Archrock, Inc.

In the Permian, we expect mid-single-digit gas growth supported by rising gas-to-oil ratios and new takeaway later this year. Geopolitical risk in the Middle East, including Iran-related volatility, reinforces the strategic value of U.S. supply and supports tighter global LNG fundamentals. And longer term, the outlook is improving. The EIA's Annual Energy Outlook 2026 raised its view of U.S. gas production and demand versus last year, driven in part by LNG growth and AI DAB center power needs, with production projected to rise from 107 BCF a day in 2025 to approximately 133 to 151 BCF a day by 2050. That would represent an increase in natural gas production of between 24% and 41%, reinforcing our view of a longer-term growth trajectory for both natural gas production and for compression. Moving to our segments, contract operations delivered outstanding performance supported by excellent execution and continued high demand for our compression fleet, particularly our large horsepower and electric motor drive units, extending our track record of strong results. Our fleet remained highly utilized during the quarter, exiting at 95% utilization, reflecting continued high demand and the high quality of our fleet, and sustaining strong utilization in our contract operations business over a multi-year period. That durability is also evident in the time on location with the blended fleet averaging approximately six years and units of 1,500 horsepower or greater averaging approximately eight years in largely midstream applications. At quarter end, we had 4.5 million operating horsepower. Operating horsepower declined by approximately 43,000 as new build deliveries during the quarter were more than offset by the sale of approximately 40,000 non-strategic horsepower including 21,000 active horsepower. As a reminder, we also sold approximately 123,000 horsepower, including 84,000 active horsepower at the end of 2025. Taken together, these sales reduced first quarter adjusted EBITDA by approximately 3 million on a sequential basis. Monthly revenue per horsepower moves higher on a sequential and year-over-year basis. In 2026, we continue to expect monthly revenue per horsepower to benefit from the full year carryover of the rate increases implemented in 2025 and increases in 2026. We achieved a quarterly adjusted gross margin percentage of 72%. Consistent profitability above 70% continues to be driven by strong pricing, disciplined execution, and a continued focus on per horsepower cost management. Over the last several years, we've executed well on the cost inputs into our operations, offsetting some of the cost increases we experienced during the recent higher inflationary environment, including higher costs for labor and parts. We remain focused on continuing this level of execution through technology deployment and ongoing cost management. Moving to our aftermarket services segment, performance was solid in the first quarter. As expected, Q1 is seasonally slower. Even so, we continue to deliver strong profitability levels in the business, reflecting disciplined execution and an ongoing focus on higher quality, higher margin work. Turning to capital allocation, we remain disciplined and returns focused, prioritizing growth, investment, and shareholder returns supported by a strong balance sheet. We reaffirmed our 2026 growth capital plan of $250 to $275 million for fleet investment, reflecting strong demand and our desire to continue growing our profitable platform through high-return, new-build investments. We expect substantial free cash flow to support increasing shareholder returns. We declared a quarterly dividend of 22 cents per share up approximately 16% year-over-year while maintaining robust coverage. We also have flexibility for additional shareholder returns, including $113 million of remaining authorization under our share repurchase program as of quarter end, which we view as a tool within our returns-based framework and may use more actively during periods of market dislocation. We exited the quarter below our long-term leverage target of between three times to 3.5 times and expect to operate below three times in the near term, preserving flexibility for both organic and inorganic growth, as well as continued shareholder returns. In summary, ArchRock is delivering consistent, strong results underpinned by a culture of disciplined execution and continuous improvement. Looking ahead, we see a meaningful runway for profitable growth with earnings supported by our returns-based capital allocation and durable tailwinds for natural gas infrastructure, including compression. Before I hand it over, I want to recognize Doug Aaron. As we previously announced, Doug plans to retire by the end of the year. On behalf of our truck, thank you, Doug. for more than seven years of outstanding service and leadership during an exciting and transformative period for the company. Doug has been a key leader and a trusted advisor to me, the rest of the executive leadership team, and our board. And to be clear, he's not going anywhere just yet. Doug will stay in his role until a successor is named to ensure a smooth transition. With that, I'll turn the call over to Doug to walk through our first quarter and 2026 outlook.

Thank you, Brad. Certainly appreciate the kind words. Good morning, everyone. Thanks for joining us. Let's review our first quarter results and then cover our current financial outlook for 2026. Net income for the first quarter of 2026 was $73.8 million. Excluding transaction related and restructuring costs and adjusting for the associated tax impact, we delivered adjusted net income of $74.4 million or 42 cents per share. We reported adjusted EBITDA of $221 million for the first quarter of 2026. Underlying business performance exceeded our basis for guidance and results also benefited from a $10 million net gain from the sale of non-strategic compression and other assets. strength in segment fundamentals was somewhat offset by higher selling, general, and administrative expense in the quarter. That performance translated into adjusted free cash flow of $92 million and adjusted free cash flow after dividend of $52 million in the quarter, driven by durable operating cash flow and further supported by proceeds from the non-strategic asset sales, supporting our ongoing commitment to return capital to shareholders. SG&A expenses were $45 million in the first quarter of 2026 compared to $37 million in the first quarter of 2025, with the increase primarily driven by higher long-term incentive compensation for two reasons. First, a little more than half of this increase was the result of the sharply higher stock price in the quarter. Second, the balance of the increase was the result of a GAAP accounting acceleration of expense recognition for long-term incentive compensation under an executive retention agreement, which we do not expect will recur in the remaining periods of this year. Turning to our business segments, Contract operations revenue came in at $331 million in the first quarter, up 10% compared to the first quarter of 2025, driven by growth in horsepower and higher pricing. Operating horsepower of 4.53 million at the end of the quarter was up approximately 250,000 year-over-year from 4.28 million in the first quarter of 2025. Our adjusted gross margin percentage of 72% in the first quarter of 2026 reflects consistent profitability. While reported adjusted gross margin percentage was down from 78% last quarter, the figure increased slightly on a sequential basis after excluding the impact of out-of-period cash tax settlements and credits we benefited from during the fourth quarter of 2025 that were more one-time in nature. In our aftermarket services segment, we reported first quarter 2026 revenue of $43 million, reflecting lower service activity and a seasonal slowdown. Even with the expected seasonal softness, AMS delivered a great level of profitability. First quarter 2026 adjusted gross margin percentage was 23%, consistent with the high end of our guidance range for the year. We ended the quarter with total debt of $2.4 billion. In January, we issued $800 million of senior notes to fund the April 1st repurchase of 100% of our senior notes due 2028 at par, which moves our nearest bond maturity to 2032. Pro forma for this activity, available liquidity was approximately $600 million. Our leverage ratio at quarter end was 2.6 times compared to 2.7 in the fourth quarter of 2025 as we continue to operate comfortably below our stated target of three times in the near term. We recently declared a first quarter dividend of 22 cents per share or 88 cents on an annualized basis. This is consistent with the fourth quarter 25 dividend level and up approximately 16% year over year. Cash available for dividend for the first quarter of 2026 totaled $134 million, leading to robust quarterly dividend coverage of 3.5 times. During the quarter, we repurchased approximately 171,000 shares for approximately $4.4 million and an average price of $25.87 per share. This leaves approximately $113 million in remaining capacity for additional share repurchases. Given our solid first quarter performance, we reaffirmed our full year 2026 guidance with yesterday's earnings release. We remain on track to deliver our 2026 adjusted EBITDA guidance of $865 to $915 million. Segment performance in the first quarter was consistent with the basis of that guidance with strength in the underlying business partially offset by higher SG&A. We do not expect the $3.7 million of long-term compensation expense acceleration to recur in future periods for the remainder of 2026. In contract operations, our outlook reflects year-over-year growth in horsepower, revenue, and profitability. In AMS, we expect revenue and profitability to remain strong. Turning to capital, on a full-year basis, we continue to expect total 2026 capital expenditures to be approximately $400 to $445 million. Within that total, we reiterate growth capex of $250 to $275 million to support investment in new-build horsepower and repackage capex to meet continued customer demand. Growth is expected to be funded by operations with additional support from non-strategic asset sale proceeds as we continue to high-grade our fleet, including year-to-date proceeds totaling approximately $21 million. Maintenance CapEx is forecasted to be approximately $125 to $135 million up versus 2025 due to increased planned overall activity. We also anticipate approximately $25 to $35 million in other CapEx, primarily for new vehicles. In summary, we remain confident in the strength of our platform and in the long-term opportunity in front of us. The combination of a fully utilized fleet and the continued build-out of U.S. midstream infrastructure to support both expected growth in LNG exports and rising power demand reinforces our view that the need for reliable compression remains strong. Against that backdrop, we are focused on excellent execution, delivering for our customers, advancing the technologies we've put in place, and adhering to a discipline, returns-based approach to capital allocation to grow the business and create long-term value for our shareholders. With that, Kerry, I believe we are ready to open the line for questions.

Thank you. At this time, if you'd like to ask a question, please press stars and the number one on your telephone keypad. As a courtesy to all participants, we ask that you limit yourself to one question and one follow-up. We'll pause for just a moment to probably Q&A roster. Your first question, Michael Bloom from Wells Fargo.