day. Thank you for joining, and see you next time.

Thank you. Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Good morning. Welcome to USA Compression Partners Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, February 17, 2026. I now would like to turn the call over to Clint Green, President and Chief Executive Officer.

Good morning, everyone, and thank you for joining us. With me today is Chris Paulsen, Senior Vice President and Chief Financial Officer; Chris Wauson, Senior Vice President and Chief Operating Officer; and other members of our leadership team. This morning, we released our operational and financial results for the year and quarter ending December 31, 2025. Today's call will contain forward-looking statements based on our current beliefs and certain non-GAAP measures. Please refer to our earnings release and SEC filings for reconciliations, definitions of non-GAAP measures and related risk factors.

Please note that the historical information presented excludes the results of J-W Power acquisition, which closed on January 12.

With that, I would like to congratulate the team for closing the J-W transaction. With this transaction, we are leaning into the USA Compression name with broader reach all across this great country. The transaction makes us a clear choice for operators who want a provider with a reputation of high-quality reliable service in every major oil and gas basin in the U.S. and across all horsepower classes.

I want to highlight the tremendous year we had across our operations, commercial and finance organizations. On the safety front, we recorded a TRIR of 0.39, which is approximately half of the industry average. We delivered full year adjusted EBITDA of $613.8 million. and DCF of $385.7 million, both are records for the company.

We maintained high average utilization in excess of 94% throughout the year and ended the year at 94.5%. Finally, we refinanced our ABL in 1 of our senior notes, significantly reducing our weighted average borrowing cost and improving strategic flexibility. These accomplishments occurred as the company embraced a new leadership team, a change in headquarters, a new shared services model and new ERP platform.

The resilience and grit showcased across our organization in 2025 gave us confidence to pursue and now integrate the J-W acquisition in 2026. Last year, the energy macro environment stabilized following early tariff discussions, but the development pace slowed in the Permian as rigs continue to reduce throughout the year in response to lower oil prices. Of note, while oil production flattened in the last half of the year, natural gas continued to move upward, ending approximately 9% higher year-over-year.

We continue to be bullish on the Permian longer term. With the acquisition of J-W, we maintain a large presence and have increased our active horsepower in the Permian to around 1.7 million. We have also increased our horsepower in oil and liquids-rich basins as well as major gas basins like the Marcellus, Utica and Haynesville, which returned to growth in 2025. This growth was tied to increased local demand, additional infrastructure debottlenecking and a higher average natural gas price of $3.52 per MMBtu. This is a 56% increase from the prior year.

We are encouraged by these fundamentals and believe the acquisition of J-W strengthens our leadership within these natural gas basins. The broader compression industry continues to forge ahead with strong margins and a disciplined approach to new compression capital and USA Compression is no different. Of note, lead times for new equipment have increased to over 2 years, which presents a new set of opportunities and challenges that our team continues to work through.

In 2026, we have budgeted approximately 105,000 new horsepower, representing a 2% increase in active horsepower with half of that new horsepower under contract. We also have new units contracted for the first half of 2027 and are in active discussions to procure additional horsepower in 2027.

With that, I will turn the call over to Chris Wauson, our Chief Operating Officer.

Thanks, Clint. Since the close of the transaction on January 12, we have begun planning to optimize route management, inventory, contracts and operational structures to begin to realize synergies as early as this year. As we have previously noted, we moved forward with the go-live of a new ERP system in Q1 of 2026 for the legacy USA Compression assets and now plan to integrate the J-W assets during 2026.

We will have modest onetime cost associated with the transaction in 2026, but expect to lay the groundwork for substantial synergy capture by 2027. Our assessment is still ongoing, but at this time, we anticipate approximately $10 million to $20 million in annual run rate synergies that will be achieved by the end of 2027. We expect these synergies to create improvements in both operating margins and G&A with the additional potential for commercial synergies as we better serve our combined customer base.

As we discussed in our announcement we are excited about increasing the extent and depth of our asset offering and customer base. Customer retention and review of existing contracts are top of mind and we have already begun moving contracts under USA Compression MSAs, and we'll work to extend average contract duration throughout this year. We hope our customers will realize the best of both organizations. I am personally excited to see the strength of our organization growth, especially across the mid-Continent, The Rockies and Northeast with the addition of the J-W assets. We will focus on continuing to be the operator of choice across these basins and others providing customers commercial and operational consistency across the U.S.

No other contract compression company in the market can support its customers' diverse horsepower and geographic needs like USA Compression can to date. Finally, with the acquisition of J-W, we acquired approximately 200,000 idle horsepower that will undergo significant review over the course of the next year. As we indicated in December's J-W acquisition call, we believe approximately 50,000 horsepower is readily deployable with limited capital spend. As it relates to the remainder, we will analyze the best path, including potential monetization of a portion of the horsepower.

We also acquired a manufacturing business that provides strong optionality for third-party sales and internal reconfigurations. I will now turn it over to Chris Paulsen to discuss our 2025 financial results in detail and our 2026 guidance.

Thanks, Chris. In Q4, we increased pricing to an all-time high, averaging $21.69 per horsepower, a 1% increase in sequential quarters and a 4% increase compared to the year ago period. Average active horsepower increased approximately 1% relative to Q3 to $3.579 million. Our fourth quarter adjusted gross margins came in at 66.8%, right on historical trend. Regarding the consolidated financial results, our fourth quarter 2025 net income was $27.8 million, operating income was $76.6 million, net cash provided by operating activities was $139.5 million and cash interest expense net was $43.4 million. Our leverage ratio at the end of the fourth quarter was 4.0x.

Turning to operational results. Our total fleet horsepower at the end of the quarter was approximately 3.9 million horsepower, adding approximately 21,000 horsepower as compared to the prior quarter. Our average utilization for the fourth quarter was 94.5%, a slight increase compared to the prior quarter. Fourth quarter 2025 expansion capital expenditures were $40 million and our maintenance capital expenditures were $7.8 million. Expansion capital spending in Q4 primarily consisted of new units.

Turning to 2025 full year results. We ended the year with adjusted EBITDA of $613.8 million. We also ended the year with distributable cash flow of $385.7 million, above the recently increased guidance, in part due to the final preferred unit conversion in December. Maintenance capital ended at $39.4 million and expansion capital was $117.6 million, both towards the lower end of previously provided guidance.

Looking ahead and with the contribution full year of J-W, we are forecasting adjusted EBITDA of $770 million to $800 million and distributable cash flow of $480 million to $510 million. Maintenance capital range is forecasted to be $60 million to $70 million, allowing for consistent preventative maintenance intervals across our combined fleet. Expansion capital range is $230 million to $250 million, which includes just over 100,000 new horsepower or over 2% of our active fleet being added and panel upgrade for improved telemetry practices.

The expansion capital range also includes approximately $40 million of other capital, including vehicles, tools, investments in technology and other items. This expanded growth capital budget relative to prior years will enable us to better respond to the needs of our broader customer base and enable us to get new horsepower in both the Permian and the Northeast. The net result of our budget should enable us to improve upon our debt metrics with our near-term targets at 3.75x debt-to-EBITDA, a quarter-turn improvement over the next 12 months.

We remain committed to managing debt levels and will remain open to transactions that can further delever the balance sheet and are accretive to unitholders. We also continue to evaluate our capital structure in its fixed versus floating proportion as it relates to DCF and business certainty. Today, at current Fed rates, our borrowing costs are improved by approximately 50 basis points by utilizing our ABL relative to our most recent notes refinance. We also have approximately $0.5 billion of capacity, not including the $300 million of additional accordion.

Overall, I'm very pleased with the operational momentum we carry into the 2026 with the legacy USA Compression business and the J-W Power assets. In the near term, the addition of J-W assets will reduce our aggregate gross margin for the contract compression business. Our clear goal is to more closely align those margins with our own over the next 2 years, contributing to the synergies Chris Wauson spoke of earlier. And with that, I will turn the call back to Clint for concluding remarks.

Thank you, Chris. I want to thank all of our employees for the advanced planning and early integration efforts that have taken place across the 2 companies. We are honored to be part of the J-W Power legacy and are confident it will be improved going forward given the broader reach and resources of USA Compression. It is our goal to provide the same level of excellence throughout every region in the U.S., something that continues to set us apart. I will now open the call up to questions.

[Operator Instructions] Your first question comes from the line of Doug Irwin with Citi Group.

I just wanted to start with the growth CapEx guidance here. Could you maybe just help dissect a bit how much of that $250 million growth budget is tied to kind of organic base growth versus maybe the backlog inherited from J-W Power and then just curious if this level is kind of the right way to think about your run rate moving forward for CapEx, particularly as we kind of think about the potential impact of 2-year lead times here?

Yes, great question. Appreciate that. So just to break down the growth capital this year a little bit, about $205 million of growth capital is tied in with the typical compression business, both new units, make ready and reconfigurations. Approximately $150 million of that $205 million is tied to new units. So as we mentioned in the call, approximately 105,000 new units overall.

And we have another just less than $40 million in other capital tied to vehicles, IT tools, et cetera. We're really trying to add consistency across our fleet as it relates to the other capital. We think there is a scenario by which that can come in lower but hopefully, overall, that kind of breaks down what we call growth and expansion capital.

Yes, that is helpful and then...

And as it relates to your other question and apologies, as it relates to your other question in terms of percentage growth going forward, as we mentioned, this year is approximately around 2% growth overall relative to our active horsepower. As it relates to 2027, those long lead times do make for difficult planning. The beauty of our manufacturing entity is that it does allow us to start to dissect some of that a little bit differently than we have in the past as we've kind of been beholden to packagers.

Today, we do have manufacturing capacity in 2027. We're trying to load up that relative capacity. We have about 10,000 horsepower already contracted for that capacity. We're looking to utilize probably the remainder of that capacity for our own compression just next year.

And certainly, as it relates to smaller horsepower, and I say smaller, it's still around 1,500 horsepower or so, the lead times are less. It's really some of those really large 2,500 horsepower plus packages that have the long lead times. So we do have some flexibility as it relates to that. And frankly, this year, we've even packaged smaller horsepower than 1,000 horsepower. So we'll continue to listen to our customers talk about their needs and be responsive as it relates to kind of the horsepower for 2027 and decide whether or not that number is kind of 1.5% to 2% range that we've been in over the last several years.

Got it. That's helpful detail. I just wanted to follow up on some of the comments made in the prepared remarks about just some of the actions you've taken to improve the balance sheet and then J-W Power is obviously accretive from a leverage perspective as well. Just curious if these actions kind of impact the way you think about the right level of distribution coverage moving forward and whether they might give you some runway to start thinking about potentially growing the distribution from here.

Yes, great question. So last year was really about, as you noted, kind of making sure that our balance sheet trajectory we set along the right path. We were able to do that transaction and able to put the cash forward because we did go through the process of a notes refinance beforehand. We went through an ABL restructuring and grew that relative ABL and as I mentioned, we also have capacity to even expand it further with our accordion feature of around $300 million. So we're on the right track as it relates to our balance sheet and the relative improvement there. 3.75x, I think is a worthy goal in the near term.

The question is, do we move down further from there to 3.5x. I ultimately would like to be there, but we also need to balance. As you noted, the fact that our distribution coverage has continued to improve. And net of the dividends that were -- or distribution, excuse me, that were paid a week ago, our number on a normalized basis is 1.55x. We did pay the Westerman Family, some units associated with Q4 that was factored into that 1.36x and those units were ultimately repaid.

So our normalized number is about 1.55x on Q4. We're looking for that number to be in the 1.6x plus range next year or this coming year that is. And as that number starts to expand beyond 1.6x and grow beyond there, we need to continue to have conversations with all of our unitholders as to what the right answer is in terms of distribution growth.

Your next question comes from the line of James Rollyson with Raymond James.

Just to circle back to the capacity adds of 105,000, it's in the budget for this year. Maybe just kind of give this can really sway how things lay out across the quarters? If you could talk about the timing of delivery and when you expect that capacity to actually be in the field.

Yes. I'll start and then Chris Wauson will probably add into that. I think most of what's coming on this year is in the back half of the year, July forward. Chris, do you have anything to add to that?

Yes. So thanks, Clint. So majority of the horsepower, there's a little bit that triples in Q3, but mainly the bulk of the horsepower comes in late Q3 into Q4. So we'll see good numbers of growth in the back half of the year.

Got you. And maybe just kind of following up Clint on your comments. It seems like every call I hear on compression lately, the lead times getting longer and longer. Wondering if that's showing up, you go back 2, 3, 4 years, and obviously, you guys like Cat had really ramped up the cost of equipment which was translating into higher pricing for everybody on new orders. And then it seems like as we were originally kind of late last year, prices were just more inflationary like typical annual Cat increases. But I'm curious, as lead times continue to stretch out. Are you seeing that? Or do you expect to see that translate at some point into higher equipment costs again like a bigger stepup?

I don't think that any manufacturer ever misses the opportunity to increase prices. But yes, we -- the main driver in the lead times is Caterpillar engines and the data center demand for generation has driven that lead time out. We still have some other options with some other manufacturers out there. They're not as sought after, what have you. I expect we'll see some type of increase at some point this year. I haven't heard of one yet. But I'm sure 1 will come down later on this year.

Your next question comes from the line of Gabe Moreen with Mizuho.

Obviously, one of your competitors recently announced a pretty big step out into the distributed power space. Just wondering kind of your latest thinking on potentially evaluating that space, whether it's something you're looking at or reconsider?

Yes. Gabe, it's Clint. Yes, absolutely. We believe those business -- that -- the distributed power business and the compression business are a lot alike. They -- we have -- you have mechanical equipment that has to run or hasn't guaranteed run time, several synergies with the type of folks you need to work on it. So we've definitely evaluated several of those over the last 18 months or 12 months, what have you.

We put them into our model. The ones we've looked at haven't quite met the requirements that we wanted for whether -- to make our model like we wanted it to be. And so we haven't jumped out there yet, but we are always evaluating that. It's a business we think that we could drive the same type of margins out of that we do in the compression business.

Got you. Thanks Clint. And then maybe if I can pivot a little bit to the 50% of the new HP for '26 being placed. Can you just talk about what expectations for placing the rest of it? And sorry, if I missed it. Is that going to be next quarter, quarter after kind of what you're hearing from customers about demand from that HP which you haven't signed up customers yet for?

It's Chris Wauson. I'll take that one. We strive for kind of consistent margins and our new unit growth has primarily been focused on our Tier 1 customers. So I'm pretty confident that the remaining balance of what we have available will get contracted up here in the near future. So we look forward to working through that for our customers.

Your next question comes from the line of Nate Pendleton with Texas Capital Bank.

Congrats on the strong year. I wanted to go back for a moment to the new unit time lines. How do those time lines impact your longer-term horsepower growth strategy, organic or inorganic? And could we see the time lines impact contract compression pricing with customers in the near term?

It's Chris Wauson. With the lead times pushing out for a new package at 120-plus weeks, it gets challenging, right? It's not going to affect our 2026 growth, but in 2027, we are working to secure that and figure that out, picking up the manufacturing business with J-W that gives us a lot of optionality that Chris Paulsen spoke to earlier. We do have around 10,000 horsepower already contracted into '27. So we are looking at every angle to work through that and add growth.

So we're going to continue to push for that as well.

I want to add that the size of the J-W manufacturing business is it's almost the exact same size as our expected growth over the next couple of years. We're not looking to expand that manufacturing facility or go out and try to sell a huge amount of packages, but we want to be able to fund some of our own growth internally. And give us that flexibility that we need to, when packages move out to 100 weeks that we can still provide for our customers.

Got it. Appreciate that detail. And then as my follow-up, in the prepared remarks, Chris Paulsen mentioned expansion CapEx, including the new telemetry being added to units. Can you get any more detail on what that can entail for customers?

Yes, I'll take that. It's Chris Wauson. One thing we're looking at is always looking for efficiencies, to drive efficiencies. And with that, we have to invest in our units. So panel upgrades, unit upgrades is huge. So it allows us to have some dashboards to really see what's going on without having employees out there on site 24/7. So that gives you a little color as to what that looks like, but it's our eyes and ears basically without folks on the ground.

I'm going to add to that, too. It also gives us the ability to manage how our folks -- when they leave to go work on a piece of equipment that's down, maybe got called out in the middle of the night, they can have the right parts. That's where we're trying to get to with this with some form of AI going forward. And this is the first step in our business to move that direction.

[Operator Instructions] I will turn the call back over to Clint Green, President and Chief Executive Officer, for closing remarks.

Yes. Just to add a little bit there. I want to explain how happy we are with the J-W acquisition, how excited we are to be able to get into all those basins. And then the excitement that we have for the overall gas industry. And the way that the demand from data centers and LNG, and it's real. It's coming online. And those -- we're excited to be in this business at this time and look forward to creating unitholder value as we move forward. Thank you for all for joining our call, and good day.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Good morning, and welcome to USA Compression Partners December 2025 Investor Conference Call. [Operator Instructions] This conference is being recorded today, December 1, 2025.

I would now like to turn the call over to Clint Green, President and CEO. Please go ahead.

Thank you, operator, and thank you all for joining us today. During this call, we will reference certain non-GAAP measures -- forward-looking statements. Please review the related legends included in our presentation discussing this transaction found on our website.

As you all have seen -- now have seen, we are excited to discuss our acquisition of J-W Power Company, a largely private-held provider of compression services with a storied history dating back to the 1960s. This represents an exciting opportunity to increase our geographic footprint across the U.S. and expand our existing customer relationships while acquiring new ones. We especially want to thank the Westerman family for entrusting us with the assets and for their commitment to the combined company going forward as owners of common units. Together, our two companies bring decades of experience in contract compression and a shared focus on exceptional people, a strong culture, reliable equipment and superior service, consistent with our four pillars.

With that, I will turn the call over to Chris Paulsen to discuss the merits of the transaction in further detail.

Thanks, Clint. I'll start on Page 2 of the presentation. The transaction will be funded with $430 million in cash initially via the existing credit facility and approximately 18.3 million USAC common units issued to the seller. This represents an attractive valuation of approximately 5.8x 2026 estimated adjusted EBITDA. Notably, while we anticipate meaningful synergies associated with the combined business in the fullness of time, we have assumed no synergies upon announcement. The majority of J-W's adjusted EBITDA is tied to its 800,000-plus active contract compression horsepower, which is primarily mid to large and will increase our active fleet to roughly 4.4 million horsepower on a pro forma basis. Noncontract compression adjusted EBITDA is approximately 10% of the total and is attributable to the AMS and manufacturing businesses. The transaction is expected to close in the first quarter of 2026 and will be subject to customary closing conditions, including regulatory approval.

Turning to Page 3. J-W allows us to increase the scale and product offering, expand long-term customer relationships and improved geographic presence, all while priced at an attractive valuation. J-W's assets are complementary to our own with over 300 customers across the U.S. In the near term, we expect this asset will deliver meaningful accretion in 2026 on a DCF basis, and will move us below 4x leverage on a pro forma basis. J-W also provides a strong pipeline for continued organic growth. We expect active horsepower to grow roughly 2% by year-end 2026 driven by newly contracted horsepower and dependent upon our post-close finalized capital budget.

Turning to Slide 4. In Slide 4, you can see that J-W provides 70% of the contract compression fleet that is mid- to large horsepower with 46% of the HP greater than 1,000 horsepower. The fleet historically serviced both gas lift and gathering with a slightly higher proportion tied to the wellhead. The fleet is relatively evenly spread across our existing operations in the U.S. and provides us new access to the Bakken. Total acquired horsepower is approximately 1.05 million, of which we anticipate over 900,000 horsepower is readily deployable with limited additional capital to make ready idle units. Approximately 90% of the expected adjusted EBITDA in 2026 is tied to the contract compression business with expected gross margins nearing 60% for contract compression in AMS. While this is lower than our baseline average, we are confident that through combined best practices, we can streamline operations and incrementally improve our operating margins over time.

Finally, Page 5 shows our pro forma active fleet mix by basin and unit size. The hatched areas represent basins where we currently have an operating presence whereas the blue areas are new, including portions of the Bakken, Uinta and Arkoma Basins. In each hashed area, we expect to meaningfully enhance operational efficiencies through improved materials and fluids cost and route management.

We cannot be more excited about the addition of J-W Power to the USAC portfolio. Its field operations are well respected throughout the industry and horsepower offerings complement our own. As mentioned, we anticipate closing the transaction early Q1, and we'll look to provide pro forma adjusted EBITDA and capital numbers at that time.

I will now open up to Q&A.

[Operator Instructions] Our first question will come from the line of Jim Rollyson with Raymond James.

Congrats on the deal. Chris, maybe starting with you, just can you give us a little bit of kind of trailing 12-month context on kind of revenues, EBITDA and I think the 10% mix was related to EBITDA, but just maybe a little bit of history kind of we know where we're coming from to then project where we're going.

Yes. Good question, Jim. So as we look forward into 2026, we mentioned that we're looking to grow new horsepower approximately 2%, that horsepower number in terms of what's currently contemplated within the J-W legacy assets is about 40,000 new horsepower, of which over 60% of that's contracted at the moment. Looking back historically and relatively, the last 12 months, the number has been just south of $140 million on an adjusted EBITDA basis. And again, most of that increase on a relative basis for 2026 is tied to that new horsepower.

Got it. That's helpful. And then, Clint, obviously, J-W has been around for a long time. Would love to just hear your thoughts on kind of how you got this transaction? And as you think about it, you mentioned geographic diversity, but love to hear beyond just kind of geographic footprint?

And what's your thoughts that this brings to the table? Does it bring a lot of new customers of the 300? I imagine there's a lot of overlap there. Is it more tied to new growth opportunities? Is there any technologies or the manufacturing and AMS business that you kind of wanted to grow into and this helps you? Or is this more of a kind of gets you more scale, gives you some growth opportunity and helps deleveraging with a bunch of synergies? Just kind of curious your approach there.

Yes. Thank you, Jim. That -- it's really all of that, right? If you -- at investor conferences and over the last year, we've talked about if we were going to do a deal, it would need to be deleveraging, it would need to be accretive. It would need to be DCF -- improved DCF. We feel like that this does all of that. We also like being the footprint in the basins that it gives us opportunities to work in. With the AMS business, we've been pushing to grow that business here over the last year, and this helps us with that. It gives us opportunity there as well. So I think the best way to sum it up is we like the whole enchilada.

Our next question comes from the line of Eli Jossen with JPMorgan.

Just wanted to start on the kind of age and utilization of the horsepower versus your existing fleet. Can you just kind of provide some high-level color on how these assets from a utilization and uptime perspective compare to what you already have?

Sure, Eli. Yes. In terms of utilization, I think in the context of historical utilization, we have to decide what is that appropriate count of total horsepower. As we indicated in the slide deck, we're about -- the total horsepower being delivered associated with the transaction is about 1.05 million. We also distinguish between that and indicate that in excess of 900,000, we believe is readily deployable with some limited capital tied to it.

So if you tag that in and look at kind of where that number is, if you just simply look at 850,000 into 900,000 that would kind of be the relative utilization on what we would say is a comparable basis. Ultimately, we will get in with the assets and determine whether or not that number is 900,000 or 950,000 or whatever the case may be.

In terms of service offerings and the comparable service offerings, their uptime requirements are no different than our own, no different than many of our peers at the same time. The assets themselves are on average kind of similar age as our existing. The contract terms, I would draw a distinction there. They have tended towards shorter contract terms on average, whereas our average contract term nears 30 months, theirs is probably half that.

And so that is something that we're going to look towards as we go about recontracting in the next 12 months. And with that, we'll also be moving towards MLP qualified income with the recontracting. So there's some synergies that we would hope to achieve as it relates to that. Obviously, some additional tax synergies in time as we move to MLP qualified income. So hopefully, that addresses your questions. If you have anything that I did not address, please let me know.

No, that's super helpful color. And then maybe just one more. So if you -- I think there's some helpful splits and pie charts in the deck, but if we think about the upstream versus midstream exposure for the acquired assets, if you can provide a little bit of color on that and also just how that tied into the acquisition decision as well?

Yes. I'll just say this. We think that the gas gathering versus the -- what I would call gas lift or upstream component is somewhat similar with our own with a little bit heavier weight towards the gas lift side. I mean when we looked at this acquisition, what was exciting to us, frankly, was its geographic presence across the U.S. And while it incremented our Permian presence and continue to increase our Permian presence, in fact, on a pro forma basis, moved that just below 40%. These other areas are areas that are really going to be necessary to see the gas growth into the second half of this decade.

And so as we look forward to 2028, 2029, 2030, various third-party reports really show the growth in wells drilled in some of these other basins within the greater Rockies, within the Greater Mid-Continent, within the greater Northeast. And so that in and of itself is exciting. But certainly, having a little bit smaller proportion of what we would call small horsepower relative to our own fleet creates some more horsepower nearer to the wellhead.

Our next question will come from the line of Nate Pendleton with Texas Capital.

Congrats on a great acquisition. Following this acquisition and the improving distributable cash flow, can you talk about how you're looking at balancing further growth, accelerated deleveraging and the distribution? I know it's early, but any thoughts there would be helpful.

Yes. One of the things that we need to do is combine both assets once this deal closes and the expectations, hopefully, well before February time frame. And then in February, come out with our combined capital budget in the same way and timing that we normally do. As we do that, our capital priorities remain the same. I mean, we want to draw leverage below 4x sustainably.

And then we want to look at opportunistic growth with that. And so we had a horsepower number in mind, separate and distinct from this asset. As I mentioned, this asset has 40,000 horsepower that will be deployed and could be deployed to these particular -- to the contract compression space tied to the manufacturing business. We anticipate utilizing all of that. And then we need to decide what the pro forma numbers will be for USAC sub total. But again, we're looking at keeping leverage at or below 4x and then finding ways to continue to grow that relative coverage. And then at a point in time, decide what the priorities are beyond that.

And Nate, just to add to that, we're going to maintain our capital discipline we've been talking about it.

Got it. I really appreciate the detail there. And then maybe just a quick follow-up. Just drilling down a bit on the fleet. Can you talk about the composition, specifically electric motor drive? And are the others mostly cat aerial or any color there?

The vast majority is cat aerial. We will improve our relative electric components. Part of the manufacturing business has been retrofitting electric on smaller units, 690 horsepower units and below in some cases, so mid- to small horsepower. So we will improve that. I would expect for that to continue. We'll kind of provide some more fulsome numbers on electric.

But again, within our capital budget for 2026, and we haven't arrived at the final proportion for that. But I would tell you that, that electric would be extremely limited. And so as needed and as required by our customers, we're delivering electric. But overall, for 2026, the electric appetite was not immense.

Our next question will come from the line of Gabe Moreen with Mizuho.

Just had a couple of quick follow-ups. One is any divestitures, whether basins or HP types contemplated after this acquisition? I'm just curious.

Not at this time, Gabe. We'll continue to evaluate that as we move through it, but not at this time.

And then I was just curious, you mentioned a lot of new customers here, but as far as your existing basins where there is overlap with J-W Power, any shared customers here where you think they're 1 on 1 [ could ] equal 3 here in terms of more market share with some of those producer customers given this acquisition?

What was interesting about it, one, is the contract tenor of the customers. When we look at the top 10, it's real similar to our own in terms of the time frame. But what was interesting was as it relates to top 10, the relative limited overlap. So 300 customers amongst the top 10, limited overlap, really limited overlap in many of the top 20 customers. And so to your point, I think the calculus is actually a very positive one and not one where we necessarily have a great intensity -- customer intensity rate for any one customer.

Our next question comes from the line of Elvira Scotto with RBC Capital Markets.

Can you talk about -- I know you gave the acquisition multiple kind of without synergies. But can you talk about some of the potential synergies or cost savings that you expect over time from this acquisition?

Sure. Elvira, I'll take that one. The synergies -- we're pretty reasonably excited about the potential for synergies. I think we'll be more apt to be able to speak to those upon close. I'll tell you, we'll look across the landscape and find out where we can improve in terms of the gross margin side. I think some of that improvement is going to come from simple things like we had a lot of contract labor throughout a good portion of this year, had some open positions through a portion of this year. We would -- we had budgeted for some open positions next year. And I think through this process, we'll be able to fill those with J-W employees. So we're excited about that. And in turn, I think margins will improve.

There are things that, again, in the fullness of time as we move MLP qualified contracts over, I think there will be some ability to minimize some of the cash taxes associated with the assets that were historically tied to them. When I say minimize and defer some of those cash taxes, that probably is better said. And then between the 2 companies, we really made some meaningful impact in terms of our shared services offering with ET. I think we'll have some immediate impacts with some things like HR, IT platforms and so forth. Keep in mind, as we mentioned on that last call, our health care costs have come in and improved quite substantially. Our 401(k) and benefits package, I think, is a really strong offering. And so I think once we integrate some of the J-W platform into the shared services offering, I think we'll have some improvements to talk about. I think we'll be, again, better positioned to discuss that upon the transaction close and maybe be able to put forward some synergy numbers over the next 6 months or so.

[Operator Instructions] And our next question will come from the line of Selman Akyol with Stifel.

Just a couple of quick ones. Just to confirm, there was no debt acquired with this transaction?

Yes. So this will be -- this is kind of what we would call a cash -- a debt-free, cash-free transaction. They -- the legacy J-W asset did have an ABL tied to it. That ABL will go away with the transaction. And again, we'll fund a portion of this initially through our ABL and then decision whether or not we want to approach anything different with more of a fixed proportion going forward.

Understood. And then -- and I know this is small, but I'm just curious more than anything else. They had some enhanced oil recovery compression. And I'm just wondering, is there any difference in terms of margins, growth outlook, pricing, anything different there that we should be aware of?

No. I think CNG, EOR are part of the specialized manufacturing business. I think they are different and exciting packages for J-W relative to some other manufacturers. Ultimately, EOR is the better way to probably say that is really big, big units. And so that's a lot of horsepower on location and on site. And so they take some reasonable time to build. But the long and short of that is they're just big, big units.

And that concludes the question-and-answer session. With that, I would like to turn the call back to Clint Green for closing comments.

Yes. Thank you all for dialing in. As you can see, we're extremely excited about this opportunity. And just to close it out, we'd really like to thank the Westerman family for entrusting us for this. We're excited about carrying on the legacy and the history. And we'll be back with more updates later on. Thank you all very much.

This does conclude our call today. Thank you all for joining. You may now disconnect.

Good morning. Welcome to the USA Compression Partners Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, November 5, 2025.

I now would like to turn the call over to Chris Porter, Vice President, General Counsel and Secretary. Mr. Porter, you may begin.

Good morning, everyone, and thank you for joining us. With me today is Clint Green, President and CEO; Chris Paulsen, Vice President and CFO; and Chris Wauson, Vice President and COO. This morning, we released our operational and financial results for the quarter ending September 30, 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 our other public filings. Please note that information provided on this call speaks only to management's views as of today, November 5, 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.

Thanks, Chris, and good morning. Thank you all for joining our call. We are pleased to deliver another solid quarter with revenues of over $250 million, adjusted EBITDA over $160 million and DCF approaching $104 million, with strong margins and consistent utilization resulting in improved leverage ratio of 3.9x and DCF coverage ratio of 1.6x. Based on year-to-date performance, we have increased our 2025 ranges for EBITDA and DCF guidance. This increase in guidance is a result of management's commitment to effective cost management and operational discipline. This includes certain onetime impacts that Chris Paulsen will discuss later in the call.

Additionally, we will deploy most of our 2025 new unit horsepower in Q4, setting the foundation for continued momentum in 2026. We are in the process of finalizing our 2026 capital budget, which we anticipate releasing in February. We expect that new horsepower will exceed 2025 levels given continued natural gas demand and new projects, both expanding takeaway capacity and increased localized demand in the Permian and Northeast. We have already committed to several deliveries in Q2 and Q3 of 2026.

Notably, we have recently seen lead times increase to more than 60 weeks for larger orders. Although U.S. producers are still evaluating macro market conditions to arrive at their appropriate capital budgets for 2026, we continue to see growth opportunities in the markets we operate. We expect our active horsepower in the Northeast and Central regions to grow by more than 40,000 horsepower before the end of 2025 relative to Q2. This is partially due to contracting 300 small horsepower units that will draw from idle capacity and increase small horsepower utilization to nearly 80% over the coming months.

These contracts include a 36-month initial term. This deployment, coupled with Q4 new unit deliveries to the Permian will bring our projected year-end active fleet to roughly 3.6 million horsepower. Turning to SG&A. We now expect to realize the majority of the $5 million of shared services annualized savings in 2025, ahead of the 2026 time line shared on our last call. These savings have and will continue to come from cost improvements seen through centralized IT efforts and other savings due to economies of scale. For example, Q3 benefited from a onetime health care cost true-up, reflecting a lower monthly per employee health care cost than previously estimated.

We expect 2026 G&A to grow modestly off of our new baseline, reflecting typical wage inflation and modest investments in new commercial and financial capabilities. Finally, we are pleased that both our bank syndicate and long-term investors continue to recognize the quality of the compression market. In Q3, we refinanced our ABL and our 2027 senior notes, significantly reducing our weighted average borrowing cost and improved strategic flexibility.

With that, I will turn the call over to Chris Paulsen, our Chief Financial Officer, for a detailed financial update.

Thanks, Clint. In Q3, our sales team continued to build upon pricing improvements, up to an all-time high, averaging $21.46 per horsepower for the third quarter, a 1% increase in sequential quarters and a 4% increase compared to a year ago. Average active horsepower remained flattish compared to Q2 at $3.55 million. Our third quarter adjusted gross margins were higher at 69.3%, in large part due to the realization of both onetime and ongoing cost savings tied to our centralized procurement processes, employee health care savings and onetime sales tax refund recognized at the completion of a prior year sales tax audit.

While Q3 gross margins were partially elevated due to onetime true-up and cost savings, going forward, we expect margins to stay consistent with our trailing 12-month rate. Regarding the consolidated financial results, our third quarter 2025 net income was $34.5 million. Operating income was $83.9 million. Net cash provided by operating activities was $75.9 million and cash interest expense net was $44.9 million. Our leverage ratio at the end of the third quarter was 3.9x.

As you may recall, our leverage ratio is determined in accordance with our ABL definition, which remained consistent with our latest refinancing and is calculated as funded debt divided by the latest quarter annualized adjusted EBITDA.

Turning to operational results. Our total fleet horsepower at the end of the quarter was approximately 3.9 million horsepower, essentially flat versus the prior quarter. Our average utilization for the third quarter was 94%, consistent with the prior quarter. Third quarter 2025 expansion capital expenditures were $37.3 million, and our maintenance capital expenditures were $9 million. Expansion capital spending in Q3 primarily consisted of new units, and we expect that to be the same in Q4.

Turning to 2025 guidance. We have increased and tightened our adjusted EBITDA range to $610 million to $620 million, increasing the midpoint of the range by approximately $15 million. We have also increased our DCF range to $370 million to $380 million, reduced our expansion capital range to $115 million to $125 million, and maintained our maintenance capital between $38 million and $42 million.

Approximately $11 million of expansion capital tied to late December deliveries is now expected to be realized in 2025 instead of January 2026, as stated in our Q2 call and therefore, is factored into our 2025 capital range. As previously discussed, we continue to maintain our leverage ratio and expect it to marginally increase at the end of the year as we fund new growth projects that are back-end loaded. Our target remains at or below 4x debt to EBITDA.

Finally, as Clint mentioned earlier, Q3 was characterized by 2 major refinancings. First, we extended and expanded our ABL from $1.6 billion to $1.75 billion, reducing our drawn cost by approximately 25 basis points. Second, we called our $750 million 2027 notes at par in favor of the 2033 notes of the same quantum, reducing our interest rate 62.5 basis points. All in all, we are on track to realize over $10 million annualized interest savings given these efforts and based on forecasted rate cuts, all while increasing overall liquidity and extending tenor.

And with that, I will turn the call back to Clint for concluding remarks.

Thanks, Chris. I want to thank our employees that have worked diligently towards our ERP implementation in early 2026. The collaboration across the organization has been significant and has brought regions and departments closer together. At the same time, we are realizing cost synergies from our new shared services model. The combination of both is improving our control, sophistication, data integrity and profitability. Therefore, I am excited about the path forward.

[Operator Instructions] Your first question comes from Nate Pendleton with Texas Capital.

Congrats on the record quarter. In a sustained slowdown in oil-directed activity, can you speak to your willingness to lean further into compression and dry gas plays in this environment based on the success you just highlighted in your prepared remarks?

And then also, would there be any investment in in-basin facilities required to support any significant increase in gas-directed compression?

Yes. So Nate, thank you for that question. We're already established in the dry gas markets. We -- while we have the majority of our operations is in the Permian, we're still very large in the Northeast, up in Oklahoma, down in the Gulf Coast. And we see with these demands coming online and these pipelines being built out of West Texas or out of the Permian, we see those plays as a place to -- as a growth where we expect to see drilling for gas instead of drilling for gas and -- associated gas and oil. And I missed the second part of your question there, Nate, what was that?

Just to add, would there be any incremental investment needed in the in-basin facility to support any increase in assets deployed there?

Well, I mean, we have active horsepower running in those basins, in the other dry gas basins. And so we can move equipment from anywhere that may slow down to those basins or we can buy new equipment and install there for operating. I hope that answers your question.

Yes, it does. I was just trying to get your geographic diversification. It does sound like you're already established there, so it would just be a matter of moving the horsepower in. So definitely positive.

That's exactly right. Thank you.

And then, Clint, if I may, one more. With the strong pricing trends that you guys noted during the quarter, can you speak to recent pricing dynamics and how spot prices are comparing to your fleet average here?

Yes. It's Chris Wauson. I'll take that one. Our market has definitely picked up since Q2. So our pricing trends from a dollar per horsepower basis is going to be consistent into the back half of 2025 into 2026. We feel like our dollar per horsepower revenue is going to be consistent. So we'll just see how everything works out, but that's our feeling right now.

[Operator Instructions] There are no further questions at this time. I'll now turn the conference back over to Clint Green for closing remarks.

Yes. Thank you all for joining our call. We appreciate the interest in our company, and have a good day.

This concludes today's conference call. You may now disconnect.

Good morning. Welcome to USA Compression Partners Second Quarter 2025 Earnings Conference Call. [Operator Instructions] This conference is being recorded today, August 6, 2025. I now would like to turn the call over to Chris Porter, Vice President, General Counsel and Secretary

Good morning, everyone, and thank you for joining us. This morning, we released our operational and financial results for the quarter ending June 30, 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 our other public filings.

Please note that the information provided on this call speaks only to manage views as of today, August 6, 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.

Thank you, Chris, and good morning, and thank you for joining our call. We are pleased to deliver a record-setting quarter for revenues and average revenue per horsepower while also maintaining consistent margins and utilization. Despite [ bears ] macro commentary related to GDP, tariffs, inflation and commodities that could have presented headwinds for our quarter our business continues to march forward with strong execution in the first half of the year. While certain of our E&P customers took a brief pause in Q2 as WTI dipped below $60, and Henry Hub marks lower most have shown a resolve into the back half of this year and into '26 to support their current levels of production.

For example, our contracted horsepower in the Northeast in Q4 is expected to be 5% higher than today. As we look to 2026, we believe we have significant reason for optimism given the number of RFQs in the pipeline. Bear in mind, our top 10 customers comprise over 45% of our revenues and most are expected to grow production next year, not just maintain it. In the longer term, we still expect to see significant growth in the natural gas demand from AI cloud services and related power needs as major tech firms continue to significantly increase budgets to expand their infrastructure. Three of the largest tech firms in the U.S. are anticipated to spend over $265 billion in capital this year combined, largely to expand their infrastructure for AI and cloud services.

In addition, new data center investments are continuously being announced. In the last several weeks alone, 2 new data center complexes tied to natural gas generation were announced. One totaling 4.4 gigawatts and another at 190 megawatts. Coming alongside tech and private equity investments, utilities are also investing over $200 billion this year to meet this growing power demand. substantially more than any year since 2000. We continue to believe that the only way to provide suitable, consistent and clean energy to power these needs is natural gas, and our country needs compression to get it there.

Turning to the U.S. oil and gas production. The July EIA short-term energy outlook showed considerable natural gas growth projections, including annualized gas growth of 6% in the Permian. Natural gas out of the Northeast and the Haynesville is also expected to grow. Finally, crude oil production in the Permian continues to stay resilient and above the average for the first half of the last year despite a lower rig count.

At the corporate level, we are beginning to reap the benefits from our new shared services model with Energy Transfer. For example, we have seen licensing savings and enhanced functionality from our IT group and expect to reap the benefits of larger centralized procurement organization moving forward. We are just 2 quarters into the process, and it's too early to understand the full impact of shared services, but we like what we see thus far.

Operationally, we have acquired approximately 48,000 new horsepower in 2025, the majority of which will be delivered before year-end. We anticipate 10,000 of this horsepower will be online in January of 2026. And we'll update our 2025 capital forecast in Q3 to the extent deliveries hit next year. We continue to seek and have success with buy and contract back opportunities as additional ways to grow horsepower. Although our average total active horsepower was down slightly on a sequential quarter basis, our large horsepower continues to be nearly fully utilized.

Across the fleet, the majority of the unit releases for the quarter have been recontracted, and we anticipate Q4 active horsepower to exceed $3.6 million, which would represent a new record for the company. In terms of day-to-day operations, we continue to focus on our 3 biggest costs, parts, labor and lube oil For several of our most costly parts, we are revisiting certain vendor discussions to solve for optimal quality cost and warranty coverage. Although labor costs increased in the quarter due to overtime and contract labor, we expect these costs to reduce going forward as we fill these needs with internal hires through enhanced recruiting effort.

We also anticipate seeing significant savings in our lube oil costs related to our new agreement with a large lower vendor. To date, Tariffs have had minimal impacts on our business as the manufacturing of most components we utilize originate in the U.S. Lead times also have not materially changed from historical averages with our engines currently running 34 to 45 weeks and compressors 24 to 28 weeks. As I previously stated, we are still getting quotes for Q1 or Q2 2026 delivery at the moment.

As parts inventories are generally around 6 months, and we would likely not see any material inventory impacts from tariffs until next year at the earliest. With that, I will turn the call over to Chris Paulsen. Our Chief Financial Officer, discuss our second quarter highlights and our 2025 guidance in more detail.

Thanks, Clint. In the quarter, our sales teams continue to build upon pricing improvements. up to an all-time high, averaging $21.31 per horsepower for the second quarter, a 1% increase in sequential quarters and 5% increase compared to the year ago period. Average active horsepower remained flattish at $3.55 million. Our second quarter adjusted gross margins were 65.4%. Regarding the consolidated financial results, our second quarter 2025 net income was $28.6 million. Operating income was $76.6 million. Net cash provided by operating activities was $124.2 million and cash interest expense net was $45.4 million.

Our leverage ratio is currently at 4.08x. Turning to operational results. Our total fleet horsepower at the end of the quarter was approximately 3.9 million horsepower, essentially unchanged to the prior quarter. Our average revenue-generating horsepower also was flat on a sequential quarter basis and up 1% from a year ago. Our average utilization for the second quarter was 94.4%, consistent with the prior quarter. Second quarter 2025 expansion capital expenditures were $18.1 million, our maintenance capital expenditures were $11.7 million. Expansion capital spending primarily consisted of reconfiguration makeready Capital of existing units while maintenance capital expenditures were higher in the first half of the year as we prioritize preventative maintenance efforts tied to annual intervals.

For the remainder of the year, most capital will be focused on reconfigurations and new horsepower largely in Q4. In the quarter, 100,000 preferred units were converted into approximately 5 million common units. Only 80,000 preferred units now remain. Turning to 2025 guidance. We maintain our adjusted EBITDA range of $590 million to $610 million distributable cash flow range of $350 million to $370 million, expansion capital range of $120 million to $140 million and maintenance capital between $38 million and $42 million. As Clint mentioned, to the extent expansion capital is expected to move into Q1 2026 due to new compression delivery dates, we will provide an update to expansion capital on the Q3 call.

As discussed in prior calls, we continue to maintain our leverage ratio and expect it to marginally increase later in the year as we fund new growth projects that are back-end loaded. Our target remains at or below 4x debt to EBITDA. Since last quarter, spreads have remained tight and yields have come in. This creates a more compelling backdrop to revisit a refinancing of our September 2027 notes sometime in Q4. An immediate focus is our ABL which we hope to extend prior to the next quarterly call. We have chosen the admin agent and have received strong unsolicited inbounds for many banks who would like to upsize or maintain their commitment levels.

This provides a degree of confidence that our current borrowing costs will be improved. And with that, I'll turn the call back to Clint for concluding remarks.

Thanks, Chris. Our disciplined growth strategy continues to serve our investors and customers well. On a final note, I would like to congratulate our employees in the Rockies who have recently received a safety and operational excellence award from 1 of our top 10 customers. Our employees make us who we are, and this is just another indication that we have the best in the business. And with that, I will open the call up to questions.

[Operator Instructions] Your first question comes from Doug Irwin with Citi.

I wanted to start with gross margin. You saw some pretty solid price increases this quarter, but it seems like it was more or less offset by increased OpEx, which you already touched on it a bit in the prepared remarks. I was just wondering if you could maybe expand on where you see overall gross margins trending from here, particularly as you bring on some new horsepower that's presumably higher margin?

Yes, Doug. This is Clint Green. Thank you for that question. I'm going to introduce Chris Watson. He's our Chief Operating Officer. I'm going to let him answer that question.

Thank you, Clint. Yes, sir. Chris Walson here. Just as a reminder, over the past 4 years, gross margins generally jumped around between 65% to 67%, and this quarter is no different. On the parts front, we're reviewing certain consumption patterns and associated warranties determine a better path forward. But on the labor side of things, we are actively recruiting to fill roles and currently incurring higher overtime expense, but we have a full-time recruiter that is addressing that.

And our goal is to get to 100% staffing so to really answer your question, as we get through the year, we anticipate GP to get more in line and fall into the historicals that you've previously seen.

Got it. That's helpful. And then as a follow-up, Clint, you mentioned an expected increase in contracted horsepower in the Northeast throughout the rest of the year. Just curious how much of the existing fleet is on long-term contracts today versus maybe being more month to month? And do you see more potential to sign more kind of longer-term contracts on the existing horsepower? And maybe if you can just talk about kind of what you're seeing with regard to term and pricing for some of those contracts that have been signed.

Yes, sir. It's Chris Walson again. We're currently seeing around typically 25% to 30% of our business in the Northeast is month-to-month. Our average contract return rate is really good. We have a lot of opportunity up there. So we will see a better dollar for horsepower revenue than we've previously seen. So that's positive for us. And we're going to see that throughout the rest of the year. A lot of those starts are Q3 and into Q4. So a positive outlook for the remaining half in the Northeast.

Your next question comes from Connor Jensen with Raymond James

I was just wondering if there was an update on sold or retired equipment during the quarter with the average horsepower down just a bit.

So can you repeat that? I couldn't understand exactly which -- sorry about that.

Yes. I was just wondering if there was an update on the sold or retired equipment during the quarter and how we should expect this to trend over the back half of the year?

Yes. Connor, this is Chris Paulsen. Really no update in terms of sold equipment. There were no material sales in terms of equipment for the quarter. As mentioned, our utilization is down slightly for the quarter and frankly, for the month of June, if you look at the average utilization, it was essentially flat Again, as we look forward to the second half of this year and in particular, into Q4, we anticipate a pretty meaningful movement in terms of overall active horsepower.

Got it. And then G&A was notably lower this quarter. Is that a function of the shared services work that you've done with Energy Transfer? And is it possible for it to stay at this level? Or what should we expect from that?

Yes, great question. So as Clint intimated, we're still early in the shared services process. We don't want to get in front of our skis as it relates to forecast just yet. So the G&A for the quarter, I think, is in line with expectations. And we could see it move up and/or down a little bit over the next several quarters. Again, as we mentioned for 2026 in the full annualized outlook, we're anticipating around $5 million of annualized savings but it's been a little bit lumpy as we embark upon the shared services process as we are going through the SAP integration process as well.

So I wouldn't read too much into Q2, but further and projecting out, we certainly anticipate some savings. And we've really appreciated some of the maturation that's come with the affiliation with Energy Transfer. Again, areas like IT, we've really seen some material improvements in terms of our licensing costs, security, et cetera. as well in the centralized procurement side, I expect that to pay very reasonable dividends going into next year with some of the contracting and bid strategies that they've put forward.

Your next question comes from Elvira Scotto with RBC Capital Markets.

In your press release and some of the comments that you made on the call today, you noted strong demand for your compression services across oil and gas producing basins. Where do you see the greatest increase in demand? And I know you talked about the Northeast, but are you seeing some significant incremental demand in the gas producing basins?

Yes. So this is Clint again. We're seeing in the dry gas basins, RFQs have definitely picked up, which leads us to believe that the more contracting will happen in those basins while the Permian and elsewhere have stayed about the same or a little better. But the dry gas basins are definitely picking up. We saw that our market digested this OPEC plus hike over the weekend, a $65 WTI. And that enables the producers to feel better going into 2026. We typically see that our producers start awarding contracts in September and through the end of November, once their budgets are finalized.

We've also seen an increase in large station bid rate as well as small horsepower units in gassier areas. So it's kind of across the board everywhere with demand growing the way it has.

Your next question comes from Eli Jossen with JPMorgan.

Maybe just to start on the electric motor drive side. I think it's been a little bit less topical in recent quarters. Can you just kind of give us an update if there's any shift in the compression market from within the electric to gas side and any power constraints that you're seeing that might be impacting that?

Yes, it's Chris Walson. I'll take that one. So we are seeing just a shift kind of -- we had some electric drive opportunities late Q4, Q1 and those talks honestly have subsided and natural gas engine-driven compressors are still top of the list.

Got it. And then -- maybe just quickly on the capital structure side. You guys are obviously near the leverage target, and I know you're probably looking at a refinancing of some notes coming up. But just beyond that, is there any consideration for distribution upside? Or how do you kind of see the capital allocation waterfall beyond that refinancing?

Eli, it's Chris Paulsen, great question. So again, as 50 straight quarters have really played out, the distribution is sacrosanct, and we've been pretty clear about that. Our distribution coverage has been in kind of the 1.4x to 1.5x range here very recently. And obviously, the preferred interest as it relates to that is starting to play out and be a much smaller portion of the overall story. We still would like to see coverage increase a little bit while pushing down relative leverage -- to the degree that we can push down relative leverage, it really increases the amount of cash that we have for the business and growing the business, but also as it relates to distributions longer term.

So today, in terms of ordering and priority, again, maintain the distribution to move towards 4x leverage or below. And the way in which we plan to do that again is looking at refinancing the ABL. I think we'll increase the relative floating percentage in terms of our total story. So we may modestly increase the size of our ABL facility while may modestly decrease the size of our long-term notes outstanding.

And in turn, I think we initially cut our interest cost by doing so at the margin and then continue to grow our way into a lower relative coverage ratio in time. and then move forward from there.

Your next question comes from Brian DiRubbio with Baird.

Just talk about CapEx on the investments. Are you seeing any substantial change in the cost to acquire new horsepower today versus just the last 2 years?

Yes, it keeps going up. It's like everything else. Caterpillar engines and eggs both are more expensive than they were 2 years ago. It seems to have stabilized here in the recent term but we have seen significant increase over the last couple of years.

Are you able to get pricing for that? I know that was a big topic about 2 years ago, just as some of the first wave of price increases went through and -- the industry was able to get some pricing. Pricing appears to be slowing down a little bit. So I would love to get your thoughts there.

Yes. I mean, it's -- I'll let Chris finish this, but I'll start and say that right now, we're able to get the margin needed to build new equipment. It's not as easy as it might have been a couple of years ago, but it's still there. So Chris, do you have anything to add?

I'll add a little bit to that. Thanks, Clint. One thing just to keep in mind is Q2 the market softened a bit. We saw customers move to more of an optimization efforts rather than just growth, growth. So as Clint mentioned, we're still getting the returns we need for the capital, but it's not as easy as it once was, but things are still positive. That's for sure.

Fair enough. And then just one follow-up housekeeping question. Stock comp was a benefit this quarter. Did that fully hit the SG&A line? Or is that in cost of goods sold, too?

Fully on the SG&A side?

Okay. So net-net, actually, SG&A costs on a cash basis were up then. Is that correct? My math is correct?

I've got to look at the math maybe marginally so, I'd really call it flattish.

Your final question comes from Robert Mosca with Mizuho Securities.

I just want to revisit the prepared remarks, I think you referenced buy and contract opportunities. I think that's something that's been brought up in the past, but wondering what you're seeing now? Is that different from what you might have seen last year? And how are you approaching that opportunity? And can you give us an idea of how large you would expect a package like that to be?

Well, I'll start and I'll let Chris add on to this. But I don't know that it's up any from last year. We've just been able to pick up some horsepower at different times. Mostly from producers that want to get the capital out of their asset and then turn around and pay a contracted back for a term. I don't know that I would say it's up any -- Chris?

I wouldn't say it's up. It's kind of flattish, but there are opportunities out there. And the deals that make the most sense for us, we're going to absolutely chase and take advantage of it and apply that service to our customers. But it's flat from last year. That's right.

Got it. Okay. Appreciate that. And then maybe in referencing the CapEx outlook, kind of maybe spilling into '26 should -- is that being driven by maybe customers looking to bring on production a bit later? Or is there anything that's else to call out on timing?

It really was driven by -- when we ordered the units when they hit the -- right towards the end of the fourth quarter or the beginning of the first quarter. And that's really where we're at with that. It's just when the unit delivers and when we can get them online and get them started up.

That concludes our Q&A session. I'll now turn the conference back over to President and Chief Executive Officer, Mr. Clint Green for closing remarks.

Thank you. I would like to thank all of you for joining our call today. USA Compression has been undergoing significant changes throughout 2025, but our recontracting rate is up, and we expect the back half of the year to be even better. We see this as proof that demand growth is real and here to stay. Just this morning, Kelcy Warren said that the U.S. natural gas market has flipped from supply-based market to a demand-based market. He is right, and this cements our message that natural gas is here to stay for the foreseeable future. I hope everyone has a great day, and thank you for joining our call.

This concludes today's conference call. You may now disconnect.