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 September 30, 2023 As of December 31, 2022 Assets Current assets: Cash and cash equivalents $ 6,128 $ 20,431 Accounts receivable, net 116,875 97,551 Inventories, net 70,606 72,155 Fair value of derivative instruments — 823 Contract assets 9,608 3,555 Prepaid expenses and other current assets 13,253 9,520 Total current assets 216,470 204,035 Property, plant and equipment, net 2,511,110 2,488,682 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 Current liabilities: Accounts payable $ 48,835 $ 37,992 Accrued liabilities 102,448 93,873 Contract liabilities 71,917 57,109 Total current liabilities 223,200 188,974 Long-term debt, net of unamortized debt issuance cost 1,747,912 2,720,019 Operating lease liabilities 34,026 6,754 Deferred tax liabilities 65,258 57,155 Other liabilities 2,052 3,545 Total liabilities $ 2,072,448 $ 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, 77,400,000 and 59,000,000 shares of common stock issued and outstanding as of September 30, 2023 and December 31, 2022, respectively 774 590 Additional paid-in capital 956,465 33,189 Retained earnings 214,553 195,314 Total stockholders’ equity 1,171,792 229,093 Total liabilities and stockholders’ equity $ 3,244,240 $ 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 September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Revenues: 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 Operating expenses: Cost of operations (exclusive of depreciation and amortization shown below): 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 capital assets — ( 818 ) ( 721 ) ( 825 ) Total operating expenses 170,025 124,392 441,028 363,631 Income from operations 60,958 58,253 183,373 164,506 Other income (expenses): Interest expense, net ( 39,710 ) ( 49,859 ) ( 182,030 ) ( 104,616 ) 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 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 Net income $ 21,766 $ 45,900 $ 26,940 $ 104,356 Basic and diluted earnings per share 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 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 - profits interests — — ( 136 ) 619 483 Net income, as restated — — — 49,555 49,555 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 - 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 ) 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. 3 Table of Contents KODIAK GAS SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) For the Nine Months Ended September 30, 2023 2022 Cash flows from operating activities: Net income $ 26,940 $ 104,356 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization expense 136,414 129,913 Stock-based compensation expense 3,452 619 Amortization of debt issuance costs 11,260 9,453 Non-cash lease expense 3,132 2,066 Provision for credit losses 2,047 85 Inventory reserve 375 375 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 ( 21,371 ) 5,048 Inventories 1,174 ( 9,904 ) Contract assets ( 6,053 ) ( 8,111 ) Prepaid expenses and other current assets ( 3,733 ) 598 Accounts payable 3,257 403 Accrued and other liabilities 8,497 8,673 Contract liabilities 14,807 3,974 Net cash provided by operating activities 203,699 186,854 Cash flows from investing activities: Purchase of capital assets ( 145,573 ) ( 199,707 ) Proceeds from sale of capital assets 1,055 8,023 Other ( 45 ) ( 86 ) Net cash used in investing activities ( 144,563 ) ( 191,770 ) Cash flows from financing activities: Borrowings on debt instruments 756,418 1,409,006 Payments on debt instruments ( 1,021,556 ) ( 545,730 ) Payment of debt issuance cost ( 32,759 ) ( 27,819 ) 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 Cash and cash equivalents - end of period $ 6,128 $ 21,336 Supplemental cash disclosures: Cash paid for interest $ 173,006 $ 88,569 Cash paid for taxes $ 5,946 $ 1,836 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 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 (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 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 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. 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 $ 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. 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. 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 consolidated 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 September 30, 2023 2022 Services provided over time: 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 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 Nine Months Ended September 30, 2023 2022 Services provided over time: 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 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 Total revenue $ 624,401 $ 528,137 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 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. 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 in 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 $ 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 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 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) : Remainder of 2023 2024 2025 2026 2027 and thereafter Total Remaining performance obligations $ 162,915 $ 504,092 $ 241,526 $ 101,568 $ 54,906 $ 1,065,007 7 Table of Contents 4. Accounts Receivable, net Accounts receivable, net consist of the following ( in thousands ): As of September 30, 2023 As of December 31, 2022 As of December 31, 2021 Accounts receivable $ 119,869 $ 98,500 $ 81,708 Allowance for credit losses 2,994 949 959 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. 5. Inventories, net Inventories consist of the following ( in thousands ): As of September 30, 2023 As of December 31, 2022 Non-serialized parts $ 59,093 $ 61,082 Serialized parts 11,513 11,073 Total inventories $ 70,606 $ 72,155 6. Property, Plant and Equipment, net Property, plant and equipment, net consist of the following ( in thousands ): As of September 30, 2023 As of December 31, 2022 Compression equipment $ 3,113,641 $ 2,973,599 Trailers and vehicles 9,239 7,193 Field equipment 18,385 15,501 Technology hardware and software 10,330 6,698 Leasehold improvements 4,209 1,947 Shipping containers 3,349 3,137 Furniture and fixtures 1,570 1,519 Finance lease 530 981 Land 20 — Total property and equipment, gross 3,161,273 3,010,575 Less: accumulated depreciation ( 650,163 ) ( 521,893 ) Property, plant and equipment, net $ 2,511,110 $ 2,488,682 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. 8 Table of Contents 7. Goodwill and Identifiable Intangible Assets, net 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 September 30, 2023 and December 31, 2022 ( in thousands ): As of September 30, 2023 Original Cost Accumulated Amortization 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 Total identifiable intangible assets $ 163,000 $ ( 37,743 ) $ 125,257 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 $ 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 ): Amount Years ending December 31, Remainder of 2023 $ 2,368 2024 9,474 2025 9,474 2026 9,474 2027 9,474 Thereafter 84,993 Total $ 125,257 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 nor triggering events were identified for the three and nine month periods ended September 30, 2023 and 2022. 9 Table of Contents 9. Debt and Credit Facilities Debt consists of the following (in thousands) : As of September 30, 2023 As of December 31, 2022 ABL Facility $ 1,789,086 $ 1,754,224 Term Loan — 1,000,000 Total debt outstanding 1,789,086 2,754,224 Less: unamortized debt issuance cost ( 41,174 ) ( 34,205 ) Long-term debt, net of unamortized debt issuance cost $ 1,747,912 $ 2,720,019 ABL Facility 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 $ 2.1 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 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 September 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 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 10 Table of Contents 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 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. 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 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 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 ): Amount Years ended December 31, Remainder of 2023 $ — 2024 — 2025 — 2026 — 2027 — Thereafter 1,789,086 Total $ 1,789,086 11 Table of Contents 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. 10. Derivative Instruments 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 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 $ 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 billion, $ 375 million is related to forward dated interest rate swaps with an effective date after September 30, 2023. 12 Table of Contents 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 of September 30, 2023 Level 1 Level 2 Level 3 Total Current assets: Interest rate swaps $ — $ — $ — $ — Total current assets $ — $ — $ — $ — Non-current assets: Interest rate swaps $ — $ 51,790 $ — $ 51,790 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: 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 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 Recognized Three Months Ended September 30, 2023 2022 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 (Loss) Recognized Nine Months Ended September 30, 2023 2022 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. 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 13 Table of Contents 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 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 nine months ended September 30, 2023. See fair value tables below ( in thousands ): 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 12. Stockholders’ Equity 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. 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. 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 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 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 14 Table of Contents 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 September 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 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 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. 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. 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 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 $ 16.99 Vested or exercised — — — — 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 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. 13. Commitments and Contingencies Purchase Commitments 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. 15 Table of Contents 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 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 September 30, 2023 and December 31, 2022, none 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 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 September 30, 2023 whose resolution could have a material adverse effect on the unaudited condensed consolidated financial statements. 14. Prepaid Expenses and Other Current Assets P repaid expenses and other current assets consist of the following ( in thousands ): As of 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 16 Table of Contents 15. Accrued Liabilities Accrued liabilities consist of the following ( in thousands ): As of September 30, 2023 As of December 31, 2022 Sales tax liability $ 28,688 $ 27,820 Accrued interest 11,746 16,347 Accrued bonus 10,475 7,764 Accrued taxes 14,675 9,667 Accrued payroll 1,036 2,744 Accrued legal fee 1,823 1,906 Lease liabilities - current portion — 3,090 Contingent consideration 3,673 3,673 Accrued accounts payable 16,629 14,080 Accrued insurance 109 2,231 Station construction accrual 12,361 — Other 1,233 4,551 Total accrued liabilities $ 102,448 $ 93,873 16. Income Taxes 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. 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 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. 17. Defined Contribution Plan The Company maintains a defined contribution savings plan for its employees. 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. 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 $ 46.1 million and $ 136.4 million for the three and nine months ended September 30, 2023 17 Table of Contents 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 ): Compression 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 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 Compression 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 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 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 capital assets — 818 721 825 Interest expense, net ( 39,710 ) ( 49,859 ) ( 182,030 ) ( 104,616 ) 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 19. 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. For 18 Table of Contents 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 20. Subsequent Events 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. 19 Table of Contents