Kodiak Gas Services, Inc. 10-Q

Item 1. Financial Statements. KODIAK GAS SERVICES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, except share and per share data) As of June 30, 2023 As of December 31, 2022 Assets Current assets: Cash and cash equivalents $ 41,371 $ 20,431 Accounts receivable, net 119,254 97,551 Inventories, net 76,813 72,155 Fair value of derivative instruments — 823 Contract assets 4,513 3,555 Prepaid expenses and other current assets 20,201 9,520 Total current assets 262,152 204,035 Property, plant and equipment, net 2,486,846 2,488,682 Operating lease right-of-use assets, net 34,799 9,827 Goodwill 305,553 305,553 Identifiable intangible assets, net 127,625 132,362 Fair value of derivative instruments 43,811 64,517 Other assets 577 564 Total assets $ 3,261,363 $ 3,205,540 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 35,100 $ 37,992 Accrued liabilities 88,440 93,873 Contract liabilities 86,258 57,109 Total current liabilities 209,798 188,974 Long-term debt, net of unamortized debt issuance cost 2,769,355 2,720,019 Operating lease liabilities 29,970 6,754 Deferred tax liabilities 57,916 57,155 Other liabilities 1,449 3,545 Total liabilities 3,068,488 2,976,447 Commitments and contingencies (Note 13) Stockholders’ Equity: Common stock, par value $ 0.01 per share; 750,000,000 shares of common stock authorized, 59,000,000 shares of common stock issued and outstanding as of June 30, 2023 and December 31, 2022 590 590 Additional paid-in capital — 33,189 Retained earnings 192,285 195,314 Total stockholders’ equity 192,875 229,093 Total liabilities and stockholders’ equity $ 3,261,363 $ 3,205,540 See accompanying notes to the unaudited condensed consolidated financial statements. 1 Table of Contents KODIAK GAS SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except share and per share data) For the Three Months Ended June 30, For the Six Months Ended June 30, 2023 2022 2023 2022 Revenues: Compression O perations $ 181,619 $ 162,808 $ 359,316 $ 320,303 Other S ervices 21,687 14,343 34,102 25,189 Total revenues 203,306 177,151 393,418 345,492 Operating expenses: Cost of operations (exclusive of depreciation and amortization shown below): Compression O perations 65,017 58,336 127,787 111,273 Other S ervices 18,099 11,774 27,087 20,601 Depreciation and amortization 45,430 43,397 90,327 85,802 Selling, general and administrative expenses 13,438 11,740 26,523 21,570 Gain on sale of fixed assets ( 738 ) — ( 721 ) ( 7 ) Total operating expenses 141,246 125,247 271,003 239,239 Income from operations 62,060 51,904 122,415 106,253 Other income (expenses): Interest expense, net ( 60,964 ) ( 36,829 ) ( 119,687 ) ( 62,469 ) Realized gain on derivatives 25,835 — 25,835 — Unrealized (loss) gain on derivatives ( 3,595 ) ( 3,386 ) ( 21,529 ) 32,822 Other income (expense) 32 ( 7 ) 1 9 Total other expenses ( 38,692 ) ( 40,222 ) ( 115,380 ) ( 29,638 ) Income before income taxes 23,368 11,682 7,035 76,615 Income tax expense 5,851 2,781 1,861 18,159 Net income $ 17,517 $ 8,901 $ 5,174 $ 58,456 Earnings per share: Basic and diluted earnings per share $ 0.30 $ 0.15 $ 0.09 $ 0.99 Weighted-average shares outstanding - basic and diluted 59,000,000 59,000,000 59,000,000 59,000,000 See accompanying notes to the unaudited condensed consolidated financial statements. 2 Table of Contents KODIAK GAS SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED) (in thousands, except share data) Common Stock Shares Amount Additional Paid-In Capital Retained Earnings Total Stockholders’ Equity Balance, January 1, 2022 59,000,000 $ 590 $ 871,403 $ 88,078 $ 960,071 Equity compensation — — ( 136 ) 619 483 Net income, as restated — — — 49,555 49,555 Balance, March 31, 202 2, as restated 59,000,000 $ 590 $ 871,267 $ 138,252 $ 1,010,109 Distribution to parent — — ( 838,000 ) — ( 838,000 ) Net income — — — 8,901 8,901 Balance, June 30, 2022 59,000,000 $ 590 $ 33,267 $ 147,153 $ 181,010 Balance, January 1, 2023 59,000,000 $ 590 $ 33,189 $ 195,314 $ 229,093 Equity compensation — — ( 193 ) 879 686 Net loss — — — ( 12,343 ) ( 12,343 ) Balance, March 31, 2023 59,000,000 $ 590 $ 32,996 $ 183,850 $ 217,436 Distribution to parent ( 33,189 ) ( 9,111 ) ( 42,300 ) Equity compensation — — 193 29 222 Net income — — — 17,517 17,517 Balance, June 30, 2023 59,000,000 $ 590 $ — $ 192,285 $ 192,875 See accompanying notes to the unaudited condensed consolidated financial statements. 3 Table of Contents KODIAK GAS SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) For the Six Months Ended June 30, 2023 2022 Cash flows from operating activities: Net income $ 5,174 $ 58,456 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 90,327 85,802 Stock-based compensation expense 908 619 Amortization of debt issuance costs 11,071 5,212 Non-cash lease expense 1,786 1,365 Provision for credit losses 2 85 Inventory reserve 250 250 Gain on sale of fixed assets ( 721 ) ( 7 ) Unrealized loss (gain) on derivatives 21,529 ( 32,822 ) Deferred tax provision 761 14,974 Changes in operating assets and liabilities: Accounts receivable, net ( 21,705 ) ( 11,367 ) Inventories ( 4,907 ) ( 5,302 ) Contract assets ( 958 ) ( 3,051 ) Prepaid expenses and other current assets ( 10,681 ) ( 314 ) Accounts payable 10,954 6,436 Accrued and other liabilities ( 14,971 ) 854 Contract liabilities 29,149 6,457 Net cash provided by operating activities 117,968 127,647 Cash flows from investing activities: Purchase of capital assets ( 94,034 ) ( 145,952 ) Proceeds from sale of capital assets 1,055 13 Investment in fund ( 24 ) ( 24 ) Other 10 13 Net cash used in investing activities ( 92,993 ) ( 145,950 ) Cash flows from financing activities: Borrowings on debt instruments 499,279 1,221,161 Payments on debt instruments ( 428,812 ) ( 345,465 ) Payment of debt issuance cost ( 32,202 ) ( 27,561 ) Distributions to parent ( 42,300 ) ( 838,000 ) Net cash (used in) provided by financing activities ( 4,035 ) 10,135 Net increase (decrease) in cash and cash equivalents 20,940 ( 8,168 ) Cash and cash equivalents - beginning of period 20,431 28,795 Cash and cash equivalents - end of period $ 41,371 $ 20,627 Supplemental cash disclosures: Cash paid for interest $ 116,370 $ 52,204 Cash paid for taxes $ 5,726 $ 1,836 Supplemental disclosure of non-cash investing activities: Change in accrued capital expenditures $ 9,946 $ 1,931 See accompanying notes to the unaudited condensed consolidated financial statements. 4 Table of Contents KODIAK GAS SERVICES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Description of Business Kodiak Gas Services, Inc. (together with its subsidiaries, referred to as “Kodiak” or the “Company”) began its operations in 2011. On February 8, 2019, Kodiak was acquired by entities affiliated with EQT AB Group. On October 24, 2019, the Company acquired Pegasus Optimization Managers, LLC, a provider of natural gas compression operations. The Company is an operator of contract compression infrastructure in the U.S, primarily in the Permian Basin and Eagle Ford Shale with additional operations in the Powder River Basin, Mid-Continent Region, DJ Basin, Appalachian Basin, Barnett Shale / East Texas Region and Black Warrior Basin. The Company operates its compression units under stable, fixed-revenue contracts with upstream and midstream customers. The Company manages its business through two operating segments: Compression Operations and Other Services. Compression Operations consists of operating Company-owned and customer-owned compression infrastructure for its customers to enable the production, gathering and transportation of natural gas and oil. Other Services consists of station construction, maintenance and overhaul, and other ancillary time and material-based offerings. See Note 18 (“Segments”). Stock Split On June 20, 2023, Kodiak’s board of directors approved a 590,000-for-1 split (the “Stock Split”) of the Company’s common stock. Prior to the consummation of the initial public offering of the Company’s common stock (the “IPO”), the Company was 100 % owned by its Parent, Frontier TopCo Partnership, L.P. (“Kodiak Holdings”). The Stock Split became effective upon filing of the Company’s Amended and Restated Certificate of Incorporation on June 28, 2023 in connection with the IPO. The par value of the Company’s common stock was not adjusted as a result of the Stock Split, however, the number of shares that the Company is authorized to issue increase d to 750,000,000 . As a result of the Stock Split, 59,000,000 shares of common stock were outstanding. All share and per share data shown in the accompanying condensed consolidated financial statements and related notes has been retroactively revised to give effect to the Stock Split for all periods presented. IPO On June 28, 2023, Kodiak’s Registration Statement on Form S-1 relating to the IPO was declared effective by the U.S. Securities and Exchange Commission (“SEC”) and the shares of its common stock began trading on the New York Stock Exchange on June 29, 2023. On July 3, 2023, Kodiak issued and sold 16,000,000 shares of common stock at a price to the public of $ 16.00 per share. Kodiak received net proceeds of approximately $ 231.4 million, after deducting expenses and underwriting discounts and commissions payable by the Company. 2. Basis of Presentation and Consolidation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on the accrual basis using accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are not required in these interim financial statements and have been condensed or omitted. Management believes that the information furnished reflects all normal recurring adjustments necessary to fairly present the Company’s consolidated financial position, results of operations and cash flows for the periods indicated. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements presented in Kodiak’s latest annual financial statements included in Kodiak’s final prospectus filed with the SEC on June 30, 2023 pursuant to Rule 424(b)(4) (the "IPO Prospectus"), which contain a more comprehensive summary of the Company’s accounting policies. The interim results reported herein are not necessarily indicative of results for a full year. These unaudited condensed consolidated financial statements include the accounts of Kodiak and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated upon consolidation. Restatement of Previously Issued Financial Statements During the preparation and review of the unaudited interim condensed consolidated financial statements for the three and six month periods ended June 30, 2023 and 2022, the Company identified a previously corrected adjusting entry that should have been recorded in the three months ended March 31, 2022. This entry was specific to the unrealized (loss) gain on derivatives and does not impact the six month period ended June 30, 2022 financial statements and does not impact the Company’s Consolidated Financial Statements as of and for the year ended December 31, 2022. See Note 10—Derivative Instruments. The foregoing error had no effect on the Company’s revenue and financial covenants. The error does not impact the Company’s cash or liquidity. Similarly, the error did not have an impact on the Company’s operations or business fundamentals. The Company assessed the materiality of the error in its historical unaudited interim condensed consolidated financial statements in accordance with Accounting Standards Codification (“ASC”) 250, Accounting Changes and Error Corrections, and concluded that the previously issued unaudited condensed consolidated financial statements for the three months ended March 31, 2022 should be restated. The Company corrected for the error by restating amounts previously presented and disclosed in the unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022. A summary of the effect of the restatements on the unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2022 is as follows ( in thousands, except per share data ): Unaudited Condensed Consolidated Statement of Operations For the three months ended March 31, 2022 As Previously Reported Restatement Adjustments As Restated Unrealized gain on derivatives $ 7,838 $ 28,370 $ 36,208 Income Tax Expense 8,624 6,754 15,378 Net Income 27,939 21,616 49,555 Basic and diluted earnings per share $ 279,390 $ 216,160 $ 495,550 Unaudited Condensed Consolidated Statement of Shareholders’ Equity As of March 31, 2022 As Previously Reported Restatement Adjustments As Restated Retained Earnings $ 116,636 $ 21,616 $ 138,252 Total stockholder’s equity $ 988,493 $ 21,616 $ 1,010,109 Unaudited Condensed Consolidated Statement of Cash Flows For the three months ended March 31, 2022 As Previously Reported Restatement Adjustments As Restated Net income $ 27,939 $ 21,616 $ 49,555 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Unrealized loss (gain) on derivatives ( 7,838 ) ( 28,370 ) ( 36,208 ) Deferred tax provision 7,104 6,754 13,858 Changes in Operating assets and liabilities Prepaid Expenses and other current assets 1,032 ( 14,185 ) ( 13,153 ) Accrued and other liabilities ( 6,713 ) 14,185 7,472 Net cash provided by operating activities $ 54,796 $ — $ 54,796 5 Table of Contents Recently Adopted Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments—Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments which changes the impairment model for financial assets measured at amortized cost and certain other instruments, including trade and other receivables, held-to-maturity debt securities and loans, and requires entities to use a new current expected credit loss model that will result in earlier recognition of allowance for losses. The Company adopted this Topic 326 on January 1, 2023. The adoption of this amendment did not have a material impact on the Company’s con solid ated financial statements. 3. Revenue Recognition The following table disaggregates the Company’s revenue by type and timing of provision of services or transfer of goods (in thousands) : Three Months Ended June 30, 2023 2022 Services provided over time: Compression O perations $ 179,740 $ 159,788 Other S ervices 18,357 13,422 Total services provided over time 198,097 173,210 Services provided or goods transferred at a point in time: Compression O perations 1,879 3,020 Other S ervices 3,330 921 Total services provided or goods transferred at a point in time 5,209 3,941 Total revenue $ 203,306 $ 177,151 Six Months Ended June 30, 2023 2022 Services provided over time: Compression O perations $ 354,616 $ 315,361 Other S ervices 28,275 22,770 Total services provided over time 382,891 338,131 Services provided or goods transferred at a point in time: Compression O perations 4,700 4,942 Other S ervices 5,827 2,419 Total services provided or goods transferred at a point in time 10,527 7,361 Total revenue $ 393,418 $ 345,492 The Company derives its revenue from contracts with customers, which comprise the following revenue streams: Compression Operations Compression Operations consists of operating Company-owned and customer-owned compression infrastructure for the Company’s customers, pursuant to fixed-revenue contracts enabling the production, gathering and transportation of natural gas and oil. Compression Operations for Company-owned, as well as customer-owned, compressors are generally satisfied over time as services are rendered at selected customer locations on a monthly basis and based upon specific performance criteria identified in the applicable contract. Terms are typically one to seven years and at the end of the term, transition to a month-to-month contract if not cancelled by either party. The monthly service for each location is substantially the same service month-to-month over the service contract term. The progress and performance of the service are measured consistently using a straight-line, time-based method as each month passes, because the performance obligations are satisfied evenly over the contract term as the customer simultaneously receives and consumes the benefits provided by the service. 6 Table of Contents If variable consideration exists, it is allocated to the distinct monthly service within the series to which such variable consideration relates. The Company has elected to apply the invoicing practical expedient to recognize revenue for such variable consideration, as the invoice corresponds to the value transferred to the customer based on the Company’s performance completed to date. Service revenue earned primarily on freight and crane charges that are directly reimbursable by the Company’s customers is recognized at the point in time the service is provided and control is transferred to the customer. At such time, the customer has the ability to direct the use of the benefits of such service after the performance obligation is satisfied. The amount of consideration the Company receives and revenue the Company recognizes is based upon the invoice amount. There are typically no material obligations for returns, refunds, or warranties. The Company’s standard contracts do not usually include non-cash consideration. Other Services This revenue stream primarily relates to compressor station construction services provided to certain customers and services provided based on time, parts and/or materials with customers. For most of the Company’s construction contracts, the Company integrates a significant set of tasks and components into a single contract for its customers. Hence, the entire contract is accounted for as one performance obligation. The Company recognizes revenue over time as the Company performance creates or enhances an asset that the customer controls. For construction services, revenue is recognized using an input method. Measure of the progress towards satisfaction of the performance obligation is based on the actual amount of labor and material costs incurred. The amount of the transaction price recognized as revenue is determined by multiplying the transaction price by the ratio of actual costs incurred to total estimated costs expected for the construction services. Judgment is involved in the estimation of the progress toward completion. Any adjustments to the measure of the progress toward completion is accounted for on a prospective basis. Changes to the scope of service are recognized as an adjustment to the transaction price in the period in which the change occurs. Services provided based on time spent, parts and/or materials is generally short-term in nature and labor rates and parts pricing is agreed upon prior to commencing the service. As revenue is recognized when time passes, this revenue is recognized at the point and time when the service is rendered. Contract Assets and Liabilities The Company recognizes a contract asset when the Company has the right to consideration in exchange for goods or services transferred to a customer. Contract assets are transferred to trade receivables when the rights become unconditional. The Company had contract assets of $ 4.5 million, $ 1.1 million and $ 3.6 million as of June 30, 2023, March 31, 2023 and December 31, 2022 , respectively. The Company records contract liabilities when cash payments are received or due in advance of performance. The Company’s contract liabilities w ere $ 86.3 million and $ 57.1 million, as of June 30, 2023 and December 31, 2022, respectively. As of January 1, 2023 and 2022, the beginning balance s for contract liabilities were $ 57.1 million and $ 51.2 million, respectively, all of which was recognized as revenue in the six months ended June 30, 2023 and 2022, respectively. Performance Obligations As of June 30, 2023, the aggregate amount of transaction price allocated to unsatisfied p erformance obligations related to the Company’s revenue for the Compression Operations segment is $ 1.1 billion. The Company expects to recognize these remaining performance obligations as follows (in thousands) : Remainder of 2023 2024 2025 2026 2027 and thereafter Total Remaining performance obligations $ 312,116 $ 461,662 $ 221,345 $ 94,796 $ 50,984 $ 1,140,903 7 Table of Contents 4. Accounts Receivable, net Accounts receivable, net consist of the following ( in thousands ): As of June 30, As of December 31, 2023 2022 Accounts receivable $ 120,203 $ 98,500 Allowance for credit losses 949 949 Accounts receivable, net $ 119,254 $ 97,551 5. Inventories Inventories consist of the following ( in thousands ): As of June 30, As of December 31, 2023 2022 Non-serialized parts $ 66,252 $ 61,082 Serialized parts 10,561 11,073 Total inventories $ 76,813 $ 72,155 6. Property, Plant and Equipment, Net Property, plant and equipment, net consist of the following ( in thousands ): As of June 30, As of December 31, 2023 2022 Compression equipment $ 3,049,309 $ 2,973,599 Trailers and vehicles 8,341 7,193 Field equipment 17,919 15,501 Technology hardware and software 9,736 6,698 Leasehold improvements 2,646 1,947 Shipping containers 3,267 3,137 Furniture and fixtures 1,564 1,519 Capital lease 683 981 Total property and equipment, gross 3,093,465 3,010,575 Less: accumulated depreciation ( 606,619 ) ( 521,893 ) Property, plant and equipment, net $ 2,486,846 $ 2,488,682 Depreciation expense was $ 43.0 million and $ 85.6 million for the three and six months ended June 30, 2023, respectively, and is recorded within depreciation and amortization on the accompanying condensed consolidated statements of operations. Depreciation expense was $ 41.0 million and $ 81.1 million for the three and six months ended June 30, 2022, respectively. 7. Goodwill and Identifiable Intangible Assets, Net There were no changes in the carrying amount of goodwill during the six months ended June 30, 2023. All of the goodwill was allocated to the Company’s Compression Operations reporting unit. 8 Table of Contents The Company’s identifiable intangible assets consist of the following as of June 30, 2023 and December 31, 2022 ( in thousands ): As of June 30, 2023 Original Cost Accumulated Amortization Net Amount Remaining Weighted Average Amortization Period (years) Trade name $ 13,000 $ ( 2,856 ) $ 10,144 15.6 Customer relationships 150,000 ( 32,519 ) 117,481 13.3 Total identifiable intangible assets $ 163,000 $ ( 35,375 ) $ 127,625 As of December 31, 2022 Original Cost Accumulated Amortization Net Amount Remaining Weighted Average Amortization Period (years) Trade name $ 13,000 $ ( 2,531 ) $ 10,469 16.1 Customer relationships 150,000 ( 28,107 ) 121,893 13.8 Total identifiable intangible assets $ 163,000 $ ( 30,638 ) $ 132,362 Amortization expense was $ 2.4 million and $ 4.7 million for each of the three and six months ended June 30, 2023 and 2022 and is recorded within depreciation and amortization on the condensed consolidated statements of operations. At June 30, 2023, the following is a summary of future minimum amortization expense for identified in t angible assets ( in thousands ): Amount Years ending December 31, Remainder of 2023 $ 4,737 2024 9,474 2025 9,474 2026 9,474 2027 9,474 Thereafter 84,992 Total $ 127,625 8. Long-Lived and Other Asset Impairment Long-lived assets, including property, plant, and equipment, and other finite-lived identifiable intangible assets, are reviewed for impairment whenever events or changes in circumstances, including the removal of compressors from the active fleet, indicate that the carrying amount of an asset may not be recoverable. Such events and changes may include significant changes in performance relative to expected operating results, significant changes in asset use, significant negative industry or economic trends, and changes in the Company’s business strategy, among others. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to estimated future undiscounted net cash flows expected to be generated by the asset. Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its estimated future discounted net cash flows. No impairment was recorded for the six months ended June 30, 2023 and 2022. For the six months ended June 30, 2023 and 2022, no triggering event for any long-lived assets was identified. 9 Table of Contents 9. Debt and Credit Facilities Debt consists of the following (in thousands) : As of June 30, As of December 31, 2023 2022 ABL Facility $ 1,824,691 $ 1,754,224 Term loan 1,000,000 1,000,000 Total debt outstanding 2,824,691 2,754,224 Less: unamortized debt issuance cost ( 55,336 ) ( 34,205 ) Long-term debt, net of unamortized debt issuance cost $ 2,769,355 $ 2,720,019 ABL Facility As of January 1, 2022, a wholly-owned subsidiary of Kodiak had a revolving-asset backed loan credit facility (the “ABL Facility”) with unaffiliated secured lenders and JPMorgan Chase Bank, N.A., as administrative agent. On May 19, 2022, wholly-owned subsidiaries of Kodiak entered into the Third Amendment to the Third Amended and Restated Credit Agreement which mainly served to amend the applicable rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and allow for the return of capital to the stockholders of Kodiak in the amount of $ 838 million by increasing borrowings on the ABL Facility by $ 225 million, increasing the Term Loan by $ 600 million and utilizing $ 13 million of cash on hand. In addition , the ABL Facility size was increased from $ 1.875 billion to $ 2.050 billion to increase available liquidity under the facility. New lender fees and costs totaling $ 13.2 million were incurred as a result of the amendment and will be amortized over the life of the loans to interest expense. On March 22, 2023, wholly-owned subsidiaries of Kodiak entered into the Fourth Amended and Restated Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (as amended or restated from time to time, the “ABL Credit Agreement”) which mainly served to extend the maturity date from June 2024 to March 2028. The total facility size was increased from $ 2.050 billion to $ 2.200 billion to increase available liquidity under the facility. New lender fees and costs totaling $ 31.8 million were incurred and will be amortized over the life of the loans to interest expense. An additional $ 4.2 million in accrued interest related to exiting lenders was expensed and paid in the period. The remaining unamortized deferred financing costs of $ 1.2 million associated with the exiting lenders was written-off in the period. Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum fixed charge coverage ratio of 1.1 x and a maximum Leverage Ratio . The maximum Leverage Ratio (calculated based on the ratio of Consolidated Total Debt to Consolidated EBITDA, each as defined in the ABL Credit Agreement) is 7.25 x through the first quarter of 2023; 7.00 x thereafter through the third quarter of 2023; 6.75 x thereafter through the first quarter of 2024; and 6.50 x in the second quarter of 2024 and thereafter. All loan amounts are collateralized by essentially all the assets of the Company. The Company was in compliance with all covenants as of June 30, 2023 and December 31, 2022. The ABL Credit Agreement also restricts the Company’s ability to: incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions or repurchase or redeem equity interests; prepay, redeem or repurchase certain debt; issue certain preferred units or similar equity securities; make loans and investments; sell, transfer or otherwise dispose of assets; incur liens; enter into transactions with affiliates; enter into agreements restricting the Company’s restricted subsidiaries’ ability to pay dividends; enter into certain swap agreements; amend certain organizational documents; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of the Company’s assets. The applicable interest rates as of June 30, 2023 were 10.25 % (prime rate plus 2.00 % ) and 8.34 % (Term SOFR rate plus 0.10 % plus 3.00 %). The applicable interest rates as of December 31, 2022 were 9.50 % (prime rate plus 2.00 % ) and 7.60 % (Term SOFR rate plus 0.10 % plus 3.00 %). 1 0 Table of Contents The ABL Facility is a “revolving credit facility” that includes a lock box arrangement whereby, under certain events, remittances from customers are forwarded to a bank account controlled by the administrative agent and are applied to reduce borrowings under the facility. One such event includes “Cash Dominion” and occurs when availability under the agreement falls below a specified threshold (i.e., the greater of $ 200.0 million or 10 % of the aggregate commitments at such time of event). As of June 30, 2023 and December 31, 2022, availability under the agreement was in excess of the specified threshold and as such the entire balance was classified as long-term in accordance with its maturity. Term Loan As of January 1, 2022, a wholly-owned subsidiary of Kodiak had a term loan (the “Term Loan”) pursuant to a credit agreement with unaffiliated unsecured lenders and Wells Fargo Bank, N.A., as administrative agent. In May 2022, the Company completed a recapitalization and return of capital of $ 838 million to stockholders of Kodiak primarily by increasing the borrowings from the ABL Facility by $ 225 million and the Term Loan by $ 600 million per the Amended and Restated Term Loan Credit Agreement entered into by the Company on May 19, 2022 (as amended from time to time, the “Term Loan Credit Agreement”) and utilizing $ 13 million of cash on hand. New lender fees and costs totaling $ 14.6 million were incurred for this amendment and will be amortized over the life of the loans to interest expense. On March 31, 2023, the Company’s wholly-owned subsidiary entered into the First Amendment to the Amended and Restated Term Loan Credit Agreement pursuant to which the maturity date was extended to September 22, 2028. Lender fees and costs totaling $ 0.75 million were incurred for this amendment and will be amortized over the life of the loans to interest expense. Pursuant to the First Amendment to the Amended and Restated Term Loan Credit Agreement, the Company must comply with certain restrictive covenants, including a maximum Leverage Ratio . The maximum Leverage Ratio (calculated based on the ratio of Consolidated Total Debt to Consolidated EBITDA, each as defined in the Term Loan Credit Agreement) was 7.50 x through the first quarter of 2023; 7.25 x thereafter through the third quarter of 2023; 7.00 x thereafter through the first quarter of 2024; 6.75 x thereafter through the first quarter of 2025; 6.50 x thereafter through the first quarter of 2026; 6.25 x thereafter through the fourth quarter of 2026; and 6.00 x in the first quarter of 2027 and thereafter. The Company was in compliance with all financial covenants as of June 30, 2023 and December 31, 2022. Borrowings under the Term Loan bear the following applicable rates: interest rates are based on 6.00 % plus an alternate base rate and 7.00 % plus an adjusted eurocurrency rate for alternate base rate loans and eurocurrency loans, respectively. The applicable interest rates were 12.16 % and 10.67 % as of June 30, 2023 and December 31, 2022, respectively. Commencing with the fiscal year ending December 31, 2023, an excess cash flow payment that would reduce the principal balance of the Term Loan would have potentially been due 120 days following the end of each fiscal year. This excess cash flow payment was based on the Leverage Ratio (calculated based on the ratio of Consolidated Total Debt to Consolidated EBITDA, each as defined in the Term Loan Credit Agreement) at year end. Based on the calculated ratio, a payment percentage would have been applied to the excess cash flow to determine the amount, if any, due. The Term Loan Credit Agreement restricts certain of Kodiak’s wholly-owned subsidiaries’ ability to : incur additional indebtedness and guarantee indebtedness; pay dividends or make other distributions or repurchase or redeem equity interests; prepay, redeem or repurchase certain debt; issue certain preferred units or similar equity securities; make loans and investments; sell, transfer or otherwise dispose of assets; incur liens; enter into transactions with affiliates; enter into agreements restricting such restricted subsidiaries’ ability to pay dividends; enter into certain swap agreements; amend certain organizational documents; enter into sale and leaseback transactions; and consolidate, merge or sell all or substantially all of such subsidiaries’ assets. 1 1 Table of Contents As of June 30, 2023, the scheduled maturities, without consideration of potential mandatory prepayments, of the long-term debt were as follows ( in thousands ): Amount Years ended December 31, Remainder of 2023 $ — 2024 — 2025 — 2026 — 2027 — Thereafter 2,824,691 Total $ 2,824,691 On July 3, 2023, in connection with the IPO, a subsidiary of Kodiak entered into a Novation, Assignment, and Assumption Agreement with Kodiak Holdings, pursuant to which all of the Company’s remaining obligations under the Term Loan were assumed by Kodiak Holdings, and the Company’s obligations thereunder were terminated effective July 3, 2023. The Company is no longer a borrower or guarantor under, nor otherwise obligated with respect to the debt outstanding under the Term Loan. See Note 19 (“Subsequent Events”) for further details. Deferred Financing Costs There were unamortized debt issuance costs of $ 55.3 million and $ 34.2 million at June 30, 2023 and December 31, 2022, respectively, which are being amortized over the terms of the ABL Facility and Term Loan. Amortization expense related to these costs of $ 5.6 million and $ 11.1 million for the three and six months ended June 30, 2023, are included in interest expense in the accompanying condensed consolidated statements of operations. Amortization expense was $ 3.4 million and $ 5.2 million for the three and six months ended June 30, 2022. 10. Derivative Instruments The Company has entered into interest rate swaps exchanging variable interest rates for fixed interest rates and interest rate collars that fix interest rates within a range through the simultaneous purchase of an interest rate cap and sale of an interest rate floor. The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative or trading purposes. The Company’s cash flow is only impacted when the actual settlements under the derivative contracts result in the Company making a payment to or receiving a payment from the counterparty. Cash flows from all derivative activity for the periods presented appear in the operating section on the condensed consolidated statements of cash flows. As a result of the increase to the ABL Facility and Term Loan during the year ended 2022, the Company entered into an additional $ 975.0 million notional amounts of interest rate swaps to comply with hedging requirements set forth in the credit agreements. On June 29, 2023, the Company terminated all interest rate swaps and collars attributable to the Term Loan and recognized a realized gain of $ 25.8 million during the period ended June 30, 2023 (the “Term Loan Derivative Settlement”). 1 2 Table of Contents The table below summarizes information related to the notional amount and maturity dates for interest rate swaps at June 30, 2023: Notional Amount Maturities $ 125,000,000 12/4/2024 $ 225,000,000 12/5/2024 $ 200,000,000 6/14/2025 $ 125,000,000 12/6/2025 $ 175,000,000 6/14/2026 $ 125,000,000 6/22/2026 $ 125,000,000 12/6/2026 $ 75,000,000 5/18/2027 $ 100,000,000 5/19/2027 $ 200,000,000 5/19/2027 $ 125,000,000 12/6/2027 Of the total notional amount of $ 1.6 b i l l i o n , $ 0.4 b i llion is related to forward dated interest rate swaps with an effective date after June 30, 2023. The following tables set forth the Company’s assets that were measured at fair value on a recurring basis during the period, by level, within the fair value hierarchy and classification of the Company’s derivative instruments not designated as hedging instruments on the accompanying condensed consolidated balance sheets ( in thousands ): As on June 30, 2023 Level 1 Level 2 Level 3 Total Current assets: Interest rate swaps $ — $ — $ — $ — Total current assets $ — $ — $ — $ — Non-current assets: Interest rate swaps $ — $ 43,811 $ — $ 43,811 Total non-current assets $ — $ 43,811 $ — $ 43,811 Total $ — $ 43,811 $ — $ 43,811 As of December 31, 2022 Level 1 Level 2 Level 3 Total Current assets: Interest rate swaps $ — $ 823 $ — $ 823 Total current assets $ — $ 823 $ — $ 823 Non-current assets: Interest rate swaps $ — $ 48,955 $ — $ 48,955 Interest rate collars — 15,562 — 15,562 Total non-current assets $ — $ 64,517 $ — $ 64,517 Total $ — $ 65,340 $ — $ 65,340 1 3 Table of Contents The following table summarizes the effects of the Company’s derivative instruments in the condensed consolidated statements of operations ( in thousands ): Derivative Instruments Not Designated as Hedging Instrument Location of Gain (Loss) Recognized Three Months Ended June 30, 2023 2022 Interest rate swaps Unrealized (loss) gain on derivatives $ 8,863 $ ( 7,459 ) Interest rate collars Unrealized (loss) gain on derivatives ( 12,458 ) 4,073 Total unrealized loss on derivative ( 3,595 ) ( 3,386 ) Interest rate swaps Realized gain on derivatives 13,350 — Interest rate collars Realized gain on derivatives 12,485 — Total realized gain on derivatives 25,835 — Total $ 22,240 $ ( 3,386 ) Derivative Instruments Not Designated as Hedging Instrument Location of Gain (Loss) Recognized Six Months Ended June 30, 2023 2022 Interest rate swaps Unrealized (loss) gain on derivatives $ ( 5,967 ) $ 16,413 Interest rate collars Unrealized (loss) gain on derivatives ( 15,562 ) 16,409 Total unrealized (loss) gain on derivative ( 21,529 ) 32,822 Interest rate swaps Realized gain on derivatives 13,350 — Interest rate collars Realized gain on derivatives 12,485 — Total realized gain on derivatives 25,835 — Total $ 4,306 $ 32,822 The following table summarizes the effects of correcting the restatement in the condensed consolidated statement of operations for the period ended March 31, 2022, as disclosed in Note 2 – Basis of Presentation and Consolidation: Derivative Instruments Not Designated as Hedging Instrument Location of Gain Recognized Three Months Ended March 31, As Previously Reported Restatement Adjustments As Restated Interest rate swaps Unrealized gain on derivatives $ 4,371 $ 19,501 $ 23,872 Interest rate collars Unrealized gain on derivatives 3,467 8,869 12,336 Total $ 7,838 $ 28,370 $ 36,208 11. Fair Value Measurements The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, derivative instruments and long-term debt. The carrying amounts of cash and cash equivalents, accounts receivable, accrued liabilities, and accounts payable are representative of their respective fair values due to the short-term maturity of these instruments. The fair value of debt and contingent consideration are considered Level 3 measurements. These fair value measurements are based on unobservable inputs. The fair value of variable rate long-term debt is based upon the current market rates for debt with similar credit risk and maturity which approximates fair value. Debt includes the ABL Facility and the Term Loan and is shown net of unamortized debt issuance cost in the tables below. The contingent consideration liability is measured at fair value each reporting period and changes in estimates of fair value are recognized in earnings. The fair value estimate reflects the contractual terms of the purchase agreement (e.g., potential payment amounts, length of measurement periods, manner of calculating any amounts due) and utilizes assumptions with regard to future cash flows, probabilities of achieving such future cash flows and a discount rate. Depending on the contractual terms of the purchase agreement, the probability of achieving future cash flows generally represents the only significant unobservable input. There was no change in the fair value of contingent consideration during the three and six months ended June 30, 2023. See fair value tables below (in thousands): As on June 30, 2023 Level 1 Level 2 Level 3 Total Debt $ — $ — $ 2,769,355 $ 2,769,355 Contingent Consideration — — 3,700 3,700 Total $ — $ — $ 2,773,055 $ 2,773,055 As of December 31, 2022 Level 1 Level 2 Level 3 Total Debt $ — $ — $ 2,720,019 $ 2,720,019 Contingent Consideration — — 3,700 3,700 Total $ — $ — $ 2,723,719 $ 2,723,719 1 4 Table of Contents 12. Stockholders’ Equity Holders of the Company’s common stock are entitled to one vote for each share. As of June 30, 2023 and December 31, 2022, there were 59,000,000 shares of common stock issued and outstanding. Holders of common stock are entitled to receive, in the event of a liquidation, dissolution or winding up, ratably the assets available for distribution to the stockholders after payment of all liabilities. As stated in Note 19 (“Subsequent Events”), on July 3, 2023, 16,000,000 shares of common stock were issued and sold as part of the closing of the IPO and on July 13, 2023, the underwriters exercised in full their option to purchase an additional 2,400,000 shares of common stock. After giving effect to these transactions, Kodiak had 77,400,000 shares of common stock issued and outstanding. Class B and C Profits Interests Prior to the IPO, Kodiak Holdings issued incentive awards to certain employees of Kodiak Gas Services, LLC (a wholly-owned subsidiary of the Company) in the form of Class B incentive units (“Class B Units”). The Company records a stock-based compensation expense associated with the Class B Units because of the employment relationship of the grantees with Kodiak Gas Services, LLC. On March 6, 2019, 61,098.4 Class B Units were authorized under the Kodiak Holdings 2019 Class B Unit Incentive Plan for grants to certain employees and non-employee board members. These Class B Units are intended to constitute “profits interests” for federal income tax purposes, but constitute a substantive class of equity under GAAP. As of June 30, 2023 and December 31, 2022, there were 61,068.0 authorized Class B Units and 60,363.4 outstanding Class B Units, respectively. There were no Class B Units granted in the six months ended June 30, 2023 or 2022. Twenty-five percent ( 25 %) of the Class B Units are subject to time vesting (the “Time-Vesting Units”) and the remaining 75 % of the Class B Units are subject to performance-vesting (the “Performance-Vesting Units”). Time-Vesting Units vest in equal annual installments on each of the first five anniversaries of the applicable vesting commencement date, subject to the Class B Unit holder’s continuous service through the applicable vesting date. Performance-Vesting Units vest based on the achievement of certain investor return metrics, subject to the Class B Unit holder’s continuous service through the applicable vesting date. Holders of Class B Units are entitled to distributions on vested awards in accordance with the Kodiak Holdings distribution waterfall. Class B Units are not subject to any conversion rights other than an automatic conversion to Class C incentive units (“Class C Units”) in connection with certain terminations of employment. Each Class C Unit is eligible to receive distributions up to an amount equal to the fair market value of the corresponding converted Class B Unit on the date of conversion. As of June 30, 2023 no material conversions had occurred. There are no performance hurdles associated with the Time-Vesting Units. The fair value of each incentive award was estimated on its applicable grant date using an option pricing model. Stock compensation expense is recognized ratably over the vesting period of the awards. During the six months ended June 30, 2023 and 2022, approximately $ 0.9 million and $ 0.6 million, respectively, in stock compensation expense was recognized in selling, general and administrative expenses. As of June 30, 2023, there were 3,170.7 unvested Time-Vesting Units, representing $ 1.3 million in unrecognized stock compensation expense. 2023 Omnibus Incentive Plan On June 20, 2023, Kodiak’s board of directors authorized and adopted the Kodiak Gas Services, Inc. Omnibus Incentive Plan (the “Omnibus Plan”) for employees, consultants and directors. The Omnibus Plan enables Kodiak’s board of directors (or a committee authorized by Kodiak’s board of directors) to award incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, stock awards, dividend equivalents, other stock-based awards, cash awards and substitute awards intended to align the interests of service providers, including the Company’s named executive officers, with those of the Company’s stockholders. A total of 6,375,000 shares of common stock have been reserved for issuance pursuant to awards under the Omnibus Plan. 1 5 Table of Contents On June 29, 2023, Kodiak granted 1,297,188 shares of common stock to certain employees, including Kodiak’s named executive officers, pursuant to awards under the Omnibus Plan. 985,313 of the shares were granted pursuant to awards of time-based restricted stock units (“RSUs”) that vest ratably over a three-year period, subject to continuous service through each vesting date. 311,875 of the shares were granted pursuant to awards of performance stock units (“PSUs”) that cliff vest at the end of a three-year performance period, with the ultimate number of shares earned and issued ranging from 0 - 190 % of the number of shares subject to the PSU award, subject to continuous service through the end of the performance period. The following table summarizes award activity under the Omnibus Plan for the six-month period ending June 30, 2023: RSUs PSUs Number of RSUs Weighted- Average Price Number of PSUs Weighted- Average Price Outstanding at December 31, 2022 — — — — Granted 985,313 $ 16.00 311,875 $ 16.00 Vested or exercised — — — — Forfeited — — — — Outstanding at June 30, 2023 985,313 $ 16.00 311,875 $ 16.00 Restricted stock awards expected to vest 985,313 $ 16.00 311,875 $ 16.00 As of June 30, 2023, the total future compensation cost related to unvested equity awards was approximately $ 20.8 million assuming the performance-based restricted stock units vest at 100 % per the terms of the applicable award. 13. Commitments and Contingencies Purchase Commitments Purchase commitments of $ 129.2 million primarily consist of commitments to purchase compression units that are expected to be settled within the next twelve months. Contingent Consideration The Company agreed to pay, as contingent consideration, up to $ 3.7 million of certain past due accounts receivable acquired in connection with a prior acquisition, to the seller if collected. The Company records contingent consideration at the acquisition and end of reporting periods at fair value in accrued liabilities. As of June 30, 2023 and December 31, 2022, no ne of the outstanding receivables had been collected. Sales Tax Contingency Between October 2019 and April 2023, the Company received notices from the Texas Comptroller’s office in regards to audits for periods ranging from December 2015 through December 2022. The audits pertain to whether the Company may owe sales tax on certain of its compression equipment that it had purchased during that time period. As of December 31, 2022, the Company had accrued a total amount of $ 27.8 million for this contingent liability. During the six months ended June 30, 2023, based on current information the Company accrued an additional $ 0.6 million and as of June 30, 2023, the Company had accrued a total of $ 28.4 million for this contingent liability. Legal Matters From time to time, the Company may become involved in various legal matters. Management believes that there are no legal matters as of June 30, 2023 whose resolution could have a material adverse effect on the unaudited condensed consolidated financial statements. 1 6 Table of Contents 14. Prepaid Expenses and Other Current Assets The prepaid expenses and other current assets consis t of the following ( in thousands ): As of June 30, 2023 As of December 31, 2022 Prepaid insurance $ 6,047 $ 3,997 Prepaid rent 799 589 Deferred IPO issuance costs 8,462 3,047 Other 4,893 1,887 Total prepaid expenses and other current assets $ 20,201 $ 9,520 15. Accrued Liabilities Accrued liabilities consist of the following ( in thousands ): As of June 30, 2023 As of December 31, 2022 Sales tax liability $ 28,406 $ 27,820 Accrued interest 7,678 16,347 Accrued bonus 9,034 7,764 Accrued taxes 10,534 9,667 Accrued payroll 2,674 2,744 Accrued legal fee 4,183 1,906 Lease liabilities - current portion 4,853 3,090 Contingent consideration 3,673 3,673 Accrued accounts payable 13,549 14,080 Accrued insurance 710 2,231 Other 3,146 4,551 Total accrued liabilities $ 88,440 $ 93,873 16. Income Taxes For the three and six months ended June 30, 2023, the Company recorded income tax expense of $ 5.9 million and $ 1.9 million, respectively. Income tax expense for the three and six months ended June 30, 2022 was $ 2.8 million and $ 18.2 million, respectively. The effective tax rate was approximately 25.0 % and 26.5 % for the three and six months ended June 30, 2023, compared to 23.8 % and 23.7 % for the three and six months ended June 30, 2022. The difference between the Company’s effective tax rates for the three and six months ended June 30, 2023 and 2022 and the U.S. statutory tax rate of 21 % was primarily due to state income taxes. In August 2022, the U.S. Inflation Reduction Act of 2022 and the CHIPS and Science Act of 2022 were signed into law. These acts include, among other provisions, a corporate alternative minimum tax of 15 %, an excise tax on the repurchase of corporate stock, various climate and energy provisions, and incentives for investment in semiconductor manufacturing. These provisions are not expected to have a material impact on the Company’s results of operations or financial position. The Company did no t have any uncertain tax benefits as of June 30, 2023 and December 31, 2022. For the three and six months ended June 30, 2023 and 2022, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the condensed consolidated statement of operations. 1 7 Table of Contents 17. Defined Contribution Plan The Company maintains a defined contribution savings plan for its employees. The Company contributed $ 0.8 million and $ 1.6 million to the plan for the three and six months ended June 30, 2023, respectively. The Company contributed $ 0.7 million and $ 1.4 million to the plan for the three and six months ended June 30, 2022, respectively. 18. Segments The Company manages its business through two operating segments: Compression Operations and Other Services. Compression Operations consists of operating Company-owned and customer-owned compression infrastructure for its customers, pursuant to fixed-revenue contracts to enable the production, gathering and transportation of natural gas and oil. Other Services consists of a full range of contract services to support the needs of customers, including station construction, maintenance and overhaul, and other ancillary time and material based offerings. The Company evaluates performance and allocates resources based on the gross margin of each segment, which includes revenues directly attributable to the specific segment and all costs of service directly attributable to the specific segment, which includes cost of operations and depreciation and amortization. Depreciation and amortization for the Compression Operations segment was $ 90.3 million and $ 85.8 million for the six months ended June 30, 2023 and 2022, respectively. Revenue includes only sales to external customers. The following table represents financial metrics by segment ( in thousands ): Compression Operations Other Services Total Three Months Ended June 30, 2023 Revenue $ 181,619 $ 21,687 $ 203,306 Gross margin 71,172 3,588 74,760 Total assets 3,219,556 41,807 3,261,363 Capital expenditures 45,453 — 45,453 Three Months Ended June 30, 2022 Revenue $ 162,808 $ 14,343 $ 177,151 Gross margin 61,075 2,569 63,644 Total assets 3,051,426 17,743 3,069,169 Capital expenditures 74,129 — 74,129 Compression Operations Other Services Total Six Months Ended June 30, 2023 Revenue $ 359,316 $ 34,102 $ 393,418 Gross margin 141,202 7,015 148,217 Total assets 3,219,556 41,807 3,261,363 Capital expenditures 94,034 — 94,034 Six Months Ended June 30, 2022 Revenue $ 320,303 $ 25,189 $ 345,492 Gross margin 123,228 4,588 127,816 Total assets 3,051,426 17,743 3,069,169 Capital expenditures 145,952 — 145,952 1 8 Table of Contents The following table reconciles total gross margin to income before income taxes ( in thousands ): Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Total gross margin $ 74,760 $ 63,644 $ 148,217 $ 127,816 Selling, general and administrative expenses ( 13,438 ) ( 11,740 ) ( 26,523 ) ( 21,570 ) Gain on sale of fixed assets 738 — 721 7 Interest expense, net ( 60,964 ) ( 36,829 ) ( 119,687 ) ( 62,469 ) Realized gain on derivatives 25,835 — 25,835 — Unrealized (loss) gain on derivatives ( 3,595 ) ( 3,386 ) ( 21,529 ) 32,822 Other (expense) income 32 ( 7 ) 1 9 Income before income taxes $ 23,368 $ 11,682 $ 7,035 $ 76,615 19. Subsequent Events The following events occurred subsequent to the date the condensed financial statements were available to be issued: On July 3, 2023, the Company issued and sold 16,000,000 shares of common stock as part of the closing of the IPO, resulting in net proceeds of approximately $ 231.4 million, after deducting expenses and underwriting discounts and commissions payable by us. The Company subsequently used the net proceeds, together with the proceeds resulting from the Term Loan Derivative Settlement and borrowings under the ABL Facility, to repay $ 300 million of borrowings outstanding under the Term Loan. Additionally, a subsidiary of Kodiak entered into a Novation, Assignment, and Assumption Agreement with Kodiak Holdings, pursuant to which all of the Company’s remaining obligations under the Term Loan were assumed by Kodiak Holdings, and the Company’s obligations thereunder were terminated. The Company is no longer a borrower or guarantor under, nor otherwise obligated with respect to the debt outstanding under the Term Loan. On July 1 3 , 2023, the underwriters exercised in full their option to purchase additional shares of common stock pursuant to the Underwriting Agreement relating to the IPO. On July 13, 2023, the Company issued and sold an additional 2,400,000 shares of common stock at a price to the public of $ 16.00 per share. The Company received net proceeds of approximately $ 36.2 million, after deducting underwriting discounts and commissions payable. The net proceeds were used for repayment of existing indebtedness and general corporate purposes. 19 Table of Contents