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Item 7. Management’s Discussion and Analysis

2026-02-26 compared with 2025-03-07 · 254 added, 230 removed, 319 unchanged (60% of the section changed)

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Discussion and analysis of our operating highlights and financial results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023 are included under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations 2024 Operational Highlights, Financial Results of Operations, Liquidity and Capital Resources, and Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 .

We are a leading provider and operator of large horsepower contract compression infrastructure in the U.S.

We are a leading provider and operator of large horsepower contract compression infrastructure in the U.S., supporting the critical movement and processing of natural gas across key production regions.

Our Contract Services and related services are critical to our customers’ ability to reliably produce, gather and transport natural gas and oil.

We are a market leader in the Permian Basin, which is the largest producing natural gas and oil basin in the U.S.

operate our large horsepower compression units primarily under fixed-revenue contracts with many upstream and midstream customers.

Our compression assets have long useful lives consistent with the expected production lives of the key regions where we operate.

We operate our large horsepower compression units primarily under fixed-revenue contracts with many upstream and midstream customers.

compression assets have long useful lives consistent with the expected production lives of the key regions where we operate.

We believe our customer-centric business model positions us as the preferred contract compression operator for our customers and creates long-standing relationships.

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Upstream and midstream companies have increasingly prioritized capital discipline and return of capital to stockholders.

We believe that many customers prefer to outsource their compression infrastructure needs in an effort to reduce capital expenditures outside of their core business and benefit from our technical skill and expertise.

In recent years, the U.S natural gas and oil industry has faced uncertainties and pressures from regulators and shifting sentiments from investors and other stakeholders, primarily related to broader adoption of emission reduction targets and other sustainability initiatives.

Many energy companies, including some of our customers, have announced significant GHG emission reduction initiatives.

A number of our customers are implementing electric compression infrastructure and we are well positioned to support them in these strategic initiatives.

As stakeholder sentiments and the regulatory environment evolve under the new U.S.

In recent years, the U.S natural gas and oil industry has faced ongoing uncertainty and evolving expectations from regulators, investors, and other stakeholders related to sustainability and operational efficiency.

Some energy companies, including some of our customers, have announced initiatives aimed at reducing GHG emissions and improving environmental performance.

A number of our customers are implementing electric compression infrastructure, and we are well positioned to support them in these efforts.

As stakeholder priorities and the regulatory landscape continue to evolve under the current U.S.

presidential administration, the U.S.

natural gas and oil industry will continue to face unpredictability.

natural gas and oil industry is expected to remain subject to varying levels of change and uncertainty.

Approximately 82.8% of our existing compression assets are strategically deployed in the Permian Basin and Eagle Ford Shale, which are two of the most significant crude oil and associated gas basins in the U.S.

We believe these two regions possess some of the largest and lowest-cost unconventional resources bases in the U.S.

We believe these two regions possess some of the largest and lowest-cost unconventional resource bases in the U.S.

Additionally, there are significant U.S.

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Recent Developments

CSI Acquisition

On April 1, 2024, we completed the CSI Acquisition, pursuant to the terms of the Merger Agreement.

CSI Compressco unitholders received 0.086 shares of common stock for each CSI Compressco common unit owned.

The Electing Unitholders received 0.086 OpCo Units representing economic interests in Kodiak Services (along with an equal number of shares of non-economic voting preferred stock of Kodiak) for each CSI Compressco common unit they held.

At the option of the holder, each OpCo Unit is redeemable for one share of our common stock (along with cancellation of a

corresponding share of preferred stock of Kodiak), following a 180 day post-closing lock-up period and subject to certain conditions.

Offerings and Share Repurchases

On September 11, 2024, Frontier TopCo Partnership, L.P.

(“Kodiak Holdings”), an affiliate of EQT AB and holder of record of Kodiak Gas Services, Inc.

common stock, sold 7,000,000 shares of common stock to the public pursuant to an underwritten offering (the “September Secondary Offering”).

We did not receive any proceeds from the September Secondary Offering.

On September 11, 2024, we also repurchased 1,000,000 shares from Kodiak Holdings in a private transaction (the “September Share Repurchase”).

The September Share Repurchase was consummated at a price of $25.00 per share for an aggregate purchase price of $25.0 million.

The shares of common stock purchased in the September Share Repurchase were recorded as treasury stock.

In November 2024, the Board of Directors at Kodiak (the "Kodiak Board") approved a share repurchase program to buy up to an aggregate of $50 million of our outstanding common stock (the “Share Repurchase Program”).

The Share Repurchase Program commenced on November 13, 2024 and expires on December 31, 2025.

We expect shares to be acquired from time to time in open-market transactions or through privately negotiated transactions at our discretion, subject to market conditions, applicable legal requirements and other relevant factors.

We expect any purchases to be funded by cash on hand, cash flow from operations and short-term borrowings.

As of December 31, 2024, 434,783 shares have been repurchased under the Share Repurchase Program as further detailed below.

On November 18, 2024, Kodiak Holdings, sold 6,565,217 shares of common stock to the public pursuant to an underwritten offering (the “November Secondary Offering”).

We did not receive any proceeds from the November Secondary Offering.

On November 18, 2024, we repurchased 434,783 shares from Kodiak Holdings in a private transaction (the “November Share Repurchase”) pursuant to the Share Repurchase Program.

The November Share Repurchase was consummated at a price of $34.50 per share for an aggregate purchase price of $15.0 million.

The shares of common stock purchased in the November Share Repurchase were recorded as treasury stock.

On December 12, 2024, Kodiak Holdings sold 5,500,000 shares of common stock to the public pursuant to an underwritten offering (the "December Secondary Offering").

We did not sell any shares of common stock nor did we receive any proceeds from the December Secondary Offering.

The December Secondary Offering closed on December 13, 2024.

On September 12, 2024, the Company sold certain property, plant and equipment and other assets in the U.S as well as our legal entity in Canada to a third-party buyer.

One Big Beautiful Bill Act of 2025

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”), was enacted into law in the United States.

The OBBBA introduces significant changes to U.S.

tax law, including full expensing of qualified capital expenditures, full expensing of domestic research and development expenditures, changes to the business interest limitation, and modifications to the international tax framework.

During the year ended December 31, 2025, the Company included the impact of the OBBBA, which materially reduced current income tax expense for the year, primarily driven by the permanent reinstatement of full

expensing of qualified capital expenditures and changes to the business interest limitation, with no material impact to the effective tax rate.

Trade Policy and Recent Executive Orders

Proposed changes and the announcement related to the U.S.

global trade policy, along with potential international retaliatory measures, have resulted in volatility in global markets and uncertainty around short- and long-term economic impacts in the United States, including concerns over potential tariff impacts for the cost of goods, inflation, recession and slowing economic growth.

Although these developments did not materially impact our results, we are continuing to actively monitor and evaluate the potential impacts of these measures, including the imposition of tariffs, on our business and operations, as well as opportunities to mitigate their related impacts.

There are risks that increased tariffs could, among other things, create new trade barriers that disrupt supply chains, raise costs, and weaken consumer confidence;

however, it is not currently possible to predict the impact, if any, of any changes or proposed changes to the U.S.

global trade policy, or any international retaliatory measures, on our financial condition, results of operations and cash flows.

We are also monitoring and evaluating the potential impact of various executive orders issued by the U.S.

government, including the executive orders entitled “Reducing Anti-Competitive Regulatory Barriers” and “Zero-Based Regulatory Budgeting to Unleash American Energy,” on our business, including potential impacts to our financial condition, results of operations and cash flows.

Pending Acquisition of Distributed Power Solutions

On February 5, 2026, the Company entered into a purchase agreement to acquire DPS, a provider of distributed power solutions in an equity and cash transaction valued at approximately $675.0 million at the time of signing per the terms of the purchase agreement, subject to adjustment in accordance with the purchase agreement.

Per the terms of the purchase agreement, the purchase price includes $575.0 million in cash, subject to adjustment in accordance with the purchase agreement, and the issuance of 2,401,278 shares, representing approximately $100.0 million of the Company’s common stock based on the volume weighted average price of the Company’s stock price for the five days prior to February 5, 2026 of $41.64 to the sellers.

The obligations of each of the parties to consummate the transactions contemplated by the purchase agreement are subject to customary conditions.

The Company has agreed to pay to the sellers a termination fee of $37.1 million in the event the purchase agreement is terminated under certain circumstances.

Senior Notes Offerings

On September 5, 2025, Kodiak Services completed a private offering of $600.0 million in 6.500% senior unsecured notes due 2033 and $600.0 million in 6.750% senior unsecured notes due 2035, both issued at par and guaranteed on a senior unsecured basis by the Company and certain subsidiaries.

Subsequently, Kodiak Services completed private offerings of an additional $170.0 million in 6.500% senior unsecured notes due 2033 and an additional $30.0 million in 6.750% senior unsecured notes due 2035, both of which were issued at a premium to par.

The proceeds from both offerings were used to repay a portion of the outstanding indebtedness under the revolving asset-based loan credit facility (“ABL Facility”), which was amended in September in connection with the issuance of the notes to, and among other things, reduce total commitments to $2.0 billion and extend the maturity date to 2030.

See further details in Description of Indebtedness within the Liquidity and Capital Resources section that follows herein.

Secondary Offerings and Share Repurchases

During 2025, affiliates of EQT AB, primarily Frontier TopCo Partnership, L.P., executed a series of secondary public offerings and Rule 144 sales of our common stock.

In addition, we repurchased over 2.7 million shares from EQT affiliates during 2025 pursuant to our Share Repurchase Program, these transactions reduced EQT’s ownership position from approximately 43.1% at the beginning of the year to zero by December 2, 2025.

In total, approximately 38.5 million shares were sold by EQT affiliates in non-dilutive transactions, and we did not receive any proceeds from these offerings.

On September 30, 2025, the Company sold its operation and legal entities in Mexico to a third-party buyer.

The majority of the operations were included in the Contract Services segment through the date of sale.

At the disposal date, total net assets sold were approximately $18.0 million, consisting primarily of compression equipment, inventory, and other assets.

Upon disposition, we incurred a loss of approximately $7.0 million included in loss (gain) on sale of assets in our consolidated statement of operations for the year ended December 31, 2024.

On December 9, 2024, we sold certain assets and our legal entity in Argentina.

The transaction constituted the sale of a business for accounting purposes.

Total assets sold primarily consisted of approximately $10.8 million in property, plant and equipment, $2.7 million in accounts receivable, and $2.2 million in inventory.

We recognized a loss of $13.6 million, which is included in loss (gain) on sale of assets in our consolidated statements of operations for the year ended December 31, 2024.

At the disposal date, total net assets sold were $34.3 million, consisting of compression equipment, inventory, and other assets.

Upon disposition, we incurred a loss of $33.3 million included in loss on sale of assets in our consolidated statements of operations for the year ended December 31, 2025.

Settlement of Sales Tax Audit

During 2025, the Company received a settlement offer with the Texas Comptroller’s office to resolve certain of the outstanding Texas sales and use tax matters.

Under this settlement arrangement, the Company would be subject to interest and penalties for all open periods totaling $28.0 million.

As such, this amount has been recorded within other income (expense) in the consolidated statement of operations for the year ended December 31, 2025.

2025 Operational Highlights

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Fleet compression units

4,736 5,069 (6.6) %

Revenue-generating compression units

4,490 4,592 (2.2) %

Revenue-generating horsepower per revenue-generating compression unit (3)

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Fleet utilization is calculated as (i) revenue-generating horsepower divided by (ii) fleet horsepower.

The 35.0% and 30.4% increases in fleet horsepower and revenue-generating horsepower, respectively, were primarily attributable to the compression assets acquired in the CSI Acquisition and the purchase and deployment of new compression units.

The 13.0% decrease in revenue-generating horsepower per revenue-generating compression unit was due to units acquired as part of the CSI Acquisition having, on average, less horsepower.

The 1.2% and 2.5% increases in fleet horsepower and revenue-generating horsepower, respectively, were mainly driven by the strategic acquisition and deployment of new large horsepower compression units throughout the period.

This was partially offset by the divestiture of assets from our Mexico operations, as well as the sale and scrapping of certain other non-core assets, as part of our ongoing efforts to optimize the fleet and focus on core business segments.

The 4.7% increase in revenue-generating horsepower per revenue-generating compression unit was a result of deploying these new large horsepower units.

Financial Results of Operations

The following table presents selected financial and operating information for the periods presented (in thousands) :

Year Ended December 31,

The following table presents selected financial and operating information for the periods presented:

Year Ended December 31, % Change

(in thousands)

Contract Services $ 1,181,270 $ 1,034,173 14.2 %

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Selling, general and administrative 144,070 151,680 (5.0) %

Loss (gain) on sale of assets 29,612 (777) n/m

Loss on sale of assets 61,566 29,612 n/m

Total operating expenses 968,090 909,861 6.4 %

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Interest expense (198,370) (197,144) 0.6 %

Loss on extinguishment of debt — (6,757) (100.0) %

Gain on derivatives — 24,017 (100.0) %

Other (expense) income, net (415) 31 n/m

Total other expenses (173,542) (208,974) (17.0) %

Other expense, net (28,168) (415) n/m

Total other expenses, net (226,538) (173,542) 30.5 %

Income before income taxes 113,472 75,908 49.5 %

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Net income 81,588 50,334 62.1 %

Net income attributable to noncontrolling interests 439 — 100.0 %

Net income attributable to noncontrolling interests 1,067 439 n/m

Net income attributable to common shareholders $ 80,521 $ 49,895 61.4 %

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Contract Services revenue increased $147.1 million, or 14.2%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This was primarily due to incremental revenues associated with the CSI Acquisition, which accounted for approximately 22% of consolidated revenue for the year ended December 31, 2024.

The remainder of the increase in Contract Services is due to an increase in revenue-generating horsepower and an increase of $6.5 million related to gas treating and cooling services.

This was primarily related to a $145.2 million increase in contract compression services as a result of price increases and an increase in average revenue-generating horsepower, including revenue-generating horsepower acquired in the CSI Acquisition in 2024.

Furthermore, there was also an increase of $1.9 million related to gas treating and cooling services.

Other Services

Other Services revenue increased $1.7 million, or 1.4%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This increase was primarily due to incremental revenues associated with the CSI Acquisition, increased parts sales, increased freight and crane charges related to mobilization of units, increased maintenance and overhaul services, and increased other field services.

These increases were offset by a decrease in revenues from station construction services resulting from reduced scope of station projects during the year ended December 31, 2024.

This increase was primarily due to increased revenues from station construction services and maintenance and overhaul services.

This increase was partially offset by decreases in other field services, parts sales, and freight and crane charges related to the mobilization of units.

Operating Costs and Other Expenses

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Contract Services expenses increased $18.5 million, or 5.2%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This increase was primarily due to an $87.3 million increase in direct labor expenses related to increased headcount and salaries, a $13.0 million increase in lubricant oil and coolant, a $12.9 million increase in parts used in support of our operations, and a $2.5 million increase in gas treating expenses.

The majority of incremental costs were attributable to the CSI Acquisition.

These increases were partially offset by a $17.2 million decrease in indirect expenses and a $0.8 million decrease in sales and use tax accrual related to parts purchases.

This was primarily due to a $33.8 million increase in direct labor expenses, a $0.2 million increase in lubricant oil and coolant expenses, and a $0.1 million increase in gas treating expenses.

These increases were partially offset by a $6.9 million decrease in indirect expenses, a $5.5 million decrease in parts used in support of our operations, and a $3.3 million decrease related to sales and use tax imposed on the consumption of taxable materials in operations.

Other Services

Other Services expenses increased $3.1 million, or 3.0%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This increase was primarily due to costs associated with increased parts sales, increased freight and crane charges related to mobilization of units, increased maintenance and overhaul services, and increased other field services.

These increases were offset by decreases in station construction service expenses.

This was primarily due to increased other field service expenses, parts sales expenses, and expenses associated with freight and crane charges related to mobilization of units.

This was partially offset by decreased expenses from station construction services.

Depreciation and Amortization

Depreciation and amortization increased $15.9 million, or 6.1%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This was primarily due to an increase in compression equipment and intangible assets acquired through the CSI Acquisition, which resulted in increased depreciation and amortization associated with those assets.

This increase reflects depreciation on capitalized assets associated with the Texas Comptroller sales and use tax audit process, as well as depreciation from new assets placed into service.

Long-lived Asset Impairment

Triggering events related to a group of non-operating compression units associated with a certain customer in bankruptcy indicated the carrying value of the assets may not be recoverable.

Long-lived asset impairment decreased $3.6 million, or 36.1%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

During the year ended December 31, 2025, we implemented a new enterprise resource planning (“ERP”) system.

In connection with this implementation, previously capitalized internal-use software costs associated with legacy systems that were no longer in use were written off.

As a result, we recorded an impairment of $6.3 million.

During the year ended December 31, 2024 certain events occurring to a group of non-operating compression units associated with a certain customer in bankruptcy that indicated the carrying value of the assets may not be recoverable.

As a result, we recorded an impairment of compression equipment of $9.9 million for the year ended December 31, 2024.

No impairment was recorded for the year ended December 31, 2023.

Selling, General and Administrative

Selling, general and administrative expenses increased $78.4 million, or 106.9%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This was primarily due to a $29.0 million increase in professional fees mainly related to transactions costs associated with the CSI Acquisition, a $24.8 million increase in labor and benefits, mainly related to increased headcount and salaries, an $11.7 million increase in stock compensation expense related to equity compensation plans, an $8.9 million increase in software expense, and a $6.4 million increase in other overhead expenses, mostly consisting of insurance and facility expenses.

These increases were offset by a $2.4 million decrease in bad debt expense related to expected credit losses.

Loss (Gain) on Sale of Assets

For the year ended December 31, 2024, we recognized a $29.6 million net loss on the sale of certain property, plant and equipment and other assets in the U.S.

and the sale of our Canada and Argentina entities to third-party buyers.

This compared to a $0.8 million net gain for the year ended December 31, 2023 from the sale of capital assets.

Selling, general and administrative expenses decreased $7.6 million, or 5.0%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This decrease was due to a $13.8 million decrease in professional fees, primarily related to transaction costs associated with the CSI Acquisition in the prior year, a $3.6 million decrease in the provision for credit losses, a $2.1 million decrease in software expense, mainly related to the termination of an agreement as part of the CSI Acquisition, and a $0.8 million decrease in labor and benefits.

These decreases were partially offset by a $6.9 million increase in equity compensation expense related to equity compensation plans, and a $5.9 million increase in other selling, general, and administrative expenses.

Loss on Sale of Assets

Loss on sale of assets increased $32.0 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the sale of our Mexico operations to a third-party buyer and the write-off of certain scrapped assets.

Interest Expense

Interest expense decreased $25.4 million, or 11.4%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This decrease was primarily due to lower average borrowings on the ABL Facility and 2029 Senior Notes during the year as compared to the ABL Facility and Term Loan during the year ended December 31, 2023.

Loss on Extinguishment of Debt

During the year ended December 31, 2023, we recognized a $6.8 million loss on extinguishment of debt related to the write off of debt issuance costs and other fees as a result of the extinguishment of the Term Loan.

No such loss was recognized in the year ended December 31, 2024.

Interest expense increased $1.2 million, or 0.6%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

Following the entry into the Fourth Amendment to the ABL Facility in September 2025, the Company entered into a new interest rate swap, resulting in the de-designation of the prior hedge and the reclassification of $7.7 million from accumulated other comprehensive loss to interest expense.

This increase was largely offset by lower borrowings under the ABL Facility and settlements on the interest rate swap, resulting in a minimal net impact on reported interest expense.

Gain on Derivatives

Gain on derivatives increased $3.8 million, or 18.5%, for the year ended December 31, 2024 compared to the year ended December 31, 2023.

This is primarily related to $25.3 million in cash received on derivatives offset by a decrease in the fair value of derivatives of $1.2 million for the year ended December 31, 2024 due to a decrease in the long-term Secured Overnight Financing Rate (“SOFR”) yield curve, as compared to a $25.8 million settlement on the termination of derivatives attributable to the Term Loan and $37.4 million in cash received on derivative settlements on our interest rate collars, offset by a decrease in the change in fair value of the derivatives of $42.9 million for the year ended December 31, 2023 due to a decrease in the long-term SOFR and LIBOR yield curves.

Gain on derivatives decreased $24.0 million, or 100.0%, for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This decrease was attributed to the designation of the interest rate swap as a cash flow hedge as

of January 1, 2025.

As a result, all changes in the fair value of the interest rate swap are now recognized in other comprehensive income (loss) and reclassified into earnings in the same period the hedged transaction affects earnings within interest expense.

The net gain on derivatives recognized during the year ended December 31, 2024 primarily related to $25.3 million in cash received on derivatives offset by a decrease in the fair value of derivatives of $1.2 million for the year ended December 31, 2024 due to a decrease in the long-term Secured Overnight Financing Rate (“SOFR”) yield curve.

Other Expense, net

Other expense, net increased $27.8 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.

This increase was primarily due to the Company reaching a settlement agreement with the Texas Comptroller’s office resolving the outstanding sales and use tax matters.

As part of this settlement, the Company accrued interest and penalties totaling $28.0 million.

Income Tax Expense

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Our cash flow is affected by numerous factors including prices and demand for our compression infrastructure assets and services, conditions in the financial markets and various other factors.

We believe cash generated by operating activities will be sufficient to service our debt, fund working capital, fund our estimated capital expenditures and, as our Board may determine from time to time in its discretion, pay dividends.

Cash Requirements

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• Growth Capital Expenditures:

(1) capital expenditures made to expand the operating capacity or operating income capacity of assets by acquisition of additional compression units, (2) capital expenditures made to maintain the operating capacity or operating income capacity of assets by acquisition of replacement compression units, (3) capital expenditures made to expand the operating capacity or operating income capacity of assets for existing compression units and (4) capital expenditures on assets required to operate the business but not including compression units—such as trucks, wash trailers, crane trucks, leasehold improvements, technology hardware and software and related implementation expenditures, furniture and fixtures, and other general items that are typically capitalized and that have a useful life beyond one year.

We make capital expenditures not related to our compression units (as described in clause (4) above) if and when necessary to support the operations of our revenue-generating horsepower.

capital expenditures made to (1) expand the operating capacity or operating income capacity of assets including, but not limited to, the acquisition of additional compression units, upgrades to existing equipment, expansion of supporting infrastructure, and implementation of new technologies, (2) maintain the operating capacity or operating income capacity of assets by acquisition of replacement compression units and their supporting infrastructure, and (3) expand the operating capacity or operating income capacity of existing assets.

• Other Capital Expenditures:

capital expenditures made on assets required to support our operations—such as rolling stock, leasehold improvements, technology hardware and software and related implementation expenditures, safety enhancements to equipment, and other general items that are typically capitalized and that have a useful life beyond one year.

• Maintenance Capital Expenditures:

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We utilize a disciplined and systematic asset management program whereby we perform major unit overhauls and engine replacements on a defined schedule based on hours of operation.

As a result, our maintenance capital expenditures may vary considerably from year to year based on when such assets were

added to the fleet.

Maintenance capital expenditures along with regularly scheduled preventive maintenance expenses are typically sufficient to sustain the operating capacity of our assets over the full expected useful life of the compression units.

As a result, our maintenance capital expenditures may vary considerably from year to year based on when such assets were added to the fleet.

of the compression units.

Maintenance capital expenditures do not include expenditures to replace compression units when they reach the end of their useful lives.

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Maintenance capital expenditures are related to overhauls of significant components of our compression equipment, such as the engine and compressor, which return the components to a like-new condition, but do not modify the application for which the compression equipment was designed.

For the year ended December 31, 2024, growth capital expenditures were $286.0 million and maintenance capital expenditures were $66.2 million.

This compares to growth capital expenditures of $184.5 million and maintenance capital expenditures of $37.0 million for the year ended December 31, 2023.

The increase in growth capital expenditures includes a $22.0 million non-cash sales tax accrual on compression equipment purchases related to audits we are undergoing with the state of Texas.

The remaining amounts were primarily related to a larger amount of new horsepower acquired in 2024, an increase in unit growth capital expenditures to upgrade and revamp a large number of units acquired in the CSI Acquisition, and significant investment in compression support equipment to accommodate a far larger fleet compared to the prior year.

The increase in maintenance capital expenditures was primarily due to expenditures on the assets acquired in the CSI Acquisition since closing on April 1, 2024 and an increase in unit overhauls scheduled based on the age and operating hours of such units.

For the year ended December 31, 2025, growth capital expenditures were $199.5 million, other capital expenditures were $62.8 million and maintenance capital expenditures were $76.0 million as compared to growth capital expenditures of $227.2 million, other capital expenditure of $58.8 million and maintenance capital expenditures of $66.2 million for the year ended December 31, 2024.

The decrease in growth capital expenditures was primarily related to the timing of compression unit purchases necessary to support operating capacity demand.

The increase in other capital expenditures was primarily related to safety upgrades related to compression equipment purchased in the CSI Acquisition and the ongoing implementation of a new business system.

The increase in maintenance capital expenditures was primarily due to maintenance capital expenditures on the assets acquired in the CSI Acquisition and an increase in unit overhauls scheduled based on the age and operating hours of such units.

Our Board may elect to declare cash dividends on our common stock, subject to our compliance with applicable law, and depending on, among other things, economic conditions, our financial condition, results of operations, projections, liquidity, earnings, legal requirements, and restrictions in the agreements governing our indebtedness (as further discussed herein).

If and to the extent our Board were to declare a cash dividend to our stockholders, we expect the dividend to be paid from our Discretionary Cash Flow.

On February 3, 2025, our Board declared a quarterly dividend of $0.41 per share of common stock, or approximately $36.0 million, which was paid on February 21, 2025 to stockholders of record at the close of business on February 14, 2025.

On January 28, 2026, our Board declared a quarterly dividend of $0.49 per share of common stock, or approximately $43.1 million, which was paid on February 20, 2026, to stockholders of record at the close of business on February 13, 2026.

The declaration and payment of future dividends will be at the discretion of the Board and will depend on future business conditions, financial conditions, results of operations and other factors.

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Over the long-term, we expect to fund any dividends and our budgeted growth capital expenditures using our discretionary cash flow.

In the event our Discretionary Cash Flow is insufficient for the purpose of funding any such dividends and our budgeted growth capital expenditures for such period, we may fund such shortfall (i) with additional borrowings under our ABL Facility, which as of December 31, 2024 had $322.5 million available (subject to the requirement that our availability, in the case of dividends, under the ABL Facility (calculated on a pro forma basis after giving effect to such Specified Transaction) is not less than $125,000,000) or (ii) reduce our growth capital expenditures for such period.

Any such additional borrowings under our ABL Facility will result in an increase in our interest expense for such period.

Any such reduction in our growth capital expenditures may result in lower growth in our revenue-generating horsepower in future periods.

In the event our discretionary cash flow is insufficient to fund any such dividends and our budgeted growth capital expenditures for such period, we may fund our dividend or budgeted growth expenditures (i) with additional borrowings under our ABL Facility (subject to the requirement that our availability, in the case of dividends, under the ABL Facility calculated on a pro forma basis after giving effect to the payment of a dividend, is not less than $100,000,000) or (ii) by reducing our growth capital expenditures.

Any additional borrowings under our ABL Facility may result in an increase in our interest expense and any such reduction in our growth capital expenditures may result in lower growth in our revenue-generating horsepower in future periods.

As of December 31, 2025, we had $1.5 billion available under our ABL Facility.

Contractual Obligations

Our material contractual obligations as of December 31, 2025, consisted of the following:

• Long-term debt of $2.6 billion;

• Purchase commitments of $168.8 million, all of which are expected to be settled within the next twelve months;

• Long-term debt of $2.6 billion, of which $750.0 million matures in 2029, $464.6 million matures in 2030, $770.0 million matures in 2033, and $630.0 million matures in 2035;

• Purchase commitments of $211.2 million, of which $192.3 million is expected to be settled within the next twelve months;

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

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As of December 31, 2025, other commitments include future operating and finance lease payments totaling $74.6 million.

Pending Acquisition

On February 5, 2026, the Company entered into a purchase agreement to acquire DPS, a provider of distributed power solutions in an equity and cash transaction valued at approximately $675.0 million, at the time of signing per the terms of the purchase agreement, subject to adjustment in accordance with the purchase agreement.

Per the terms of the purchase

agreement, the purchase price includes $575.0 million in cash, subject to adjustment in accordance with the purchase agreement, and the issuance of 2,401,278 shares, representing approximately $100.0 million of the Company’s common stock based on the volume weighted average price of the Company’s stock price for the five days prior to February 5, 2026 of $41.64 to the sellers.

The obligations of each of the parties to consummate the transactions contemplated by the purchase agreement are subject to customary conditions.

The Company has agreed to pay to the sellers a termination fee of $37.1 million in the event the purchase agreement is terminated under certain circumstances.

Sources of Cash

The following table summarizes our cash flows for the year ended December 31, 2024, and 2023 ( in thousands ):

The following table summarizes our cash flows:

Year ended December 31,

(in thousands)

2025 2024 $ Variance

Net cash provided by operating activities $ 599,740 $ 327,987 $ 271,753

Net cash used in investing activities (292,468) (218,421) (74,047)

Net cash used in financing activities (36,331) (62,774) 26,443

Net cash used for investing activities (285,290) (292,468) 7,178

Net cash used for financing activities (316,021) (36,331) (279,690)

Net decrease in cash and cash equivalents $ (1,571) $ (812) $ (759)

Operating Activities

The $61.7 million increase in cash provided by operating activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a $124.0 million increase in operating items, namely depreciation and amortization, taxes and equity compensation, and a $5.3 million increase in income from operations.

These increases were offset by a $55.9 million increase in cash used for working capital, primarily due to an increase in accounts receivable and a $37.9 million decrease in cash received on derivatives.

The $271.8 million increase in cash provided by operating activities for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to changes in working capital items provided cash of $87.0 million during the year ended December 31, 2025 compared to the use of cash of $78.4 million during the year ended December 31, 2024.

The change in working capital items primarily related to enhancements in customer collection processes and timing of supplier payments.

Additionally, income from operations increased $90.6 million during year ended December 31, 2025.

Investing Activities

The $74.0 million increase in cash used in investing activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a $117.2 million increase in in capital expenditures, net of accrued capital expenditures.

This was partially offset by a $33.6 million increase in proceeds on sale of assets and by cash provided by investing activities related to a $9.5 million increase in cash acquired related to the CSI Acquisition.

The $7.2 million decrease in cash used in investing activities for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to a $21.5 million decrease in cash used for capital expenditures, net of accrued capital expenditures.

This was partially offset by a $9.5 million decrease in cash acquired in connection with the CSI Acquisition in the prior year and a $4.8 million decrease in cash provided by proceeds on sale of assets.

Financing Activities

The $26.4 million decrease in cash used in financing activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to a $42.3 million decrease in distributions to parent, a $16.5 million decrease in payments of debt issuance costs, and a $8.9 million decrease in cash payments related to offering costs, offset by a $104.1 million increase in dividends paid to stockholders, a $40.0 million increase in share repurchases, a $5.6 million increase in principal payments on other borrowings, a $5.5 million increase in distributions to noncontrolling interests, and a $2.8 million increase in cash paid for shares withheld to cover taxes.

These uses of cash were offset by a $390.7 million increase in net borrowings over payments on debt instruments and $277.8 million decrease in proceeds from the initial public offering.

Net cash used for financing activities increased $279.7 million during the year ended December 31, 2025, compared to the year ended December 31, 2024.

Cash used for financing activities of $316.0 million during the year ended December 31, 2025, was primarily the result of $159.6 million of dividends paid to stockholders, $104.0 million of share repurchases, $33.2 million of payments of debt issuance costs, $6.4 million of cash paid for shares withheld to cover taxes, $6.2 million of net borrowings, $5.3 million of cash paid on principal payments of other borrowings, $2.5 million of cash paid on principal payments of finance leases, and $1.3 million of distributions to noncontrolling interest.

This was partially offset by $2.3 million of cash related to vesting of restricted stock.

Net cash used for financing activities for the year ended December 31, 2024 was primarily the result of $133.9 million of dividends paid to stockholders, $40.0 million of share repurchases, $16.3 million of debt issuance costs, $5.5 million of distributions to noncontrolling interest, $5.6 million of cash paid on principal payments of other borrowings, $2.8 million of cash paid for shares withheld to cover taxes, $1.2 million of payments for offering costs, and $2.4 million of principal payments on finance leases.

This was partially offset by $166.8 million of net borrowings and $4.5 million of deferred taxes and taxes payable related to the vesting of restricted stock.

Description of Indebtedness

As of January 1, 2022, Kodiak Services had an ABL Facility with unaffiliated secured lenders and JPMorgan Chase Bank, N.A., as administrative agent.

On March 22, 2023, wholly owned subsidiaries of Kodiak entered into the ABL Credit Agreement, whereby the total facility (among other things) was increased to $2.2 billion and certain changes were made to our financial covenants and maturity date.

On May 31, 2023, the ABL Credit Agreement was amended to, among other things, permit distributions of over-allotment 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 over-allotment proceeds from the IPO and to instead require prepayment of the obligations and cash collateralization of any letter of credit exposure upon the issuance of any equity interests by Kodiak pursuant to the over-allotment in the IPO.

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

As of December 31, 2024, there was $2.4 million of letters of credit outstanding under the ABL Facility.

The maturity date of the ABL Facility is March 22, 2028.

On September 5, 2025, Kodiak and Kodiak Services entered into the Fourth Amendment 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” or “ABL Facility”), which amends the Fourth Amended and Restated Credit Agreement dated as of March 22,

The Fourth Amendment, among other things, reduces the interest rate margins applicable to loans under the ABL facility, reduces overall commitments under the ABL facility to $2.0 billion, provides for a flat unused commitment fee of 0.25%, modifies the calculation of various leverage ratios, modifies certain borrowing base provisions, and extends the maturity date from March 2028 to September 2030.

As of December 31, 2025, there were $1.4 million in letters of credit outstanding under the ABL Facility.

Lender fees and costs totaling $12.0 million were incurred related to the Fourth Amendment and are amortized over the life of the loan to interest expense.

Debt and Credit Facilities to the consolidated financial statements included elsewhere in this Annual Report.

The ABL Credit Agreement requires that we meet certain financial ratios.

Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum interest coverage ratio of 2.5x and a maximum Leverage Ratio (calculated based on the ratio of Total Indebtedness to EBITDA, each as defined in the ABL Credit Agreement), and beginning for the quarter ended June 30, 2024, a Secured Leverage Ratio (calculated based on the ratio of Senior Secured Debt to EBITDA).

Leverage Ratio is (i) 5.75 to 1.00 through the fiscal quarter ending March 31, 2025 and (ii) 5.25 to 1.00 for each fiscal quarter thereafter.

The maximum Secured Leverage Ratio is (i) 3.75 to 1.00 through the fiscal quarter ending March 31, 2025 and (ii) 3.25 to 1.00 for each fiscal quarter thereafter.

Pursuant to the ABL Credit Agreement, the Company must comply with certain restrictive covenants, including a minimum interest coverage ratio of 2.5x and a maximum Leverage Ratio (calculated based on the ratio of (a) an amount equal to (i) Total Indebtedness minus (ii) the lesser of (A) unrestricted cash and certain cash equivalents and (B) $50.0 million to (b) EBITDA, each as defined in the ABL Credit Agreement), and a Secured Leverage Ratio (calculated based on the ratio of (a) an amount equal to (i) Senior Secured Debt minus (ii) the lesser of (A) unrestricted cash and certain cash equivalents and (B) $50.0 million to (b) EBITDA).

The maximum Leverage Ratio is 5.25 to 1.00.

The maximum Secured Leverage Ratio is 3.25 to 1.00 for each fiscal quarter.

All obligations under the ABL Facility are collateralized by essentially all the assets of the Company.

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incur additional indebtedness and guarantee indebtedness;

pay dividends or make other distributions or repurchase or redeem equity interests;

pay certain dividends or make other distributions or repurchase or redeem equity interests;

prepay, redeem or repurchase certain debt;

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and consolidate, merge or sell all or substantially all of the Company’s assets.

The applicable interest rate under the ABL Facility is (i) in the case of SOFR-based borrowings, the Term SOFR or Daily Simple SOFR rate then in effect (subject to a floor of 0%) plus 0.10% plus a spread that depends on our Leverage Ratio as of the most recent determination date ranging from 2.00% if our Leverage Ratio is less than or equal to 3.00:1.00 to 3.00% if our Leverage Ratio is greater than 5.50:1.00 and (ii) in the case of prime rate-based borrowings, the prime rate (subject to a floor of 2.5%) plus a spread that depends on our Leverage Ratio as of the most recent determination date ranging from 1.00% if our Leverage Ratio is less than or equal to 3.00:1.00 to 2.00% if our Leverage Ratio is greater than 5.50:1.00.

Depending on the loan type elected by the Company, interest accrues based on variable rates of SOFR plus an applicable rate ranging from 2% to 3% or prime rate plus an applicable rate ranging from 1% to 2% depending on the type of loan and the leverage ratio.

The weighted average interest rate as of December 31, 2024 and 2023, was 6.8% and 8.8%, respectively, excluding the effect of interest rate swaps.

The Company pays an annualized commitment fee of 0.25% on the unused portion of its ABL Facility if borrowings are greater than 50% of total commitments and 0.50% on the unused portion of the ABL Facility if borrowings are less than 50% of total commitments .

Third Amendment to ABL Credit Agreement

On January 22, 2024, Kodiak, and certain other subsidiaries of Kodiak entered into the Third Amendment, which amends the Existing ABL Credit Agreement.

The Third Amendment, among other things, amended certain provisions of the Existing ABL Credit Agreement (i) to accommodate the consummation of the transactions contemplated by the Merger Agreement and (ii) to account for Kodiak’s organizational structure after giving effect to the transactions contemplated by the Merger Agreement.

In addition, the Third Amendment amended the ABL Facility to (i) update the maximum secured leverage ratio to (x) 3.75 to 1.00 for the first four fiscal quarters after the Company issues any unsecured indebtedness and (y) 3.25 to 1.00 for each fiscal quarter thereafter, (ii) modify the triggers for commencing a “cash dominion” period (i.e., a period when the administrative agent applies proceeds in the deposit accounts to reduce borrowings under the ABL Credit Agreement)}, such that a “cash dominion” period will commence if availability under the ABL Credit Agreement is less than $125 million for more than five consecutive business days or if certain types of events of default occur, (iii) include customary provisions relating to the designation of “unrestricted subsidiaries” (i.e., subsidiaries that are not required to become loan parties or be bound by the covenants contained in the ABL Credit Agreement), (iv) provide that only material domestic restricted subsidiaries are required to become guarantors and collateral grantors under the ABL Facility, and (v) permit the Company and its restricted subsidiaries to incur additional indebtedness and liens and to make additional investments, dividends, distributions, redemptions and dispositions.

As of January 1, 2022, a wholly owned subsidiary of Kodiak had a $400 million Term Loan pursuant to a credit agreement with unaffiliated unsecured lenders and Wells Fargo Bank, N.A., as administrative agent.

On May 19, 2022, we entered into the Term Loan Credit Agreement whereby we increased the aggregate commitments under the Term Loan from $400 million to $1 billion.

On March 31, 2023, our wholly owned subsidiary entered into the First Amendment to the Term Loan Credit Agreement, which extended the maturity date to September 22, 2028.

On July 3, 2023, we used the net proceeds of our IPO, together with the proceeds resulting from the Term Loan Derivative Settlement and borrowings under our ABL Facility, to repay $300 million of borrowings outstanding under the Term Loan.

In connection with the IPO, all of the Company’s and its subsidiaries’ remaining obligations under the Term Loan were assumed by a parent entity of Kodiak Holdings, and the Company’s obligations thereunder were terminated.

As a result, the Company is no longer a borrower or guarantor under, nor otherwise obligated with respect to the debt outstanding under the Term Loan.

The ABL Facility is a “revolving credit facility” that includes a lockbox 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 if availability under the ABL Credit Agreement falls below a specified threshold (i.e., $100 million for five (5) consecutive days until such time availability is greater than $100 million for twenty (20) consecutive days).

As of December 31, 2025, and December 31, 2024, 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.

Interest on the outstanding borrowings under the ABL Facility is payable monthly.

Depending on the loan type elected by the Company, interest accrues based on variable rates of the Secured Overnight Financing Rate (“SOFR”) plus an applicable rate ranging from 1.75% to 2.50% or prime rate plus an applicable rate ranging from 0.75% to 1.50% depending on the leverage ratio as of the most recently ended quarter.

The weighted average interest rate on the ABL Facility as of December 31, 2025, and December 31, 2024, was 5.72% and 6.80%, respectively, excluding the effect of interest rate swaps.

The Company pays an annualized commitment fee of 0.25% on the unused portion of its ABL Facility.

2029 Senior Notes

On February 2, 2024, Kodiak Services issued $750 million aggregate principal amount of 7.250% senior notes due 2029 (the “Notes”), pursuant to an indenture, dated February 2, 2024 (the “Indenture”), by and among Kodiak Services, Kodiak Gas Services, Inc., certain other subsidiary guarantors party thereto and U.S.

Bank Trust Company, National Association, as trustee.

At any time prior to February 15, 2026, Kodiak Services may, on any one or more occasions, redeem all or part of the Notes, at a redemption price equal to 100% of the principal amount of the Notes plus a “make-whole” premium plus accrued and unpaid interest, if any, up to, but not including, the redemption date.

At any time prior to February 15, 2026, Kodiak Services may also redeem up to 40% of the aggregate principal amount of the Notes with an amount of cash not greater than the net cash proceeds from one or more equity offerings, at a redemption price of 107.250% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, up to, but not including, the redemption date, as long as at least 50% of the aggregate principal amount of the Notes originally issued remains outstanding after each such redemption and the redemption occurs within 180 days after the date of the closing of such equity offering.

On or after February 15, 2026, Kodiak Services may, on any one or more occasions, redeem all or part of the Notes at the following redemption prices:

103.625% beginning on February 15, 2026;

101.813% beginning on February 15, 2027;

and 100.000% beginning on February 15, 2028.

The Indenture contains certain covenants that limit the ability of Kodiak and its restricted subsidiaries, including Kodiak Services, to make distributions on, purchase or redeem Kodiak’s equity interests or repurchase or redeem contractually subordinated indebtedness;

make certain investments;

incur or guarantee additional indebtedness, issue any disqualified stock, or issue other preferred securities (other than non-economic preferred securities);

create or incur certain liens to secure indebtedness;

sell or otherwise dispose of assets;

consolidate with or merge with or into another person;

enter into transactions with affiliates;

and create unrestricted subsidiaries.

If the Notes achieve an investment grade rating from any two of Moody’s Investors Service, Inc.

(“Moody’s”), S&P Global Ratings (“S&P”) and Fitch Ratings, Inc.

(“Fitch”) and no default under the Indenture exists, many of the foregoing covenants will terminate.

If Kodiak or Kodiak Services experiences certain kinds of changes of control and Moody’s, S&P or Fitch decreases their rating of the Notes as a result thereof within 60 days, holders of the Notes will be entitled to require Kodiak Services to repurchase all or any part of that holder’s notes at a price of 101% of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest, if any, on the notes repurchased to the date of settlement.

The Indenture also contains customary events of default.

On February 2, 2024, Kodiak Services issued $750.0 million aggregate principal amount of 7.25% senior notes due 2029, (the “2029 Senior Notes”).

The net proceeds from the 2029 Senior Notes were used to repay a portion of the debt outstanding under the ABL Facility and to pay related fees and expenses in connection with the issuance.

2033 Senior Notes

On September 5, 2025, Kodiak Services issued $600.0 million in aggregate principal amount of 6.50% senior unsecured notes due 2033 (the “2033 Senior Notes”).

Subsequently, on September 22, 2025, Kodiak Services completed a private offering of an additional $170.0 million of 2033 Senior Notes.

The net proceeds from these offerings were used by the Company to repay a portion of the debt outstanding under the ABL Facility.

2035 Senior Notes

On September 5, 2025, Kodiak Services issued $600.0 million in aggregate principal amount of 6.75% senior unsecured notes due 2035 (the “2035 Senior Notes”).

Subsequently, on September 22, 2025, Kodiak Services completed a private

offering of an additional $30.0 million of 2035 Senior Notes.

The net proceeds from these offerings were used by the Company to repay a portion of the debt outstanding under the ABL Facility.

Derivatives and Hedging Activities

To mitigate a portion of the exposure to fluctuations in the variable interest rate of the ABL Facility and the Term Loan, we have entered into various derivative instruments.

Our interest rate swaps exchange variable interest rates for fixed interest rates.

We have not designated any derivative instruments as hedges for accounting purposes and do not enter into such instruments for speculative or trading purposes.

To mitigate a portion of the exposure to fluctuations in the variable interest rate of the ABL Facility, we have entered into various derivative instruments.

Our interest rate swap exchanges variable interest rates for fixed interest rates.

The Company designated our interest rate swap as a cash flow hedge, and evaluated for hedge effectiveness and determined it to be highly effective as of December 31, 2025.

Derivative Instruments to the consolidated financial statements included elsewhere in this Annual Report.

Parent Entity Distribution

On June 27, 2023, we made a cash distribution of $42.3 million to a parent entity of Kodiak Holdings prior to the consummation of the IPO, of which $11.0 million was funded with cash on hand and $31.3 million was funded with borrowings under the ABL Facility.

Non-GAAP Financial Measures

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and depreciation and amortization;

plus (i) loss on extinguishment of debt;

plus (i) impairment of long-lived assets;

(ii) loss (gain) on derivatives;

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(v) transaction expenses;

(vi) loss (gain) on sale of assets;

and (vii) impairment of compression equipment.

(vi) sales tax reserve;

(vii) loss (gain) on disposal of business;

and (viii) loss (gain) on sale of assets.

We define adjusted EBITDA percentage as adjusted EBITDA divided by total revenues.

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We also believe that external users of our financial statements benefit from having access to the same financial measures that management uses in evaluating the results of our business.

Adjusted EBITDA and adjusted EBITDA percentage should not be considered as alternatives to, or more meaningful than, revenues, net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance and liquidity.

Adjusted EBITDA and adjusted EBITDA percentage should not be considered as alternatives to, or more meaningful than, revenues, net income (loss), operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP as measures of operating performance and liquidity.

Moreover, our adjusted EBITDA and adjusted EBITDA percentage as presented may not be comparable to similarly titled measures of other companies.

Given we are a capital-intensive business, depreciation, impairment of compression equipment and the interest cost of acquiring compression equipment are necessary elements of our costs.

To compensate for these items, we believe that it is important to consider both net income and net cash provided by operating activities determined under GAAP, as well as adjusted EBITDA and adjusted EBITDA percentage, to evaluate our financial performance and our liquidity.

Our adjusted EBITDA and adjusted EBITDA percentage exclude some, but not all, items that affect net income and net cash provided by operating activities, and these measures may vary among companies.

To compensate for these items, we believe that it is important to consider both net income (loss) and net cash provided by operating activities determined under GAAP, as well as adjusted EBITDA and adjusted EBITDA percentage, to evaluate our financial performance and our liquidity.

Our adjusted EBITDA and adjusted EBITDA percentage exclude some, but not all, items that affect net income (loss) and net cash provided by operating activities, and these measures may vary among companies.

Management compensates for the limitations of adjusted EBITDA and adjusted EBITDA percentage as an analytical tool by reviewing the comparable GAAP measures, understanding the differences between the measures and incorporating this knowledge into management’s decision-making processes.

The following table reconciles adjusted EBITDA to net income, the most directly comparable GAAP financial measure, for each of the periods presented (in thousands) :

The following table reconciles adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, for each of the periods presented:

Year ended December 31,

(in thousands)

Net income $ 81,588 $ 50,334

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Long-lived asset impairment 6,344 9,921

Loss on extinguishment of debt — 6,757

Gain on derivatives (24,017) (20,266)

Loss (gain) on derivatives — (24,017)

Equity compensation expense 24,529 17,658

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Transaction expenses (2)

Loss (gain) on sale of assets 29,612 (777)

Sales tax reserve (3)

Loss on disposal of business 33,349 20,598

Loss on sale of assets 28,217 9,014

Adjusted EBITDA $ 715,033 $ 609,550

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Adjusted EBITDA percentage 54.7 % 52.6 %

For detailed footnote descriptions, refer to the annotations beneath the following table.

The following table reconciles adjusted EBITDA to net cash provided by operating activities for each of the periods presented (in thousands) :

Year Ended December 31,

Net cash provided by operating activities $ 327,987 $ 266,326

Interest expense 197,144 222,514

Income tax expense 25,574 15,070

Deferred tax provision (15,429) (7,863)

Cash received on derivatives (25,251) (63,156)

Loss on extinguishment of debt — 2,398

Severance expense (1)

Transaction expenses (2)

(21,922) (25,622)

Change in operating assets and liabilities 78,395 22,480

Adjusted EBITDA $ 609,550 $ 438,148

Represents severance expense related to the CSI acquisition for the year ended December 31, 2024.

There were no such expenses for the year ended December 31, 2023.

Represents certain costs associated with non-recurring professional services and other costs, primarily related to the CSI Acquisition, for the year ended December 31, 2024.

Includes amortization of debt issuance costs, non-cash lease expense, provision for credit losses and inventory reserve.

Represents severance expense for the years ended December 31, 2025 and 2024.

Represents certain costs associated with non-recurring professional services and other costs, primarily related to the secondary offerings and CSI Acquisition for the years ended December 31, 2025 and 2024.

During the year ended December 31, 2025, the Company received a settlement offer from the Texas Comptroller’s office to resolve certain of the outstanding Texas sales and use tax matters.

Under this settlement arrangement, the Company would be subject to interest and penalties for all open periods totaling $28.0 million.

Discretionary Cash Flow

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and (iii) certain other expenses;

plus (w) cash loss on extinguishment of debt;

(x) severance expenses;

and (y) transaction expenses.

We believe discretionary cash flow is a useful liquidity and performance measure and supplemental financial measure for

us in assessing our ability to pay cash dividends to our stockholders, make growth capital expenditures and assess our operating performance.

plus (w) severance expenses;

(x) transaction expenses;

and (y) sales tax reserve.

We believe discretionary cash flow is a useful liquidity and performance measure and supplemental financial measure for us in assessing our ability to pay cash dividends to our stockholders, make growth capital expenditures and assess our operating performance.

Our ability to pay dividends is subject to limitations due to restrictions contained in our ABL Credit Agreement as further described elsewhere herein.

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(iii) certain other expenses;

and (iv) growth capital expenditures;

plus (w) cash loss on extinguishment of debt;

(x) severance expenses;

(y) transaction expenses;

(iv) growth capital expenditures;

and (v) other capital expenditures;

plus (w) severance expenses;

(x) transaction expenses;

(y) sales tax reserve;

and (z) proceeds from sale of assets.

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Free Cash Flow as presented may not be comparable to similarly titled measures of other companies.

The following table reconciles net cash provided by operating activities to discretionary cash flow, and free cash flow for each of the periods presented (in thousands):

The following table reconciles net cash provided by operating activities to discretionary cash flow, and free cash flow for each of the periods presented :

Year ended December 31,

(in thousands)

Net cash provided by operating activities $ 599,740 $ 327,987

Maintenance capital expenditures (76,002) (66,200)

(66,200) (36,990)

Loss on extinguishment of debt — 2,398

Severance expense (1)

Transaction expenses (2)

Sales tax reserve (3)

Change in operating assets and liabilities (87,049) 78,395

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(199,532) (227,193)

Other capital expenditures (5)

(62,753) (58,799)

Proceeds from sale of assets 30,182 35,030

Free cash flow $ 229,581 $ 122,319

For detailed footnote descriptions, refer to the annotations beneath the following table.

The following table reconciles net income to discretionary cash flow and free cash flow for each of the periods presented (in thousands):

Represents severance expense for the years ended December 31, 2025 and 2024.

Represents certain costs associated with non-recurring professional services and other costs, primarily related to the secondary offerings and CSI Acquisition, for the years ended December 31, 2025 and 2024.

During the year ended December 31, 2025, the Company received a settlement offer from the Texas Comptroller’s office to resolve certain of the outstanding Texas sales and use tax matters.

Under this settlement arrangement, the Company would be subject to interest and penalties for all open periods totaling $28.0 million.

Includes non-cash lease expense, provision for credit losses and inventory reserve.

Growth and other capital expenditures includes a $19.6 million increase and a $8.1 million increase in accrued capital expenditures for the years ended December 31, 2025 and 2024, respectively.

Growth capital expenditures includes a non-cash increase in the sales tax accrual on compression equipment purchases of $3.1 million and $22.0 million for the years ended December 31, 2025 and 2024, respectively.

These accrual amounts are estimated based on the best-known information as it relates to open audit periods with Texas Comptroller’s office.

Commitments and Contingencies to our consolidated financial statements for additional details.

Adjusted Net Income (Loss) and Adjusted Diluted Earnings Per Share

Adjusted net income and adjusted earnings per share are considered non-GAAP measures.

Adjusted net income (loss) is defined as net income (loss) excluding (i) impairment of long-lived assets;

(ii) severance expenses;

(iii) transaction expenses;

(iv) sales tax reserve;

(v) loss on disposal of business;

(vi) loss (gain) on derivatives;

and (vii) the tax effects of the adjustments.

Adjusted earnings (loss) per share is calculated by dividing adjusted net income by the weighted average diluted shares outstanding.

We believe these non-GAAP financial measures are useful to investors because they are key measures used by our management team to evaluate our operating performance, generate future operating plans, and make strategic decisions.

Adjusted net income (loss) and adjusted earnings (loss) per share are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, such as revenues, net income (loss), operating income (loss), earnings per share, or cash flows from operating activities.

Adjusted net income (loss) and adjusted earnings per share as presented may not be comparable to similarly titled measures of other companies.

The following tables reconcile net income (loss) to adjusted net income (loss) and diluted earnings per share to adjusted diluted earnings per share, for each of the periods presented:

Year ended December 31,

(in thousands, except per share data)

Net income $ 81,588 $ 50,334

Depreciation and amortization 260,272 182,869

Long-lived asset impairment 6,344 9,921

Change in fair value of derivatives 1,234 42,890

Loss on extinguishment of debt — 6,757

Deferred tax provision 15,429 7,863

Amortization of debt issuance costs 11,969 13,556

Equity compensation expense 17,658 5,914

Severance expense (1)

Transaction expenses (2)

(Gain) loss on sale of assets 29,612 (777)

Maintenance capital expenditures (1)

Sales tax reserve (3)

Loss on disposal of business 33,349 20,598

Gain on derivatives — (24,017)

Tax effect of adjustments (4)

(16,427) (7,810)

Discretionary cash flow $ 373,281 $ 248,149

Growth capital expenditures (5)(6)

Adjusted net income $ 139,421 $ 92,078

Weighted-average common shares outstanding:

Diluted 88,523 85,170

Diluted earnings per common share $ 0.89 $ 0.56

Long-lived asset impairment 0.07 0.12

Severance expense (1)

Transaction expenses (2)

Sales tax reserve (3)

Loss on disposal of business 0.38 0.25

Gain on derivatives — (0.28)

Tax effect of adjustments (4)

(0.20) (0.10)

Proceeds from sale of assets 35,030 1,449

Free cash flow $ 122,319 $ 65,111

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources —Cash Requirements —Capital Expenditures” for information regarding amounts designated as maintenance capital expenditures.

Represents severance expense related to the CSI acquisition for the year ended December 31, 2024.

There were no such expenses for the year ended December 31, 2023.

Represents certain costs associated with non-recurring professional services and other costs, primarily related to the CSI Acquisition, for the year ended December 31, 2024.

Includes non-cash lease expense, provision for credit losses and inventory reserve.

Growth capital expenditures includes an $8.1 million increase and a $1.7 million increase in accrued capital expenditures for the years ended December 31, 2024 and 2023, respectively.

Growth capital expenditures includes a non-cash increase in the sales tax accrual on compression equipment purchases of $22.0 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively.

These accrual amounts are estimated based on the best-known information as it relates to open audit periods with the state of Texas.

Commitments and Contingencies to our consolidated financial statements for additional details.

Adjusted diluted earnings per common share $ 1.54 $ 1.05

Represents severance expense for the years ended December 31, 2025 and 2024.

During the year ended December 31, 2025, the Company received a settlement offer from the Texas Comptroller’s office to resolve certain of the outstanding Texas sales and use tax matters.

Under this settlement arrangement, the Company would be subject to interest and penalties for all open periods totaling $28.0 million.

Represents the estimated tax effect of adjustments calculated using the Company’s adjusted tax provision.

Critical Accounting Estimates

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We estimate the fair values of the assets and liabilities acquired using accepted valuation methods, and, in many cases, such estimates are based on our judgments as to the future operating cash flows expected to be generated from the acquired assets throughout their estimated useful lives.

We will account for the various assets (including intangible assets) acquired and liabilities assumed with the CSI Acquisition based on our estimate of fair values.

Goodwill represents the excess of acquisition purchase price over the estimated fair values of the net assets acquired.

The assumptions and inputs incorporated within the fair value estimates are

subject to considerable management judgement and are based on industry, market, and economic conditions prevalent at the time of the acquisition.

The assumptions and inputs incorporated within the fair value estimates are subject to considerable management judgment and are based on industry, market, and economic conditions prevalent at the time of the acquisition.

Actual results may differ from the projected results used to determine fair value.

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A number of significant assumptions and estimates are involved in the application of the income approach to forecast future cash flows, including revenue and operating income growth rates, discount rates and other factors.

The assumptions and inputs incorporated within the fair value estimates are subject to considerable management judgement and are based on industry, market, and economic conditions prevalent at the time of the acquisition.

Actual results may differ from the projected results used to determine fair value.

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Impairment losses are recognized in the period in which the impairment occurs and represent the excess of the asset carrying value over its fair value estimated using future discounted net cash flows.

For the year ended December 31, 2025, capitalized internal-use software costs associated with legacy systems were written off as they were no longer in use given the implementation of a new enterprise resource planning system.

As a result, we recorded an impairment of $6.3 million.

For the year ended December 31, 2024, we determined that certain events occurred related to a group of non-operating compression units associated with a certain customer in bankruptcy that indicated the carrying value of assets may not be recoverable.

As a result, we recorded an impairment of compression equipment of $9.9 million for the year ended

December 31, 2024.

No impairment was recorded, and no triggering events were identified, for the years ended December 31, 2023 and 2022.

As a result, we recorded an impairment of compression equipment of $9.9 million for the year ended December 31, 2024.

No impairment was recorded, and no triggering events were identified, for the year ended December 31, 2023.

Estimated Useful Lives of Property, Plant and Equipment

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We record legal costs as incurred, and all recorded legal liabilities are revised, as required, as better information becomes available to us.

As of December 31, 2024 and 2023, based on the information currently available, we accrued a contingent liability of approximately $70.1 million and $28.8 million, respectively, relating to the Sales Tax Audit for the periods currently under audit classified in accrued liabilities on the consolidated balance sheets.

As of December 31, 2025 and 2024, based on the information currently available, we accrued a contingent liability of approximately $102.3 million and $70.1 million, respectively, relating to the Sales Tax Audits for the periods currently under audit classified in accrued liabilities on the consolidated balance sheets.

As of December 31, 2025 and 2024, there are no other legal matters for which resolution could have a material adverse effect on the consolidated financial statements.

In the first quarter of 2025, the Company received a report regarding certain payments to local government officials in Mexico that commenced prior to the Company’s acquisition of its Mexican business in connection with the CSI Acquisition that may present potential compliance issues under U.S.

In response, the Company retained outside counsel to conduct an internal investigation of the reported payments, including whether any payments made may be indirectly benefiting individuals associated with certain criminal cartel organizations, some of which may be designated as foreign terrorist organizations (FTOs) and Specially Designated Global Terrorists (SDGTs) per Executive Order 14157 of January 20, 2025.

The investigation is substantially complete, and has determined that certain payments likely were made to persons associated with an organization designated as an FTO or SDGT.

The payments appear to have been made in order to protect employees of the Mexican business from threats of harm or harassment, and to ensure access to work sites.

At this time, the Company believes that the aggregate amount of these payments was not material.

As disclosed elsewhere in this filing, the Company sold its operations and legal entities in Mexico on September 30, 2025.

The Company has voluntarily self-reported this matter to governmental authorities in the United States, including the Department of Justice and the Office of Foreign Assets Control, and is cooperating with the investigative steps being taken by the Department of Justice and Office of Foreign Assets Control into the matter as a result of the voluntary self-disclosure.

The Company also voluntarily self-reported to the SEC and intends to cooperate fully should there be any investigation by the Commission.

This matter could result in U.S.

governmental authorities seeking criminal and/or civil sanctions, including monetary fines and penalties, against the Company, as well as requiring additional changes to the Company’s business practices and compliance programs.

To the extent any of the payments at issue are determined to be illegal in a foreign jurisdiction, it is possible that there could be civil or criminal penalties assessed in that jurisdiction.

Although the Company does not expect the findings from the investigation or actions taken by governmental authorities to have a significant adverse impact on its business, results of operations, financial condition and cash flows, there can be no assurance as to the ultimate outcome of these matters at this time.

Fair Value of Derivative Instruments

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the market approach, the income approach, and the cost approach in determining the appropriate valuation methodologies based on the nature of the asset or liability being measured and the reliability of the inputs used in arriving at fair value.

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

The interest rate swaps 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.

We use interest rate swap agreements to manage exposure to variability in our cash flows.

These derivatives are recorded at fair value on our consolidated balance sheet, with changes in fair value recognized in accumulated other comprehensive income.

The interest rate swap is 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.

As of December 31, 2025 and 2024, the fair value of derivative instruments were $4.7 million and $21.2 million, respectively.

2 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis