Archrock, Inc.

Good morning. Welcome to ArchRock fourth quarter and full year 2020 conference call. Your host for today's call is Megan Repine, Vice President of Investor Relations at ArchRock. I will now turn the call over to Mr. Repine. You may begin.

Thank you, Michelle. Hello, everyone, and thanks for joining us on today's call. With me today are Brad Childers, President and Chief Executive Officer of ArchRock, and Doug Aaron, Chief Financial Officer of ArchRock. Yesterday, ARCHROC released its financial and operating results for the fourth quarter of 2020, as well as annual guidance for 2021. If you have not received a copy, you can find the information on the company's website at www.archroc.com. During the call, we will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, based on our current beliefs and expectations as well as the assumptions made by and information currently available to R-TRAC's management team. Although management believes that expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Please refer to our latest filings with the SEC for a list of factors that may cause actual results to differ materially from those in the forward-looking statements made during this call. In addition, our discussion today will reference certain non-GAAP financial measures, including adjusted EBITDA, gross margin, gross margin percentage, and cash available for dividends. For reconciliations of these non-GAAP financial measures to our GAAP financial results, please see yesterday's press release in our Form 8K, Furnished to the SEC. I'll now turn the call over to Brad to discuss our truck's fourth quarter and full year results and to provide an update of our business.

Thank you, Megan, and good morning, everyone. I'm happy to be with you today to close out the discussion on our financial results for 2020, a year that brought unforeseeable and even unthinkable challenges to our industry and the global economy. While I'm excited to turn the page to 2021, I'm also proud of and grateful to and want to take a moment to thank our dedicated employees who adapted quickly to help us navigate the rapidly changing environment and delivered excellent fourth quarter and full year results. On our first quarter 2020 conference call, I detailed our objectives and action plan for the downturn, including significant cost savings and capital reduction initiatives. We reacted quickly to protect the value of our natural gas compression franchise, maximize our near-term performance, and position the business to emerge even stronger from this downturn. As our 2020 results show, we delivered on these objectives. We maintained strong capital and cost discipline. As the market deteriorated in the spring, we sharply reduced new equipment capital and optimized our maintenance and other capital investments. We reduced our total capital by $245 million in 2020 to $140 million. In addition, we reduced our run rate SG&A by 12%, even as we continue to invest incremental SG&A into our technology upgrading project. We enhanced our financial flexibility. We paid down debt of $155 million during 2020 resulting in an exit leverage ratio of 4.16 times, which is essentially flat from 2019. We have no near-term debt maturities, and with our successful senior notes offering during the fourth quarter, we extended $300 million of bond maturities by four years to 2028. And we did this at a record low financing cost to the company, a strong signal of the market's confidence in ArchRock. We continue to transform our compression fleet and drive field efficiencies. We executed several highly strategic asset cells, completed a business unit restructuring, and aligned our business for the current environment. Together, these drove a 400 basis point increase in our contract operations gross margin percentage year over year, and further solidified our strong competitive position. Last, We continued our commitment to return capital to shareholders. We paid $89 million in dividends with internally generated cash flow and maintained a robust dividend coverage ratio of 2.9 times for the full year 2020. Due to our actions, we delivered adjusted EBITDA of $415 million in 2020, which was flat compared to 2019, despite a 9% decline in revenue. It's also in line with the low end of our pre-COVID guidance range, and with our cost and capital reductions, we actually increased our full-year free cash flow and cash available for dividend compared to 2019, as well as compared to our initial forecasts for 2020. We're entering 2021 with optimism about the outlook for natural gas compression and our truck. While a degree of uncertainty surrounds the pace of the COVID-19 vaccine rollout and the resumption of pre-COVID levels of overall economic activity, the energy markets are nevertheless showing early signs of a cyclical recovery. Oil prices have returned to pre-pandemic levels, supported by OPEC's actions in December, production declines, and the prospect of improved global demand. On the natural gas side, With favorable supply and demand dynamics, Henry Hub prices are trending around $3 per million BTUs. This provides the expectation of additional cash flow as producers look to increase drilling and completion activity in 2021, at least enough to achieve maintenance levels of production. Most US natural gas forecasts show a steady increase in production in 2021, though the annual 2021 average is still expected to be 1% below 2020. Year-over-year production growth is anticipated to resume in 2022. Structural natural gas demand drivers continue to point to consistent long-term demand for our compression services. We're seeing strong power generation demand, record LNG exports, and robust annual growth in natural gas exports to Mexico so far in 2021. Given this macroeconomic backdrop, we expect our operating performance and financial results to bottom in the first half of 2021 with a pickup starting in the back half of the year. Turning to our contract operations, our actions in 2020 have further solidified our leading position in the compression market, And we entered 2021 from a position of strength. For the full year 2020, contract operation revenues were $739 million, a decline of 4% compared to 2019. However, gross margin percentage increased approximately 400 basis points year over year due to our cost reduction activities throughout the year. Gross margin of $478 million in 2020 was actually up slightly from $474 million in 2019. With our focus on large horsepower units deployed in midstream applications and in the best U.S. basins, as well as our continued efforts to keep units out on location, our 2020 exit utilization continued to hold up well at 82%. This reflects a significant decline in the pace of horsepower returns over the past several months, with stop activity now beginning to approach normalized levels. Booking activity remains low, but we have a positive backlog of demand for units to be deployed in 2021. We expect to satisfy much of this demand from existing units in our idle fleet. Given the stability provided by our large base of contracted horsepower, the overall impact of pricing reductions to our financials is modest. As you would expect with our utilization hovering in the low 80s, we've certainly seen pressure on spot pricing, but given our higher quality fleet, spot pricing remains well above prior cycle lows. During the year, we continue to manage and prune our compression fleet, selling 150,000 horsepower, accelerating EBITDA recognition from less strategic horsepower, and bringing in additional cash, which we used to repay debt. And this month, we sold another 300 compressors totaling 40,000 horsepower, which will result in a gain on sale during the first quarter of 2021 of approximately $6 million. I also want to highlight that in the midst of a global pandemic and severe energy downturn, we continue to deliver exceptionally high service quality to our customers. Our customers have also been challenged by the downturn, and we continue to work closely with them to achieve maximum production uptime and cash flows. Prioritizing these relationships and proving the value we deliver to our customers during the downturn will pay long-term dividends. And our efforts to continue to improve our customer service haven't stopped in 2021. Even as we manage costs tightly in this downturn, we continue to focus on innovation and invest both SG&A and capital dollars into our multi-year technology project. Over the last several months, we've begun to leverage the expanded Telematics capabilities on our compression units to drive an enhanced and more efficient response to downtime events. I'm excited that will complete the planned installation of Telematics on the remaining operating units in our fleet throughout the course of 2021. This is just one of several ongoing initiatives which are critical to the future enhancing the value proposition for our customers, reducing our emissions and carbon footprint, and delivering attractive returns to our shareholders. Moving to our aftermarket services segment, I appreciate the team's heavy lifting to maximize performance given the difficult hand dealt by COVID-19. The work to maintain as much profitability as possible hasn't been easy, but its importance is reflected in our results. Our fourth quarter revenue increased slightly on a sequential basis. This is particularly encouraging given the fourth quarter tends to be seasonably slow. Based on conversations with customers, our cautious optimism has carried over so far into 2021, which is reflected in our guidance for modest revenue growth this year compared to 2020. On our third quarter 2020 earnings call, we previewed our expectation for significant free cash flow generation again in 2021, supported by another significant reduction in capital expenditures. Our 2021 budget reaffirms our free cashflow expectation, both pre and post dividend, and fine tunes our CapEx forecast to reflect our latest customer engagements and view of the market. Our existing ILO capacity provides us with meaningful capital allocation flexibility as we satisfy increased customer commitments later this year. As such, We plan to limit growth capital to between $30 and $50 million, down from $79 million in 2020 and $300 million in 2019. This 2021 growth capex includes repackaging capex and investments in a small number of new build units. These are high return, large horsepower opportunities with premium customers, including several electric motor drive units. There's no doubt the energy sector has been one of the hardest hit by the pandemic, but every market offers an opportunity to outperform against that market context, and ArchRock did just that in 2020. In 2021, we will continue to do what ArchRock does best, offer excellent customer service, operate safely and efficiently, and manage our financial position with discipline. These strategic principles provide a foundation for meaningful free cash flow generation, continuation of our capital allocation priorities, strong shareholder returns, and a sustainable future. Before turning the call over to Doug, I would be remiss if I did not highlight that our efforts to ensure our future have gone beyond our profitability initiatives to include a growing commitment to our ESG performance and disclosure. We published our second ESG report during the fourth quarter, and with it, adopted the SASB reporting standards for the midstream industry. We've also formalized the governance structure ARCHROC will use to manage our ESG efforts, which include board oversight of ESG matters and an internal employee-led sustainability committee that will assess opportunities within our operations and markets and consider and propose initiatives to improve performance. I'm confident our infrastructure assets are well positioned to participate in the global energy transition. Natural gas is reliable, affordable, and cleaner burning. It has and will continue to bridge the gap between declining reliance on coal and nuclear power and increasing support for renewable energy sources. We believe our focus on natural gas and our legacy of resilience and of delivering continuous improvement will ensure that we continue to play a critical role in helping to power America. With that, I'd like to turn the call over to Doug for a review of our fourth quarter and four-year performance and to provide additional color on our 2021 guidance.

Thank you, Brad, and good morning. Let's look at a summary of our fourth quarter and full year results and then cover our financial outlook. Net income for the fourth quarter of 2020 was $5 million and included a non-cash $7 million long-lived asset impairment and $1 million in restructuring costs. We reported adjusted EBITDA of $89 million for the fourth quarter, 2020. Adjusted EBITDA was down for the third quarter, as expected, due to lower operating horsepower and $20 million in non-recurring third quarter items, which makes for challenging sequential comparisons. Our fourth quarter adjusted EBITDA performance kept us flat on a year-over-year basis for the full year 2020 and put us firmly above the midpoint of our annual guidance range. Achieving this in the face of a significant industry downturn demonstrates the stability of our business model and strong operating performance. Turning to our business segments, contract operations revenue came in at $169 million in the fourth quarter compared to $175 million in the third quarter due primarily to lower operating horsepower. We delivered a strong gross margin percentage of 65% as our operating team continued to pull out all the stops to reduce overtime, parts, lube oil, and make ready expenses. For the full year, we delivered a meaningful increase in our gross margin percentage compared to 2020 despite revenue headwinds. In our aftermarket services segment, we reported fourth quarter 2020 revenue of $31 million compared to $30 million in the third quarter. The small increase occurred despite the more typical fourth quarter seasonal decline. Fourth quarter AMS gross margin of 13% was slightly below expectation. We had a few cost items come in above our forecast for the quarter, including higher benefits and workers' compensation costs. For the year, we delivered a gross margin of 15%, which was consistent with the midpoint of our guidance. SG&A totaled $27 million for the fourth quarter, down 12% compared to the $31 million quarterly run rate earlier this year. The one-time $7 million benefit from tax audits and settlements included in the third quarter 2020 results affected quarter-over-quarter comparability. For the fourth quarter, growth capital expenditures totaled $1 million for equipment modifications and repackages. We had no new equipment capex for the quarter. Our full-year growth capex of $79 million was down from $300 million in 2019 and in line with our guidance. Maintenance and other CapEx for the fourth quarter of 2020 was $9 million. This brings the full year total to $61 million, down 24 million or 28% year over year. This was also within our guidance. Late last year, we successfully completed an opportunistic debt offering, which further increased our financial flexibility. We took advantage of favorable debt market conditions to issue $300 million in senior notes at 5.18%. Proceeds were used to pay down a portion of borrowings on our revolving credit facility. I'm very pleased with the continued support from our lenders and the debt markets, a testament to the health and steadiness of our business. We exited the year with total debt of $1.7 billion, down over $42 million compared to the third quarter, and, as Brad mentioned, down by $155 million compared to the end of 2019. This significant reduction helped mitigate the leverage ratio impact of lower adjusted EBITDA. Our leverage ratio was just under 4.2 times compared to 4.0 times last quarter and was slightly improved versus the fourth quarter of 2019. We also had available liquidity of $444 million as of December 31st. Today, we announced two amendments to our credit facility. We reduced our facility size to $750 million from $1.25 billion. And although we don't expect to need it, the amendment also provides for higher leverage ratio covenants. The total leverage ratio covenant is stepping up from 5.25 times to 5.75 times through the fourth quarter of 2022 will be 5.5 times in the first quarter of 2023 through the third quarter of 2023, and then return to five and a quarter times in the fourth quarter of 2023 and thereafter. We do not anticipate our covenant leverage exceeding the high fours, even at the low end of our guidance range, but the proactive amendment gives us additional cushion in the event of another unexpected market disruption like the one we witnessed in 2020 with COVID-19. We also put into place an at-the-market equity offering program totaling $50 million. We've had a few constructive conversations with our customers about possibly purchasing their compression assets for ArchRock to operate. If successful, we believe partially funding these potential transactions using equity would be prudent in the current market. We recently declared a fourth quarter dividend of 14.5 cents per share or 58 cents on an annualized basis. Our latest dividend represents a compelling yield of 6% based on yesterday's closing price, especially given the protection provided by our industry-leading dividend coverage. Cash available for dividend for the fourth quarter of 2020 totaled $56 million, leading to healthy fourth quarter dividend coverage of 2.5 times. Finally, on guidance, all of the customary detail can be found in the materials published last night. And for the purposes of this call, I will keep my comments high level. As we have discussed for some time now, we expect our 2021 adjusted EBITDA to be lower on a full year basis compared to 2020 due primarily to our expectation of lower average operating horsepower this year. As a later cycle and production-oriented participant in the energy value chain, we believe 2021 will be a transition year, and we expect our earnings to stabilize in the first part of the year and begin to recover in the later part of the year and into 2022. We currently forecast 2021 adjusted EBITDA to be in the range of $335 million to $375 million. In comparing 2021 guidance to 2020 performance, I'll remind you that our 2020 adjusted EBITDA included $22 million in gain on asset sales and tax benefits. We will maintain capital discipline to continue to maximize our cash flow and ability to repay debt and prudently fund our dividend in 2021. On a full year basis, we expect total capital expenditures of $80 to $106 million. This represents a decline of $47 million on the heels of the impressive $245 million reduction we delivered in 2020. Booking activity remains low, which will drive capital reinvestment even lower next year compared to 2020. We expect growth capex to be between $30 and $50 million. As we put idle equipment back out to work to meet customer demand, we expect additional make ready investment, which is reflected in our expectation for a modest increase in maintenance capital for 2021. Other CapEx should tick down meaningfully as planned as we reach the tail end of our technology investment period and as we tightly manage spending on our truck fleet. To sum it up, our expected operating performance combined with a reduced CapEx profile will drive strong free cash flow generation pre- and post-dividend, as well as meaningful debt reduction. With that, we'd now like to open up the line for questions. Michelle?

Ladies and gentlemen, we will open it up for question and answer session. If you wish to ask a question, please press star 1 on your telephone. If you wish to cancel your request, you may press the pound or hash key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Daniel Burke. So your line is now open.

Hey, good morning, guys. Good morning. Let's see. I had a question on contract ops margin in 2021. A little bit of a step down year over year. Not a surprise. But would you expect the contract ops margin to sort of mirror, I think, the general progression you described for this year? Will it be lower in the first half of the year and then begin to recover, or should we think of that as more of a steady state margin?

Well, first of all, looking back, Daniel Spratt, looking back at 2020, I'll just remind you that we had a couple of factors that gave us a boost in that gross margin percent that we don't expect to repeat in 2021. Now, one of them is we had a pretty substantial amount of horsepower move on to standby in in the year, and that has an immediate, not a long-term, but an immediate gross margin benefit that we got in 2020 that we're not going to have in 2021. On the good news on that point, however, as all that horsepower has gone to work, that's really a strong indication that the market's recovering and looking better for 2021 as our standby horsepower has returned to more normalized levels and that should allow more new horsepower to go back out. And then we also had some one-time tax benefit in that gross margin. So when we think about the gross margin year over year, we think it is close to flattish, but we are encountering a few incremental headwinds in gross margin, and that includes higher lube oil prices, which is just a consequence of higher oil prices. as well as additional new activity in an up market as we put more things to work. It pressures our gross margin overall as we make units ready and get them started again. So that's what's really, I think, the geography on the gross margin look year over year.

Okay. I appreciate that call, Brad. Let's see. Really, two questions that are related because they both sort of speak to – sort of the fleet refreshment. Could you talk about maybe the scale of some of the customer fleet acquisition opportunities that you might encounter as the year goes on? And then maybe give a broader perspective on asset sales. I mean, is the experience of 2020 likely to repeat in 2021? I know there's limited visibility in a way, but maybe there's a base case you could share there. since it does have a bearing on the guidance range for the year.

Sure. Let me try to take both of those, and then Doug's going to ask Doug to top me up on anything I missed. Look, on the customer acquisition front, we have found that customers have moved to focusing on their own balance sheets and capital discipline and free cash flow in a way that could be very constructive for our business. We're excited about that. And so the opportunities that we're talking about are, Multiple sizes, we're not going to quantify it or give specifics, but just opportunities that we wanted to be prepared to be able to move and act if we can capture them. I've had this discussion in the past with everyone, and those transactions can be hard to capture, but right now we see some momentum, and we wanted to position ArchRock to be able to take advantage of them if they materialize. I'm pretty excited. Hopefully we'll get to announce one at some point. On the fleet improvement initiative, look, this is an important long-term strategic move for our truck. As we think about the compression we've added and the focus we have on large horsepower, on midstream gathering, and just in the best plays that the U.S. Lore 48 has to offer, we're going to continue doing that when the market permits. That's not our capital allocation today. Capital allocation today is very much focused on free cash flow, reducing debt, returning capital to shareholders, and being very disciplined on our investment in this part of the investment cycle. But the other side of that fleet improvement includes looking at pockets of less strategic horsepower based upon the horsepower itself, its market location, or other factors. And the benefits to that program are really significant. Number one, it really does help us to standardize our fleet and drive improvement in our financial performance as we get a much better logistics and supply chain efficiency behind a more standardized fleet. Second, it accelerates EBITDA. It brings it into a more current period. It doesn't just That gain is a proxy for that acceleration of earnings in EBITDA, which we're excited to see. And it brings in additional cash to repay debt at a time when that's one of our focuses. So we can't quantify if 2021 is going to look like 2020 because these are transactions and we have to work hard to get them. But you should expect to see us focus on it for those reasons just as hard in 2021 as we did in 2020.

And, Daniel, this is Doug. What I would say is, you know, in Brad's prepared remark, he talks about one that we closed already here in 2021. And to further illustrate just, you know, really how meaningful that is to us, the average age of the equipment we sold in that transaction that he mentioned of 40,000 horsepower and 300 compressors was 25 years old. And so, you know, the fact that we were able to sell that for what amounted to about right at $6 million gain on sale of assets, you know, reflects that there is still usefulness. There are probably some smaller companies out there that can operate that horsepower, frankly, more efficiently than we can. And, you know, allows us to focus our existing team on on the more standardized larger fleet that we've described. So really a win-win. You know, those are a little difficult to forecast. We are hopeful there are a couple more similarly sized transactions out there this year. Those are hard to bank on. You know, I know you'd ask sort of that as it relates potentially to our guidance for the year. And we've given perhaps a little bit of a wider range on EBITDA than we typically would that higher or highest end of the guidance range might include another similarly sized transaction this year, whereas the midpoint of our guidance for this year really assumes that our horsepower stays flat to last year. And so, you know, I know you guys are trying to sort of do the impossible, which is to peg where you think we're going to be, but hopefully that helps frame the ends of the spectrum.

Yeah, that's all helpful comments, guys. I'll leave it there. Thank you. Thanks, Daniel.

Your next question comes from the line of Tom Curran. Your line is now open.

Good morning. Good morning. Brad, have any segments of the customer base started or closed? signal preparations to expand their budgeted activity in order to capitalize on these sustained, stronger than anticipated commodity prices? And if so, would you just expound on who in terms of customer type, not specific names, and where with regards to basins you've detected such a response?

Yeah. I would love to give you a very bullish response to that question. But in all honesty, what we are experiencing right now in the market is is continued restraint in the unleashing of further capital budget increases as people are focusing on free cash flow and looking to see how well this market recovers. So what we find with our customers is very optimistic discussions about future plans if – if the market continues to show the signs that it's giving us currently. And at the right levels in the customer, there are projects pending that they want to get on with. But I would still say that the timing looks to us like it's more in the back half of this year than the first half of this year. So while the discussions are optimistic, the timing yet is still showing some restraint in our customers' activities.

Got it. That's consistent with what we've heard from many others. Turning to the technology modernization project, would you update us on where you're at with some of the implementation of some of that program's other initiatives, such as the ERP system migration and remote monitoring? And then just thematically, what's the next secular phase of technology evolution? Is it a step up in automation or Is it some aspect of digitization? Just looking beyond telematics, what seems like it's going to come next for the future of compression?

Sure. I'm just making a notice, I think. I want to make sure I answer both parts of your question. So number one on the good news front, on the telematics side, our rollout is going well, and we're going to complete the installation of the remaining parts of our fleet that don't have full telemetry within 2021. That's our target, and that's going well. Where we have installed it, the really good news for us, it's exciting to see us change our method of operating to take advantage and leverage that increased visibility as to what's going on on the units on an instantaneous basis. as well as to use that information to drive a better coordination of response with our customers for their benefit and for the benefit of uptime and certainly for cost management. So as we roll that out, we expect to continue to get the benefits of that. On the ERP, the team's working hard. We are going to spend 2021 preparing our systems for that. As you can probably imagine, you've got to pick at least a quarter end, if not a year end, for the flip of a switch on the ERP system. And so we're targeting having that switch move at the end of this year. And we have adequate time and really a good time to prepare for that, to continue to prepare for that. So that's going well. And then the only other point I'm going to make on the rollout currently is that behind both of those and in between both of those, the ERP and the field systems is going to come much better logistics management through our investment in our supply chain capabilities with much more information flow and more timely and instantaneous information around inventory amounts and locations and needs. So those are some of the exciting things that we're going to get from the project as we move forward. I think that the next immediate phase of once it's fully implemented and we've practiced operationalizing and have fully operationalized the benefits of that communication system and information flow, is to look at data and have data tell us more on a preventative and predictive basis where we need to focus our time and attention so that we can get ahead of not waiting for it to happen but seeing it before it happens and taking preventative and predictive actions or actions based on that predictive and preventative approach. I think that's really the next phase. Automation will be like a yet-out-there stage. I think that's a ways off. There are some inherent safety issues around how much automation is going to go into managing compression equipment. But that's the optimistic view I have right now about how well we're going to be able to operationalize the benefits of this investment.

Great overview. Thanks for taking my questions.

Yeah, thank you.

As a reminder, in order to ask your question, please press follow on your telephone. Your next question comes from the line of Salman Akhil. Your line is now open.

Michelle, we were having a hard time hearing you on RN.

Your next question comes from the line of Salman Akhil. Your line is now open.

Got it. Thank you. Good morning. Like you, I had a difficult time hearing. So let me ask you just two quick questions. So when you talk about potentially picking up some assets from your customers, and I understand up to the $50 million, but how do you think about the earnings on that investment? Or how should we be thinking about it?

You're talking about the high end of the CapEx range?

Well, you guys talked about putting an ATM in place in order to purchase some compression assets from customers. And so if we see that, I'm just wondering how we should be thinking about that.

Yeah. So, look, I think the answer there is we still don't have one to announce and – And until we do, the specifics will be a little tougher to enumerate. But generally speaking, the way we think about new, when we think about building a new unit, as an example, we've been targeting something in that, you know, mid-teens return. Certainly, you know, at least 13%, depending on the length of the contract you could get. And so similarly, you know, our view is that obviously the cost of equity is higher than the cost of debt. And at the same time, we've had a pretty firm commitment that, you know, most will remember we had intended to have our leverage under four times by the end of 2020. COVID certainly got in the way of that. And so our point is that if we can go out and allocate equity at a mid-teens return with a term contract with a high-quality customer and owning their equipment, we think there's value in doing that while also being able to continue to deleverage. And so I think that will be the way that we'll look at these contracts. And, you know, hopefully we'll have something to report with a customer that is interested. Also, because keeping in mind that because of our scale and our expertise in compression, generally we're able to operate that equipment at a lower operating cost than they can. And so what might look like a mid-teens return to us will look like something lower to them because we're offsetting a higher operating cost.

Gotcha. And then let me just ask one other question there. Is there a reason why they would particularly come to you, or is there chances they would go to several different compression players and get bids from everybody?

It's a competitive market, and I assume our competitors work on projects like this too, but what we find is that customers with which we have a material amount of business, a significant strategic relationship, which tends to be the bulk of our top ten customers, will want to work with us because that's their provider of choice already. And in fairness, a few of our competitors probably get the same benefit from their customer deck.

Very good. And then just last one for me. As you get your telematics fully rolled out, should we see that show up in cost savings as well?

Yes. You're already seeing it. The truth is it will show up in cost savings and efficiencies. We're experiencing some of that and started to with the implementation of the expanded telematics even in the back half of 2020. The question is going to be how well we can capture that in continued profit growth, which we've demonstrated for several years in a row now, and how much of it we share with our customers in pricing to gain more growth with our customers in the market. But it's absolutely going to come through in continued improvement in our cost base, and it's impacted profitability constructively already. We expect more of that.

Very good. Thank you kindly. Yep.

Thanks. There are no more questions. Now I'd like to turn the call back over to Ms. Childers for final remarks.

Great. Thank you, operator. Thank you, everyone, for participating in our Q4 review today. As our results demonstrate, we continue to take the right steps to differentiate ArchRock and deliver value to our customers and our shareholders. Our future is bright, and I look forward to updating you on our progress again next quarter. Thank you.

Ladies and gentlemen, that does conclude today's conference call. Thank you for participating. You may now disconnect.