Archrock, Inc.

third quarter of 2025. If you have not received a copy, you can find the information on the company's website at www.RTRACS.com. During this call, we will make forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, based on our current beliefs and expectations, as well as assumptions made by and information currently available to our TRACS management team. Although management believes that the 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 net income, adjusted EBITDA, adjusted EPS, adjusted gross margin, and cash available for dividends. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial results, please see yesterday's press release and our Form 8K furnished to the SEC. I'll now turn the call over to Brad to discuss our truck's third quarter results and to provide an update of our business.

Thank you, Megan, and good morning, everyone. Third quarter performance, again, demonstrated the strength of our operations and the natural gas and compression markets. The US natural gas infrastructure build out continued to support robust third quarter and full year 2025 performance, and we expect this to continue into 2026 and beyond. And at our track, customer service remained outstanding, operational execution excellent, and profitability at high levels. We continue to expand our adjusted EPS and adjusted EBITDA during the quarter. Compared to the third quarter of 2024, we increased our adjusted EPS by 50% and our adjusted EBITDA by more than 46%. Our contract operations and aftermarket services segments both delivered impressive revenue and gross margins due to strong activity levels, a supportive pricing environment, and the efficiency improvements we've driven across our operations. We maintained our sector-leading financial position, including an attractive quarter in leverage ratio of 3.1 times, driven by the stability of our cash flows. Our quarterly dividend per share was up 20% compared to a year ago, and we maintained robust dividend coverage of 3.7 times. We also continue to accelerate the repurchase of shares on the confidence we have in the durability of natural gas demand, compression market strength, and our truck's competitive position. Since the inception of our share repurchase program in April of 2023, we've repurchased more than 3.9 million shares of common stock at an average price of $20.21 per share. I'm both excited by and proud of the level of operational and financial execution we're achieving, which is also giving us strong momentum heading into 2026. Day-to-day, we remain focused on driving the next increment of our truck success through our first-rate customer experience, implementation of innovative technology, and our returns-based capital allocation. When coupled with the opportunity-rich market for compression we believe we're in today and see for the period ahead, we believe that our truck is set up for an extended period of strong and sustained growth in earnings, free cash flow, and returns to our shareholders. With that overview, I want to dive more into the constructive compression dynamics we see on both a short and a long-term basis. Beginning with the short term, The current environment is characterized by commodity price volatility, oil rig count declines, and the possibility that oil volumes could flatten or even decline slightly in 2026. Should this scenario play out, however, we still expect natural gas production growth in the U.S. with a rate that is likely in the low single digits, including continued gas production growth in the Permian Basin. The dynamic of natural gas production outpacing oil production is one that is consistent with historical trends and other more mature associated gas shell plays like the Eagle Ford and the Bakken, where rising gas-to-oil ratios have led to natural gas volume growth long after oil volume peaks. Because of this, we expect short-term gas market fundamentals will require a similar amount of growth investment by the industry and ArchRock, during 2026 compared to 2025, a point I will return to in a bit. Shifting to the long term, we believe the compression industry has entered a durable upturn driven by natural gas demand growth and bolstered by the pervasive level of capital discipline across the energy complex, including by the producers, midstream operators, and compression service providers. Expanding on natural gas demand growth in particular, we see visible growth in U.S. LNG exports and emerging demand for AI-driven power generation. Combined, we expect these demand pressures will require a significant call on U.S. natural gas production to the tune of an incremental 20 to 25 BCF a day by 2030, depending upon the forecast, and with similar levels of growth likely into the next decade. First, on LNG export facilities, U.S. demand is expected to grow by more than 17 BCF a day by 2030, much of which is already under construction. And at least another six BCF a day of projects could be operational before 2035. Second, the proliferation of AI is creating a new and meaningful source of domestic energy demand. And the opportunity for natural gas production and infrastructure to play a critical role is becoming more tangible. We've now seen hundreds of data center projects announced across the U.S. driving a virtual arms race for power. This includes investments in new power plants by utilities, and more recently, natural gas pipeline expansion and direct power generation projects to meet this growing demand. Variation in the forecasted magnitude and timing of this opportunity remains wide, but the risk forecasts through 2030 are significant, totaling up to 10 BCF a day, with additional growth expected well into the next decade. Simply put, we need all the gas we can produce, transport, and therefore compress. At R-TRAC, we expect to fully participate in these developing markets and are increasingly encouraged by these leading indicators for our business. Moving on to our contract operation segment. Our fleet is younger, larger, and positioned in competitive basins with high quality customers. This is translating into enhanced performance across several fleet metrics. First, utilization. We remained fully utilized during the quarter with utilization exiting at a rate of 96%. I'm proud to share that we've maintained utilization in the mid-90s range for the past 12 quarters. Second, stop activity. Stop activity year-to-date remains at historically low levels. And third, time on location. Based on 2024 data, the average time an ArchRock compressor stays on location is now more than six years representing a 64% improvement since 2021. With the investments we've made to high-grade the quality of our fleets, and given what we see in the market today, we expect these recent trends in utilization, stop activity, and time on location to continue into the foreseeable future. At quarter end, we had 4.7 million operating horsepower. As a reminder, on August 1st, we completed the cell of several small high pressure gas lift units for $71 million. Excluding this and other active asset cells, we grew horsepower organically by approximately 56,000 horsepower on a sequential basis in the quarter. As we look ahead, we have a substantial contracted backlog and continue booking units for 2026 delivery to meet strong customer demand led by the Permian Basin. spot pricing continued to increase during the quarter. And as our team remains focused on achieving market rates for all of our units, rates on our active fleet also moved higher. Now, as many of you track trends in quarterly revenue per average operating horsepower per month, I wanted to point out the impact of the recent acquisition and investment activity on that calculation this quarter. As I mentioned, pricing on our installed base of compression increased sequentially in the quarter. Third quarter 2025 revenue per average operating horsepower per month declined slightly compared to the second quarter of 2025, however, due to two factors. First, the average size of our compression units increased from 899 horsepower per unit to 927 horsepower per unit in the quarter, which was primarily the result of the high-pressure gas lift unit sell I just mentioned. Second, the full quarter impact of NGCSI fleet acquisition. That fleet had an average pricing on an equivalent unit basis a bit lower than the ArchRock fleets, but we believe this gives us the opportunity to bring rates on those units up to market over time. Concurrent with the decline in revenue per average operating horsepower per month, as you would expect, part of the cost per average operating horsepower per month decline we experienced in the quarter was also due to this increase in average horsepower size. We achieved a quarterly adjusted gross margin percentage of 73%. Strong pricing and solid cost management drove underlying contract operations gross margin to 70.4% of slightly from the prior quarter. Third quarter 2025 adjusted gross margin further benefited from a $9.9 million cash tax credit, which is the driver of the gross margin increase from the 70.4% level to the reported 73% level. In the aftermarket service segment, The large base of owned compression continues to support strong AMS activity, particularly in contract maintenance and service work. And great customer service is driving repeat business. Third quarter 2025 AMS gross margin percentage remained at impressive levels and was consistent with guidance. Shifting to our capital allocation framework, we remain committed to our prudent and returns-based approach. The successful execution of this capital allocation strategy has put us in a position to generate positive free cash flow after dividend moving forward. Over the long term, we are committed to positioning and managing this business to generate positive free cash flow and increase returns to our shareholders. Now more on our objectives as we look into 2026. We see an opportunity rich market ahead and the IRRs at which we expect to invest new build capital remain robust. As I mentioned earlier, the average compressor time allocation has extended to more than six years, which is beyond our expected payback period on new investments. Our investments continue to be underpinned by multi-year contracts with blue chip customers in highly profitable basis. As we indicated last year, I'm sorry, as we indicated last quarter, we expect 2026 growth capex to be not less than $250 million and within the range of investment levels that we've made annually since 2023. We believe this is the level of capex required to support the infrastructure build-out we are experiencing in the U.S. in order to satisfy the growing demand for natural gas described earlier. As we invest in these compelling opportunities, we're committed to maintaining an industry-leading balance sheet and plan to maintain a target leverage ratio of between 3 to 3.5 times. At the same time, we're delivering on our promise to provide an ongoing and growing return to our shareholders through the payment of a quarterly dividend. We will continue also to use buybacks as an additional tool for value creation for our shareholders. We've returned $159 million to stockholders through dividends and share repurchases during the first three quarters of 2025, compared to $93 million at this time last year. Given our confidence in the company's strategy and our commitment to returning capital to shareholders, the Board has approved a $100 million increase to our existing share repurchase program. After accounting for the recent repurchases during the third quarter of 2025 and in October, with this additional authorization, our current capacity is approximately $130 million. In summary, 2025 continues to be a tremendous year for our company, and I'm as optimistic as I've ever been about where we can drive this business in 2026 and beyond. As the structural growth in natural gas production and compression continue to take hold, we are focused on growing our business, growing our attractive and durable earnings power, and growing our free cash flow generation. With that, I'd like to turn the call over to Doug for a review of our third quarter performance and to provide additional color on our updated 2025 guidance.

Thank you, Brad, and good morning. Let's look at a summary of our third quarter results and then cover our updated financial outlook for 2025. Net income for the third quarter of 2025 was $71 million. Excluding transaction related and restructuring costs and adjusting for the associated tax impact, we delivered adjusted net income of $73 million, or 42 cents per share. We reported adjusted EBITDA of $221 million for the third quarter of 2025. Underlying business performance was strong in the third quarter as we delivered higher total adjusted gross margin dollars on a sequential and year-over-year basis despite the lost revenue and profits from a larger asset sale during the quarter. We reported a $4 million net gain on the sale of assets, which was offset by $4 million in other expense and related to an amendment fee for our Mach 4 natural gas liquid recovery new venture agreement with our partner. Turning to our business segments, contract operations revenue came in at $326 million in the third quarter of 2025, up 2% compared to the second quarter of 2025, driven by growth and horsepower and pricing. and revenue would have been up even more at 4% sequentially absent the sale of active horsepower as Brad discussed. Compared to the second quarter of 2025, we grew our adjusted gross margin dollars by more than $17 million. We expanded our adjusted gross margin percentage by approximately 73%. Underlying operating profitability was 70.4% in the quarter up slightly compared to the second quarter of 2025. Results further benefited from the receipt of a $9.9 million cash tax settlement. In our aftermarket services segment, we reported third quarter 2025 revenue of $56 million compared to the second quarter of 2025 of $65 million, but up 20% from $47 million in the year-ago period. Third quarter 2025 AMS adjusted gross margin percentage was 23%, consistent with the second quarter of 2025 and consistent with guidance. Turning to our balance sheet, our period end total debt was $2.6 billion and available liquidity totaled $728 million. As previously announced in October, we intend to take advantage of the lower rate environment and use existing capacity on our ABL facility to redeem all 300 million of our outstanding senior notes due 2027 at par. The redemption date for the notes will be November 17, 2025. Our leverage ratio at quarter end was 3.1 times, calculated as quarter end total debt divided by our trailing 12-month EBITDA. This was down from 3.3 times at the end of the second quarter of 2025. With continued strong performance in our business, we expect to continue deleveraging as the year progresses. We recently declared a third quarter dividend of 21 cents per share or 84 cents on an annualized basis. This level was consistent with the second quarter of 2025 and represents a 20% year-over-year increase. Cash available for dividend for the third quarter of 2025 totaled $136 million, leading to impressive quarterly dividend coverage of 3.7 times. In addition to our quarterly dividend payment, we were purchased approximately 1.1 million shares for approximately $25 million at an average price of $23.18 in the quarter. Including the additional $100 million authorization, this leaves approximately $130 million in remaining capacity for additional share repurchases on the replenished authorization as of October 22nd. Turning to our updated outlook, ArchRock increased its 2025 annual guidance to reflect continued outperformance during the third quarter of 25 and our expectation for continued strength in our underlying business during the fourth quarter. As a reminder, our guidance reflects eight months of contribution from the NGCS acquisition and outperformance in our business, partially offset by the removal of five months of contribution from the high-pressure gas lift units we sold. We are raising our 2025 adjusted EBITDA range to $835 million to $850 million from the prior range of $810 to $850 million. Additional detail can be found in our earnings released issued last night. Turning to capital, we are narrowing our growth CapEx guidance range to between $345 and $355 million to support investment in new-build horsepower and repackage CapEx to meet continued customer demand. Our growth CapEx is underpinned by multi-year contracts. Maintenance CapEx is forecasted to be approximately $110 to $115 million. We also expect approximately $35 to $40 million in other CapEx, primarily for new vehicles. Total capital expenditures are expected to be funded by operations and further supported by non-strategic asset sale proceeds, which total more than $114 million in 2025 year-to-date. In summary, as this structural growth in our natural gas production and compression continues to take hold, we are focused on finishing out the year strong and setting a solid foundation for even higher levels of customer service, operational execution, and financial performance in 2026. With that, Julianne, we are now ready to open the line for questions.