What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-09 compared with 2023-08-10 · 307 added, 322 removed, 343 unchanged (65% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

As of June 30,

As of September 30,

2023 As of December 31,

8 unchanged sentences

Property, plant and equipment, net 2,511,110 2,488,682

Operating lease right-of-use

Operating lease right-of-use assets, net 33,453 9,827

Goodwill 305,553 305,553

Identifiable intangible assets, net 125,257 132,362

Fair value of derivative instruments 51,790 64,517

Other assets 607 564

Total assets $ 3,244,240 $ 3,205,540

Liabilities and Stockholders’ Equity

12 unchanged sentences

Common stock, par value $ 0.01 per share;

750,000,000 shares of common stock authorized, 59,000,000

of common stock issued and outstanding as of June 30, 2023 and December 31, 2022

Additional paid-in

750,000,000 shares of common stock authorized, 77,400,000 and 59,000,000 shares of common stock issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 956,465 33,189

Retained earnings 214,553 195,314

5 unchanged sentences

(in thousands, except share and per share data)

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Compression O

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Compression Operations $ 186,673 $ 163,662 $ 545,989 $ 483,965

Other Services 44,310 18,983 78,412 44,172

Total revenues 230,983 182,645 624,401 528,137

1 unchanged sentence

Cost of operations (exclusive of depreciation and amortization shown below):

Compression O

Compression Operations 65,470 55,872 193,257 167,145

Other Services 38,820 14,037 65,907 34,638

Depreciation and amortization 46,087 44,111 136,414 129,913

Selling, general and administrative expenses 19,648 11,190 46,171 32,760

Gain on sale of fixed assets

Gain on sale of capital assets — ( 818 ) ( 721 ) ( 825 )

Total operating expenses 170,025 124,392 441,028 363,631

2 unchanged sentences

Interest expense, net ( 39,710 ) ( 49,859 ) ( 182,030 ) ( 104,616 )

Realized gain on derivatives

Unrealized (loss) gain on derivatives

Loss on extinguishment of debt ( 6,757 ) — ( 6,757 ) —

Gain on derivatives 15,141 51,862 42,080 76,972

Other income (expense) 38 ( 19 ) 39 ( 10 )

Total other expenses

Total other income (expenses) ( 31,288 ) 1,984 ( 146,668 ) ( 27,654 )

Income before income taxes 29,670 60,237 36,705 136,852

Income tax expense 7,904 14,337 9,765 32,496

Earnings per share:

Net income $ 21,766 $ 45,900 $ 26,940 $ 104,356

Basic and diluted earnings per share

Weighted-average shares outstanding - basic and diluted

Basic net earnings per share $ 0.28 $ 0.78 $ 0.41 $ 1.77

Diluted net earnings per share $ 0.28 $ 0.78 $ 0.41 $ 1.77

Basic weighted average shares of common stock outstanding 76,731,868 59,000,000 64,954,244 59,000,000

Diluted weighted average shares of common stock outstanding 76,899,483 59,000,000 65,121,859 59,000,000

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except share data)

Additional Paid-In

Shares Amount Additional Paid-In

Capital Retained

Earnings Total

Stockholders’

Balance, January 1, 2022 59,000,000 $ 590 $ 871,403 $ 88,078 $ 960,071

Equity compensation

Equity compensation - profits interests — — ( 136 ) 619 483

Net income, as restated — — — 49,555 49,555

Balance, March 31, 202

2, as restated

Balance, March 31, 2022, 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

Net income — — — 45,900 45,900

Balance, September 30, 2022 59,000,000 $ 590 $ 33,267 $ 193,053 $ 226,910

Balance, January 1, 2023 59,000,000 $ 590 $ 33,189 $ 195,314 $ 229,093

Equity compensation

Equity compensation - profits interests — — ( 193 ) 879 686

Net loss — — — ( 12,343 ) ( 12,343 )

Balance, March 31, 2023 59,000,000 $ 590 $ 32,996 $ 183,850 $ 217,436

Equity compensation - profits interests — — 193 29 222

Distribution to parent — — ( 33,189 ) ( 9,111 ) ( 42,300 )

Equity compensation

Net income — — — 17,517 17,517

Balance, June 30, 2023 59,000,000 $ 590 $ — $ 192,285 $ 192,875

Proceeds from initial public offering, net of underwriter discount 18,400,000 184 277,656 — 277,840

Offering costs — — ( 10,823 ) — ( 10,823 )

Debt novation — — 687,590 — 687,590

Equity compensation - profits interests — — — 502 502

Equity compensation - Omnibus Plan — — 2,042 — 2,042

Net income — — — 21,766 21,766

Balance, September 30, 2023 77,400,000 $ 774 $ 956,465 $ 214,553 $ 1,171,792

See accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

For the Six Months

Ended June 30,

For the Nine Months Ended

September 30,

Cash flows from operating activities:

Net income $ 26,940 $ 104,356

Adjustments to reconcile net income to net cash provided by operating activities:

2 unchanged sentences

Amortization of debt issuance costs 11,260 9,453

lease expense

Non-cash lease expense 3,132 2,066

Provision for credit losses 2,047 85

Inventory reserve 375 375

Gain on sale of fixed assets

Unrealized loss (gain) on derivatives

Gain on sale of capital assets ( 721 ) ( 825 )

Change in fair value of derivatives 13,551 ( 86,676 )

Deferred tax provision 6,312 26,807

Loss on extinguishment of debt 4,359 —

Changes in operating assets and liabilities:

Accounts receivable, net

Accounts receivable ( 21,371 ) 5,048

Inventories 1,174 ( 9,904 )

Contract assets ( 6,053 ) ( 8,111 )

7 unchanged sentences

Proceeds from sale of capital assets 1,055 8,023

Investment in fund

Other ( 45 ) ( 86 )

Net cash used in investing activities ( 144,563 ) ( 191,770 )

3 unchanged sentences

Payment of debt issuance cost ( 32,759 ) ( 27,819 )

Distributions to parent

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents

Proceeds from initial public offering, net of underwriter discounts 277,840 —

Offering costs ( 9,247 ) —

Loss on extinguishment of debt ( 1,835 ) —

Distribution to parent ( 42,300 ) ( 838,000 )

Net cash used in financing activities ( 73,439 ) ( 2,543 )

Net decrease in cash and cash equivalents ( 14,303 ) ( 7,459 )

Cash and cash equivalents - beginning of period 20,431 28,795

3 unchanged sentences

Cash paid for taxes $ 5,946 $ 1,836

Supplemental disclosure of non-cash

investing activities:

Change in accrued capital expenditures

Supplemental disclosure of non-cash investing activities:

(Increase) decrease in accrued capital expenditures $ ( 6,498 ) $ 8,773

Supplemental disclosure of non-cash financing activities:

Non-cash debt novation $ ( 689,829 ) $ —

Non-cash loss on extinguishment of debt

$ ( 563 ) $ —

Non-cash offering costs $ ( 792 ) $ —

See accompanying notes to the unaudited condensed consolidated financial statements.

4 unchanged sentences

(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 February 8, 2019, Kodiak was acquired by entities affiliated with EQT AB (publ).

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 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 fixed-revenue contracts with upstream and midstream customers.

The Company manages its business through two operating segments:

3 unchanged sentences

See Note 18 (“Segments”).

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.

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.

1 unchanged sentence

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

750,000,000 .

As a result of the Stock Split,

shares of common stock were outstanding.

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 increased 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.

On June 28, 2023, Kodiak’s Registration Statement on Form S-1

relating to the IPO was declared effective by the U.S.

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.

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 $ 230.8 million, after deducting expenses and underwriting discounts and commissions payable by the Company.

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 (referred to herein as the “overallotment”).

The Company received net proceeds of approximately $ 36.2 million, after deducting underwriting discounts.

The net proceeds were used for repayment of existing indebtedness, as described further in Note 9 (“Debt and Credit Facilities”), and general corporate purposes.

After giving effect to these transactions, Kodiak had 77,400,000 shares of common stock issued and outstanding.

Basis of Presentation and Consolidation

4 unchanged sentences

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.

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.

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

Unrealized gain on derivatives

Income Tax Expense

Basic and diluted earnings per share

Unaudited Condensed Consolidated Statement of Shareholders’ Equity

As of March 31, 2022

As Previously

Retained Earnings

Total stockholder’s equity

Unaudited Condensed Consolidated Statement of Cash Flows

For the three months ended March 31, 2022

As Previously

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Unrealized loss (gain) on derivatives

Deferred tax provision

Changes in Operating assets and liabilities

Prepaid Expenses and other current assets

Accrued and other liabilities

Net cash provided by operating activities

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.

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.

The adoption of this amendment did not have a material impact on the Company’s consolidated financial statements.

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,

Three Months Ended September 30,

Services provided over time:

Compression O

Compression Operations $ 184,959 $ 162,063

Other Services 41,268 16,987

Total services provided over time 226,227 179,050

Services provided or goods transferred at a point in time:

Compression O

Compression Operations 1,714 1,599

Other Services 3,042 1,996

Total services provided or goods transferred at a point in time 4,756 3,595

Total revenue $ 230,983 $ 182,645

Six Months Ended June 30,

Nine Months Ended September 30,

Services provided over time:

Compression O

Compression Operations $ 539,576 $ 477,430

Other Services 69,543 39,757

Total services provided over time 609,119 517,187

Services provided or goods transferred at a point in time:

Compression O

Compression Operations 6,413 6,535

Other Services 8,869 4,415

Total services provided or goods transferred at a point in time 15,282 10,950

3 unchanged sentences

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.

Compression Operations for Company-owned, as well as customer-owned, compressors are generally satisfied over time as services are rendered based upon specific performance criteria identified in the applicable contract.

The service performed is substantially the same during each period of the contract, and revenues are therefore recognized on a straight-line, time-based method over the contract term as the customer simultaneously receives and consumes the benefits provided by the service.

If variable consideration exists, it is allocated to the distinct monthly service within the series to which such variable consideration relates.

4 unchanged sentences

There are typically no material obligations for returns, refunds, or warranties.

The Company’s standard contracts do not usually include non-cash

consideration.

The Company’s standard contracts do not usually include non-cash consideration.

Other Services

10 unchanged sentences

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.

As revenue is recognized when time passes, this revenue is recognized at the point in time when the service is rendered.

Contract Assets and Liabilities

1 unchanged sentence

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 had contract assets of $ 9.6 million and $ 3.6 million as of September 30, 2023, and December 31, 2022, respectively.

There was no contract asset balance as of January 1, 2022.

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

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.

The Company’s contract liabilities were $ 71.9 million as of September 30, 2023.

As of January 1, 2023 and 2022, the beginning balances for contract liabilities were $ 57.1 million and $ 51.2 million, respectively, all of which was recognized as revenue in the nine months ended September 30, 2023 and 2022, respectively.

No revenue was recognized from beginning balances in the three months ended September 30, 2023 and 2022.

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.

As of September 30, 2023, the aggregate amount of transaction price allocated to unsatisfied performance 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) :

2023 2024 2025 2026 2027 and

thereafter Total

Remaining performance obligations $ 162,915 $ 504,092 $ 241,526 $ 101,568 $ 54,906 $ 1,065,007

1 unchanged sentence

Accounts receivable, net consist of the following ( in thousands ):

As of June 30,

As of September 30,

2023 As of December 31,

2022 As of December 31,

Accounts receivable $ 119,869 $ 98,500 $ 81,708

1 unchanged sentence

Accounts receivable, net $ 116,875 $ 97,551 $ 80,749

For the three and nine months ended September 30, 2023, the Company recorded a $ 2.0 million increase in allowance for credit losses related to expected credit losses from a customer in bankruptcy experiencing financial distress.

For the three and nine months ended September 30, 2022, the Company had immaterial movements related to direct write-downs charged against the allowance for credit losses.

Inventories, net

Inventories consist of the following ( in thousands ):

As of June 30,

As of September 30,

2023 As of December 31,

Non-serialized

Non-serialized parts $ 59,093 $ 61,082

Serialized parts 11,513 11,073

2 unchanged sentences

Property, plant and equipment, net consist of the following ( in thousands ):

As of June 30,

As of September 30,

2023 As of December 31,

6 unchanged sentences

Furniture and fixtures 1,570 1,519

Capital lease

Finance lease 530 981

Total property and equipment, gross 3,161,273 3,010,575

1 unchanged sentence

Property, plant and equipment, net $ 2,511,110 $ 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.

Depreciation expense was $ 43.7 million and $ 129.3 million for the three and nine months ended September 30, 2023, respectively, and is recorded within depreciation and amortization on the accompanying condensed consolidated statements of operations.

Depreciation expense was $ 41.7 million and $ 122.8 million for the three and nine months ended September 30, 2022, respectively.

Goodwill and Identifiable Intangible Assets, net

There were no changes in the carrying amount of goodwill during the six months ended June 30, 2023.

There were no changes in the carrying amount of goodwill during the nine months ended September 30, 2023.

All of the goodwill was allocated to the Company’s Compression Operations reporting unit.

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

Remaining Weighted

The Company’s identifiable intangible assets consist of the following as of September 30, 2023 and December 31, 2022 ( in thousands ):

As of September 30, 2023

Original Cost Accumulated

Net Amount Remaining Weighted

Average Amortization

Period (years)

Trade name $ 13,000 $ ( 3,018 ) $ 9,982 15.4

Customer relationships 150,000 ( 34,725 ) 115,275 13.1

1 unchanged sentence

As of December 31, 2022

Original Cost

Remaining Weighted

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

Amortization expense was $ 2.4 million and $ 7.1 million for each of the three and nine months ended September 30, 2023 and 2022 and is recorded within depreciation and amortization on the condensed consolidated statements of operations.

As of September 30, 2023, the following is a summary of future minimum amortization expense for identified intangible assets ( in thousands ):

Years ending December 31,

Remainder of 2023 $ 2,368

Thereafter 84,993

Total $ 125,257

Long-Lived and Other Asset Impairment

3 unchanged sentences

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.

No impairment was recorded nor triggering events were identified for the three and nine month periods ended September 30, 2023 and 2022.

Debt and Credit Facilities

Debt consists of the following (in thousands) :

As of June 30,

As of September 30,

2023 As of December 31,

ABL Facility $ 1,789,086 $ 1,754,224

Term Loan — 1,000,000

Total debt outstanding 1,789,086 2,754,224

1 unchanged sentence

Long-term debt, net of unamortized debt issuance cost $ 1,747,912 $ 2,720,019

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.

, 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.

As of January 1, 2022, a wholly-owned subsidiary of Kodiak had a revolving asset-based 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 parent 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 $ 1.9 billion to $ 2.1 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 loan 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.

The total facility size was increased from $ 2.1 billion to $ 2.2 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 loan 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.

The remaining unamortized debt issuance costs of $ 1.2 million associated with the exiting lenders was written-off in interest expense, net in the period.

On May 31, 2023, the ABL Credit Agreement was amended to, among other things, permit distributions of overallotment proceeds from the IPO and revise the terms related to the payment and prepayment of the Term Loan.

On June 27, 2023, the ABL Credit Agreement was further amended to remove the ability to make distributions related to overallotment proceeds from the IPO and to instead require prepayment of the obligations upon the issuance of any equity interests by Kodiak pursuant to the overallotment in the IPO.

In connection with the IPO, the Company became a borrower under the ABL Facility.

As of September 30, 2023, there was $ 14.7 million letters of credit outstanding under the ABL Facility.

Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum interest coverage ratio of 2.5 x and a maximum Leverage Ratio (calculated based on the ratio of Consolidated Total Debt to Consolidated EBITDA, each as defined in the ABL Credit Agreement).

The maximum Leverage Ratio is (i) 5.25 to 1.00 for the fiscal quarters ending September 30, 2023 and December 31, 2023, (ii) 5.00 to 1.00 for the fiscal quarter ending March 31, 2024, (iii) 4.75 to 1.00 for the fiscal quarter ending June 30, 2024 and (iv) 4.50 to 1.00 for each fiscal quarter ending on or after September 30, 2024.

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 Company was in compliance with all covenants as of September 30, 2023 and December 31, 2022.

The ABL Credit Agreement also restricts the Company’s ability to:

11 unchanged sentences

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 %).

The applicable interest rates as of September 30, 2023 were 10.25 % (prime rate plus 2.00 %) and 8.34 % (Term SOFR rate plus 0.10 % plus 2.75 %).

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 %).

We pay an annualized commitment fee of 0.25 % on the unused portion of our ABL Facility if borrowings are greater than 50 % of total commitments and 0.50 % on the unused portion on the ABL Facility if borrowings are less than 50 % of total commitments.

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.

One such event occurs when availability under the ABL Credit Agreement falls below a specified threshold (i.e., the greater of $ 200 million or 10 % of the aggregate commitments at the time of measurement).

As of September 30, 2023 and December 31, 2022, availability under the ABL Facility was in excess of the specified threshold and as such the entire balance was classified as long-term in accordance with its maturity.

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.

In May 2022, the Company completed a recapitalization and distribution of $ 838 million to the parent 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 loan 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;

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.

As of June 30, 2023, the scheduled maturities, without consideration of potential mandatory prepayments, of the long-term debt were as follows ( in thousands

Lender fees and costs totaling $ 0.75 million were incurred for this amendment and were amortized over the life of the loan to interest expense.

On June 29, 2023, the Company terminated all interest rate swaps and collars attributable to the Term Loan and recognized a gain on derivatives and received cash of $ 25.8 million during the period ended June 30, 2023 (the “Term Loan Derivative Settlement”).

On July 3, 2023, in connection with the IPO, the Company used the net proceeds from the IPO, 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 ("Novation 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.

As part of the $ 300 million repayment of the Term Loan, unamortized debt issuance costs of $ 4.4 million and fees of $ 2.4 million were recorded to loss on extinguishment for the three and nine months ended September 30, 2023.

The carrying value of the term debt novated under the Novation Agreement of $ 689.8 million (comprised of $ 700.0 million of principal balance less $ 10.2 million of unamortized debt issuance costs) was considered an equity transaction with the Parent and recorded to additional paid-in capital in the statement of stockholder's equity.

As of September 30, 2023, the scheduled maturities, without consideration of potential mandatory prepayments, of the long-term debt were as follows ( in thousands ):

Years ended December 31,

Remainder of 2023 $ —

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.

Thereafter 1,789,086

Total $ 1,789,086

Debt Issuance Costs

Debt issuance costs of $ 41.2 million, as of September 30, 2023, are being amortized over the term of the ABL Facility.

As of December 31, 2022, $ 34.2 million were being amortized over the terms of the ABL Facility and Term Loan.

Amortization expense related to these costs of $ 0.2 million and $ 11.3 million for the three and nine months ended September 30, 2023, are included in interest expense in the accompanying condensed consolidated statements of operations.

Amortization expense was $ 4.3 million and $ 9.5 million for the three and nine months ended September 30, 2022.

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 entered into interest rate swaps exchanging variable interest rates for fixed interest rates and in prior periods, entered into 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”).

The table below summarizes information related to the notional amount and maturity dates for interest rate swaps at June 30, 2023:

Notional Amount

The Company’s derivative instruments are recognized on the unaudited condensed consolidated balance sheets at fair value and classified as current or long-term depending on the maturity date of the derivative instrument and whether the net carrying value is in a net asset or net liability position.

Realized and unrealized gains and losses associated with the derivative instruments are recognized in gain on derivative instrument within the unaudited condensed consolidated statements of operations.

On June 29, 2023, the Company terminated $ 750.0 million of notional amounts related to interest rate swaps and collars attributable to the Term Loan and recognized a gain on derivatives of $ 25.8 million during the nine months ended September 30, 2023.

The table below summarizes information related to the notional amount and maturity dates for interest rate swaps at September 30, 2023:

Notional Amount Maturities

$ 125,000,000 12/4/2024

8 unchanged sentences

$ 200,000,000 5/19/2027

Of the total notional amount of $ 1.6 b

is related to forward dated interest rate swaps with an effective date after June 30, 2023.

$ 125,000,000 12/6/2027

Of the total notional amount of $ 1.6 billion, $ 375 million is related to forward dated interest rate swaps with an effective date after September 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

As of September 30, 2023

Level 1 Level 2 Level 3 Total

Current assets:

1 unchanged sentence

Total current assets $ — $ — $ — $ —

Non-current assets:

Interest rate swaps $ — $ 51,790 $ — $ 51,790

Total non-current

Total non-current assets $ — $ 51,790 $ — $ 51,790

Total $ — $ 51,790 $ — $ 51,790

As of December 31, 2022

Level 1 Level 2 Level 3 Total

Current assets:

1 unchanged sentence

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

Total non-current assets $ — $ 64,517 $ — $ 64,517

Total $ — $ 65,340 $ — $ 65,340

The following table summarizes the effects of the Company’s derivative instruments in the condensed consolidated statements of operations ( in thousands ):

1 unchanged sentence

Designated as

Hedging Instrument

Location of Gain (Loss) Recognized

Three Months Ended June 30,

Interest rate swaps

Unrealized (loss) gain on derivatives

Interest rate collars

Unrealized (loss) gain on derivatives

Total unrealized loss on derivative

Interest rate swaps

Realized gain on derivatives

Interest rate collars

Realized gain on derivatives

Total realized gain on derivatives

Derivative Instruments Not

Designated as

Hedging Instrument

Location of Gain (Loss) Recognized

Six Months Ended June 30,

Interest rate swaps

Unrealized (loss) gain on derivatives

Interest rate collars

Unrealized (loss) gain on derivatives

Total unrealized (loss) gain on derivative

Interest rate swaps

Realized gain on derivatives

Interest rate collars

Realized gain on derivatives

Total realized gain on derivatives

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:

Hedging Instrument Location of Gain Recognized Three Months Ended September 30,

Interest rate swaps Gain on derivatives $ 15,141 $ 44,809

Interest rate collars Gain on derivatives — 7,053

Total gain on derivative $ 15,141 $ 51,862

Derivative Instruments Not

Designated as

Hedging Instrument

Location of Gain Recognized

Three Months Ended March 31,

As Previously

Interest rate swaps

Unrealized gain on derivatives

Interest rate collars

Unrealized gain on derivatives

Hedging Instrument Location of Gain (Loss) Recognized Nine Months Ended September 30,

Interest rate swaps Gain on derivatives $ 42,649 $ 54,796

Interest rate collars Gain (loss) on derivatives ( 569 ) 22,176

Total gain on derivative $ 42,080 $ 76,972

We record derivative instruments at fair value using level 2 inputs of the fair value hierarchy.

The interest rate swaps and interest rate collars are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs from actively quoted public markets.

including interest rate curves and credit spreads.

Fair Value Measurements

1 unchanged sentence

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.

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.

Debt includes the ABL Facility 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.

1 unchanged sentence

Depending on the contractual terms of the purchase agreement, the probability of achieving future cash flows generally represents the only significant unobservable input.

no change in the fair value of contingent consideration during the three and six months ended June 30, 2023.

There was no change in the fair value of contingent consideration during the three and nine months ended September 30, 2023.

See fair value tables below ( in thousands ):

As on June 30, 2023

As on September 30, 2023

Level 1 Level 2 Level 3 Total

Debt $ — $ — $ 1,747,912 $ 1,747,912

Contingent Consideration — — 3,673 3,673

Total $ — $ — $ 1,751,585 $ 1,751,585

As of December 31, 2022

Level 1 Level 2 Level 3 Total

Debt $ — $ — $ 2,720,019 $ 2,720,019

Contingent Consideration — — 3,673 3,673

Total $ — $ — $ 2,723,692 $ 2,723,692

Stockholders’ Equity

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 the Company’s common stock are entitled to one vote for each share.

As of September 30, 2023 and December 31, 2022, there were 77,400,000 and 59,000,000 shares of common stock issued and outstanding, respectively.

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.

On July 3, 2023, 16,000,000 shares of common stock were issued and sold as part of the closing of the IPO, resulting in net proceeds of $ 230.8 million, after deducting expenses and underwriting discounts and commissions payable by us.

On July 13, 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.

After giving effect to these transactions, Kodiak had 77,400,000 shares of common stock issued and outstanding.

1 unchanged sentence

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.

The Company records 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”).

As of September 30, 2023 , there were 60,406.9 authorized Class B Units and 57,058.5 were outstanding.

As of December 31, 2022, there were 61,068.0 authorized Class B Units and 60,363.4 were outstanding.

There were no Class B Units granted in the nine months ended September 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.

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.

As of September 30, 2023 no material conversions had occurred.

There are no performance hurdles associated with the Time-Vesting Units.

1 unchanged sentence

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.

During the nine months ended September 30, 2023 and 2022, approximately $ 1.4 million and $ 0.6 million, respectively, in stock compensation expense was recognized in selling, general and administrative expenses.

As of September 30, 2023, there were 3,079.1 unvested Time-Vesting Units, representing $ 0.5 million in unrecognized stock compensation expense.

2023 Omnibus Incentive Plan

1 unchanged sentence

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.

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.

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.

On June 29, 2023, Kodiak granted 1,297,188 shares of common stock equity awards 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.

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:

Average Price

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 nine-month period ending September 30, 2023:

RSUs Weighted-Average Price Number of

PSUs Weighted-Average Price

Outstanding at December 31, 2022 — — — —

Granted 985,313 $ 16.00 311,875 $ 16.99

Vested or exercised — — — —

Outstanding at June 30, 2023

Forfeited ( 20,679 ) — — —

Outstanding at September 30, 2023 964,634 $ 16.00 311,875 $ 16.99

Restricted stock awards expected to vest 964,634 $ 16.00 311,875 $ 16.99

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.

As of September 30, 2023, the total future compensation cost related to non-vested equity awards was approximately $ 18.7 million assuming the performance-based restricted stock units vest at 100 % per the terms of the applicable award.

During the three and nine months ended September 30, 2023, approximately $ 2.0 million in stock compensation expense was recognized in selling, general and administrative expenses.

There was no such expense recorded for the three and nine months ended September 30, 2022.

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.

Purchase commitments primarily consist of future commitments to purchase new compression units ordered but not received.

The commitments as of September 30, 2023, were $ 215.7 million, of which $ 182.9 million is 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 agreed to pay, as contingent consideration, up to $ 3.7 million of certain past due accounts receivable acquired in connection with a prior acquisition in 2019, if collected, to the seller.

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.

As of September 30, 2023 and December 31, 2022, none of the outstanding receivables had been collected.

Sales Tax Contingency

2 unchanged sentences

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.

During the nine months ended September 30, 2023, based on current information the Company accrued an additional $ 0.9 million and as of September 30, 2023, the Company had accrued a total of $ 28.7 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.

Management believes that there are no legal matters as of September 30, 2023 whose resolution could have a material adverse effect on the unaudited condensed consolidated financial statements.

Prepaid Expenses and Other Current Assets

The prepaid expenses and other current assets consis t

of the following ( in thousands

June 30, 2023

P repaid expenses and other current assets consist of the following ( in thousands ):

September 30, 2023 As of

December 31, 2022

Prepaid insurance $ 3,733 $ 3,997

Prepaid rent 799 589

Deferred IPO issuance costs — 3,047

Deferred project costs 3,538 —

Interest rate swap receivable 1,559 —

Other 3,624 1,887

Total prepaid expenses and other current assets $ 13,253 $ 9,520

1 unchanged sentence

Accrued liabilities consist of the following ( in thousands ):

June 30, 2023

September 30, 2023 As of

December 31, 2022

Sales tax liability $ 28,688 $ 27,820

8 unchanged sentences

Accrued insurance 109 2,231

Station construction accrual 12,361 —

Other 1,233 4,551

Total accrued liabilities $ 102,448 $ 93,873

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.

For the three and nine months ended September 30, 2023, the Company recorded income tax expense of $ 7.9 million and $ 9.8 million, respectively.

Income tax expense for the three and nine months ended September 30, 2022 was $ 14.3 million and $ 32.5 million, respectively.

The effective tax rate was approximately 26.6 % and 26.6 % for the three and nine months ended September 30, 2023, compared to 23.8 % and 23.7 % for the three and nine months ended September 30, 2022.

The difference between the Company’s effective tax rates for the three and nine months ended September 30, 2023 and 2022 and the U.S.

statutory tax rate of 21% was primarily due to state income taxes.

3 unchanged sentences

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.

The Company did not have any uncertain tax benefits as of September 30, 2023 and December 31, 2022.

For the three and nine months ended September 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.

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.

The Company contributed $ 0.7 million and $ 2.3 million to the plan for the three and nine months ended September 30, 2023, respectively.

The Company contributed $ 0.7 million and $ 2.1 million to the plan for the three and nine months ended September 30, 2022, respectively.

The Company manages its business through two operating segments:

3 unchanged sentences

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.

Depreciation and amortization for the Compression Operations segment was $ 46.1 million and $ 136.4 million for the three and nine months ended September 30, 2023

respectively.

Depreciation and amortization for the Compression Operations segment was $ 44.1 million and $ 129.9 million for the three and nine months ended September 30, 2022 respectively.

Revenue includes only sales to external customers.

The following table represents financial metrics by segment ( in thousands ):

Three Months Ended June 30, 2023

Operations Other

Services Total

Three Months Ended September 30, 2023

Revenue $ 186,673 $ 44,310 $ 230,983

Gross margin 75,116 5,490 80,606

Total assets 3,213,764 30,476 3,244,240

Capital expenditures 51,539 — 51,539

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Revenue $ 163,662 $ 18,983 $ 182,645

Gross margin 63,679 4,946 68,625

Total assets 3,133,249 3,715 3,136,964

Capital expenditures 53,755 — 53,755

Six Months Ended June 30, 2023

Operations Other

Services Total

Nine Months Ended September 30, 2023

Revenue $ 545,989 $ 78,412 $ 624,401

Gross margin 216,318 12,505 228,823

Total assets 3,213,764 30,476 3,244,240

Capital expenditures 145,573 — 145,573

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Revenue $ 483,965 $ 44,172 $ 528,137

Gross margin 186,907 9,534 196,441

Total assets 3,133,249 3,715 3,136,964

Capital expenditures 199,707 — 199,707

The following table reconciles total gross margin to income before income taxes ( in thousands ):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Total gross margin $ 80,606 $ 68,625 $ 228,823 $ 196,441

Selling, general and administrative expenses ( 19,648 ) ( 11,190 ) ( 46,171 ) ( 32,760 )

Gain on sale of fixed assets

Gain on sale of capital assets — 818 721 825

Interest expense, net ( 39,710 ) ( 49,859 ) ( 182,030 ) ( 104,616 )

Realized gain on derivatives

Unrealized (loss) gain on derivatives

Loss on extinguishment of debt ( 6,757 ) — ( 6,757 ) —

Gain on derivatives 15,141 51,862 42,080 76,972

Other (expense) income 38 ( 19 ) 39 ( 10 )

Income before income taxes $ 29,670 $ 60,237 $ 36,705 $ 136,852

Earnings Per Share of Common Stock

Basic earnings per share is computed using the weighted average number of shares of common stock outstanding during the period.

Diluted earnings per share of common stock is computed by using the weighted average shares of common stock outstanding, including the dilutive effect of restricted shares based on an average share price during the period.

the three and nine months ended September 30, 2023 and September 30, 2022, there were no anti-dilutive shares, respectively.

The computations of basic and diluted earnings per share for the three and nine months ended September 30, 2023 and September 30, 2022 are as follows:

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands, except share and per share data) 2023 2022 2023 2022

Net income $ 21,766 $ 45,900 $ 26,940 $ 104,356

Basic weighted average shares of common stock 76,731,868 59,000,000 64,954,244 59,000,000

Effect of dilutive securities 167,615 — 167,615 —

Diluted weighted average shares of common stock 76,899,483 59,000,000 65,121,859 59,000,000

Basic earnings per share of common stock $ 0.28 $ 0.78 $ 0.41 $ 1.77

Diluted earnings per share of common stock $ 0.28 $ 0.78 $ 0.41 $ 1.77

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.

, 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.

The following event occurred subsequent to the date the condensed financial statements were available to be issued:

On October 24, 2023 the Company's board of directors declared an initial cash dividend of $ 0.38 per share of common stock, or $ 1.52 per share of common stock on an annualized basis, for the third quarter of 2023.

The cash dividend of approximately $ 29 million will be paid on November 10, 2023 to all stockholders of record as of the close of business on November 3, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements