What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-16 compared with 2025-03-17 · 133 added, 134 removed, 295 unchanged (48% of the section changed)

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Certain variances presented as changes in year over year amounts that represent results that are not meaningful are indicated as “NM.”

We rent, design, sell, service, operate and maintain natural gas compressors and related equipment for oil and gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers along with limited in-house assembly.

A limited level of assembly work is done in-house and an increasing amount is done by third-party contractors.

We also provide an exchange and rebuild program for compressors and maintain an inventory of new and used compressors to facilitate this business.

Our primary focus is on the rental of natural gas compressors.

Our rental contracts generally provide for initial terms of six to 60 months, with our larger horsepower units having longer initial terms than our small and medium horsepower units.

After the initial term of our rental contracts, most of our customers have continued to rent our compressors on a month-to-month basis.

We rent, design, install, service and maintain natural gas and electric compressors and related equipment for oil and gas production and processing facilities, generally using equipment from third-party fabricators and OEM suppliers.

Substantially all of our compressor assembly is done by third-party contractors while a limited level of assembly work remains in-house at our Tulsa, Oklahoma facility.

Our primary focus is on the rental of natural gas engine and electric motor drive compressors.

Our rental agreements generally provide for initial terms of 12 to 60 months, with our large horsepower units having longer initial terms than our small and medium horsepower units.

After the initial term of our rental agreements, most of our customers have continued to rent our compressors on a month-to-month basis.

Rental amounts are billed monthly in advance and include maintenance of the rented compressor units.

We conduct our operations in several oil and gas producing basins throughout the United States including the Permian, Barnett Shale, Anadarko, San Juan, Utica/Marcellus Shale, Eagle Ford Shale and Antrim Shale.

We conduct our operations in several oil and gas producing basins throughout the U.S.

including the Permian, Barnett Shale, Anadarko, San Juan, Utica/Marcellus Shale, Eagle Ford Shale and Antrim Shale.

We have operating facilities in five states including Texas, Oklahoma, New Mexico, Michigan and Ohio.

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We operate in one reporting segment.

In December 2023, we decided to cease fabrication of new compressor units for sale or rental to customers at our Midland, Texas facility.

We continue to maintain new unit compressor fabrication capability at our Tulsa, Oklahoma facility as well as having relationships with multiple outsourced compressor fabrication providers.

State of the Industry and Outlook

Our strategy for growth is focused on our compressor rental business.

Gross margins, exclusive of depreciation and amortization, for our rental business have historically been in the mid-40 percent to low-60 percent range, while margins for the compressor sales business tend to be substantially lower.

Gross margins, exclusive of depreciation and amortization, for our rental business have historically been in the mid-50 percent to low-60 percent range, while margins for the compressor sales and aftermarket services businesses tend to be substantially lower.

The oil and gas equipment rental and services industry is cyclical in nature.

The most critical factor in assessing the outlook for the industry is the worldwide supply and demand for oil and gas and the corresponding changes in commodity prices.

As demand and prices increase, oil and gas producers typically increase their capital expenditures for drilling, development and production activities, although recent equity capital constraints and demands from institutional investors to keep spending within operating cash flow have meaningfully restrained capital expenditure budgets of domestic exploration and production companies.

Generally, increased capital expenditures result in greater revenues and profits for service and equipment companies.

Generally, higher commodity prices lead to higher capital expenditures by oil and gas producers and higher levels of production.

Generally, sustained higher commodity prices lead to higher capital expenditures by oil and gas producers and higher levels of production.

In general, we expect our overall business activity and revenues to track the level of activity in the oil and gas industry, specifically production levels, with changes in crude oil and condensate production and consumption levels and prices affecting our business more than changes in domestic natural gas production and consumption levels and prices.

In recent years we have increased our rental and sales in unconventional oil shale plays, which are more dependent on crude oil prices.

In recent years we have increased our rentals in unconventional oil shale plays, which are more dependent on crude oil prices.

With this shift towards oil production the demand for overall compression services and products is driven by two general factors;

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These latter types of applications have historically been serviced by wellhead size compressors, and continue to be, but there has also been an economic move by our customers towards centralized drilling and production facilities, which have increased the market need for single and multiple larger horsepower compressor packages.

We recognized this need in recent years and have shifted our cash and fabrication resources towards renting gas compressor packages that range from 400 horsepower up to 2,500 horsepower.

We recognized this need in recent years and have shifted our capital program towards acquiring compressor packages that range from 400 horsepower up to 2,500 horsepower for rental to our customers.

While this is a response to market conditions and trends, it also provides us with the opportunity to compete as a full-line compression service provider.

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Fleet horsepower available (at period end) 662,542 598,840 520,365

598,840 520,365 425,340

Fleet horsepower available - average 610,580 558,752 472,360

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Of the total horsepower utilized as of December 31, 2025, 464,137 of horsepower was being rented under contracts expiring between 2026 and 2030 and 98,539 of that horsepower was being rented on a month-to-month basis.

Of the 1,208 compressors utilized as of December 31, 2024, 573 were being rented on a month-to-month basis.

Of the 1,245 compressors utilized as of December 31, 2025, 754 were being rented under multi-year contracts and 491 were being rented on a month-to-month basis.

Our Performance Trends and Outlook

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The level of production for crude oil activity and capital expenditures has generally been dependent upon the prevailing view of future crude oil prices, which are influenced by numerous supply and demand factors, including availability and cost of capital, well productivity and development costs, global and domestic economic conditions, environmental regulations, policies of OPEC and Russia, and other factors.

We feel that the current crude oil market production outlook is favorable, with current prices creating strong incentives for our customers to maximize their production levels.

While crude oil prices have historically been volatile, we expect demand for our existing compressor fleet to remain positive assuming crude oil prices remain within reasonable bands with respect to current pricing levels.

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remains steady while short term price volatility remains a factor due to geopolitical influences and shifts in LNG exports.

We believe opportunities for increased utilization of our small and medium horsepower units are supported by continued investment in shale gas development, particularly in the Permian basin and Marcellus Shale.

Non-GAAP Financial Measures

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Adjusted EBITDA

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income (loss) before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance and non-cash equity-classified stock-based compensation expenses.

“Adjusted EBITDA” is a non-GAAP financial measure that we define as net income before interest, taxes, depreciation and amortization, as well as an increase in inventory allowance, impairments, retirement of rental equipment, non-recurring restructuring charges including severance and non-cash equity-classified stock-based compensation expenses.

This term, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with GAAP.

Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP.

However, management believes Adjusted EBITDA is useful to an investor in evaluating our operating performance because:

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• it is used by our management for various purposes, including as a measure of operating performance, in presentations to our Board of Directors, as a basis for strategic planning and forecasting, and as a component for setting incentive compensation.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported in accordance with GAAP.

Some of these limitations are:

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There are other material limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the impact of certain recurring items that materially affect our net income or loss, and the lack of comparability of results of operations of different companies.

Please read the table below to see how Adjusted EBITDA reconciles to our net income (loss), the most directly comparable GAAP financial measure.

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

Please read the table below to see how Adjusted EBITDA reconciles to our net income, the most directly comparable GAAP financial measure.

The following table reconciles our net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA for the periods presented:

Year Ended December 31,

2025 2024 2023

Net income (loss) $ 17,227 $ 4,747 $ (569)

Net income $ 19,928 $ 17,227 $ 4,747

Interest expense 13,565 11,927 4,082

Interest income (2,444) — —

Income tax expense 6,603 4,439 1,873

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Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024

We generate revenue from renting compressors to our customers.

These contracts, which all qualify as operating leases under GAAP, may also include a fee for servicing the compressor unit during the rental contract.

Our rental contracts typically range from six to 60 months.

Our revenue is recognized over time, with monthly payments over the term of the contract.

After the terms of the contract have expired, a customer may renew its contract or continue renting on a monthly basis thereafter.

The primary costs associated with providing our compressor fleet to our customers includes routine maintenance and repairs, fluids, primarily motor oils, and labor and related support costs for our field service facilities and employees that are geographically dispersed throughout our operating regions.

We generate revenue from renting, maintaining and servicing compressors to our customers under contractual arrangements.

The underlying rental service agreements, which all qualify as operating leases under GAAP, generally include a fee for servicing the compressor unit as well as surcharges for fluids during the rental term.

Our rental agreement terms typically range from 12 to 60 months.

Our revenue is recognized over time, with monthly payments over the term of the agreement.

After the terms of the agreement have expired, a customer may renew its agreement or continue renting on a monthly basis thereafter.

The primary costs associated with providing our compressor fleet to our customers includes routine maintenance and repairs, fluids, primarily motor oils, and labor and related support costs for our field service facilities and service employees that are geographically dispersed throughout our operating regions.

The following table summarizes the revenues, costs, adjusted gross margin and related operating statistics with respect to our rentals of compressors for the periods presented:

Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Rental revenue $ 164,326 $ 144,236 $ 20,090 13.9 %

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Percent of total company revenues 95.4 % 92.0 % 3.4 %

Rented horsepower 491,756 420,432 71,324 17.0 %

Percent of fleet horsepower utilized 82.1 % 80.8 % 1.3 %

Units utilized 1,208 1,247 (39) (3.1) %

Percent of fleet units utilized 63.2 % 66.5 % (3.3) %

Customers under contract 68 84 (16) (19.0) %

Rental revenue increased for the year ended December 31, 2024, compared to 2023 due primarily to an increase in rented horsepower despite a nominal decrease in the number of units rented and a decrease in total customers.

The increase in revenue reflects a continuing trend of growing demand for our higher horsepower units (400 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins.

The increase in utilized horsepower reflects the continued addition of high horsepower compressor units to our fleet during 2024 consistent with our emphasis on larger units over the past two years.

Rented horsepower (at period end) 562,676 491,756 70,920 14.4 %

Horsepower utilization (at period end) 84.9 % 82.1 % 2.8 %

Units utilized (at period end) 1,245 1,208 37 3.1 %

Units utilization 65.0 % 63.2 % 1.8 %

Rental revenue increased for the year ended December 31, 2025, as compared to 2024 due primarily to an increase in rented horsepower and units utilized.

The increase in revenue reflects a continuing trend of growing demand for our large horsepower units (400 horsepower and greater) which provide for higher rental rates and realized adjusted gross margins.

Our utilized horsepower increased during 2025 as compared to 2024 which reflects the continued addition of large horsepower units to our fleet consistent with our emphasis on larger units over the past several years, as well as the retirement of certain medium and small horsepower units from the fleet partially offset by the return of small horsepower units to the idle fleet by certain customers at the end of their lease terms.

During the year ended December 31, 2025, we placed into service a total of 434 newly set units, including 364 from our existing fleet and 70 new units.

Of those sets, a total of 111 were high horsepower units and 22 of those were new units to the fleet.

The decline in customers is primarily attributable to E&P industry consolidation as well as the acquisition of existing producing oil and gas properties among E&P companies;

however, it has not resulted in any meaningful decrease in our level of business activity.

The cost of rentals increased on an absolute basis due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs.

Of those unit sets, a total of 126 were large horsepower units and 70 of those were new units to the fleet.

The cost of rentals increased on an absolute basis, consistent with revenues, due to the effects of supporting a larger quantity of utilized horsepower and inflationary pressures primarily in labor and parts costs.

An expanding portion of our rented compressor units utilize our proprietary System Management and Recovery Technology (“SMART”) and telemetry software which reduces unplanned shutdowns and increases productivity.

Despite inflationary pressure associated with our primary cost components, the SMART and telemetry technology allows us to streamline and manage our maintenance activities more efficiently and thereby mitigate the costs to a manageable extent.

As a result of these factors, our adjusted gross margin increased on both an absolute basis as well as a percentage of revenues for the year ended December 31, 2025, compared to the year ended December 31, 2024.

We generate revenue by the sale of custom/assembled compressors and parts, as well as exchange/rebuilding customer owned compressors and sale of used rental equipment.

Costs of sales include purchases of engines, compressors, coolers and other component materials as well as direct and indirect labor attributable to the assembly of equipment to meet the unique specifications of our customers.

In addition, our costs of sales include overhead and related support costs attributable to our assembly, repair and overhaul facilities in Midland, Texas and Tulsa, Oklahoma.

We generate revenue primarily from the sale of compressor parts.

Costs of sales include purchases of component materials.

In addition, our costs of sales include overhead and related support costs attributable to our storage and assembly, facilities including Midland, Texas through its closure at the end of March 2025.

The following table summarizes the revenues, costs and adjusted gross margin with respect to our sales of compressors, parts and equipment and repair/overhaul services for the periods presented:

Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Sales revenue $ 3,992 $ 7,613 $ (3,621) (47.6) %

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Percent of total company revenues 2.3 % 4.9 % (2.6) %

Sales revenue declined for the year ended December 31, 2024, compared to 2023.

Sales are subject to fluctuations in the timing of industry activity related to our customers’ capital projects and, as such, can vary substantially between periods.

Due to these circumstances as well as the costs of maintaining support facilities relative to revenues, we continue to shift our business away from sales of new compressor packages to renting our owned units to our customers.

While the costs to support our sales revenues declined on an absolute basis, primarily reflecting a lower volume of business, the gross margin declined to a negative value due primarily to indirect labor and fixed overhead costs that are not otherwise subject to capitalization at our assembly, repair and overhaul facilities.

Sales revenue declined for the year ended December 31, 2025, as compared to 2024 due primarily to the phasing out of direct sales of compressors and rebuild work which was the primary focus of the former Midland Facility.

While the costs to support our sales revenues declined on an absolute basis, primarily reflecting a lower volume of business, the adjusted gross margin improved marginally due primarily to the absence of indirect labor and fixed overhead costs that are not otherwise subject to capitalization subsequent to the closure of the former facility in Midland, Texas which we closed at the end of March 2025.

Sales represented an insignificant portion of our overall gross margins in 2025 and 2024.

Aftermarket Services

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Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Aftermarket services revenue $ 3,997 $ 4,893 $ (896) (18.3) %

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Percent of total company revenues 2.3 % 3.1 % (0.8) %

Third party aftermarket services revenues, costs and margin declined for the year ended December 31, 2024, compared to 2023.

The decline is primarily attributable to a lower volume of service call-out work performed during 2024 compared to 2023.

Aftermarket services only represented 3.1 percent of our revenue in 2024, providing minimal impact on our overall adjusted gross margin.

Aftermarket services revenues and costs declined for the year ended December 31, 2025, compared to 2024;

however, the absolute gross margin and percentage both improved as compared to 2024.

The decline in revenues and costs is primarily attributable to a lower volume of unit commissioning work performed during 2025 compared to 2024 as well as the effects of lower freight costs.

Aftermarket services represented an insignificant portion of our overall gross margins in 2025 and 2024.

Selling, General and Administrative Expenses

Our selling, general and administrative (“SG&A”) expenses include compensation and benefits, including stock-based compensation, commissions and other support costs of departments serving administrative and corporate governance functions, such as executive management, finance and accounting, sales and marketing, human resources, information technology, health, safety and environmental and investor relations.

In addition, SG&A includes non-personnel costs, such as occupancy costs, IT support costs, professional fees and other supporting corporate expenses including public company compliance costs.

When applicable, SG&A expenses also includes severance benefits and related costs associated with exit activities and restructuring actions.

Our selling, general and administrative (“SG&A”) expenses include compensation and benefits, including stock-based compensation, commissions and other support costs of departments serving administrative and corporate governance functions, such as executive management, finance and accounting, sales and marketing, procurement, logistics and supply chain, human resources, information technology (“IT”), health, safety and environmental and investor relations.

In addition, SG&A includes non-personnel costs, such as rent and occupancy, IT support, professional fees and other supporting corporate expenses including public company compliance costs.

The following table summarizes the components of our SG&A expenses for the periods presented:

Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Primary selling, general and administrative expenses $ 20,285 $ 19,191 $ 1,094 5.7 %

Stock-based compensation 1,821 2,054 (233) (11.3) %

Severance and restructuring charges 33 1,224 (1,191) NM

Stock-based compensation - equity classified 2,126 1,821 305 16.7 %

Total $ 22,411 $ 21,012 $ 1,399 6.7 %

SG&A expenses as a percent of total revenues 13.0 % 13.4 % (0.4) %

SG&A expenses increased for the year ended December 31, 2024, as compared to 2023 on an absolute dollar basis while continuing a steady decline as a percent of revenues.

As our revenues have increased commensurate with our growth, total SG&A expenses have consistently declined as a percent of revenues despite our incurring a higher level of costs to appropriately scale our administrative function.

The absolute dollar increase was primarily impacted by (i) higher salaries, benefits and commissions of $3.3 million reflecting new executive leadership and support staff growth as well and higher commissions attributable to higher revenues, (ii) higher consulting expenses of $1.2 million primarily attributable to recruiting charges and interim staffing for certain senior and executive roles, (iii) higher public company compliance-related costs of $1.0 million consistent with our change in SEC filer status and (iv) higher information technology support costs of $0.4 million in support of our growth.

These items were partially offset by lower stock-based compensation expense of $0.2 million as certain prior year awards were fully amortized and lower legal fees of $0.4 million.

In addition, we incurred less than $0.1 million of severance charges in 2024 associated with certain restructuring activities at our assembly facilities.

The 2023 period included a restructuring charge of $1.2 million associated with a previously disclosed compensation arrangement with our former CEO who served in an interim role from mid-November of 2022 through mid-February of 2024.

SG&A expenses increased for the year ended December 31, 2025, as compared to 2024 on an absolute dollar basis and declined marginally as a percent of total revenues.

In general, the increase in primary SG&A expenses reflects a higher level of cost to appropriately scale our administrative function.

The increase in primary SG&A expenses during 2025 as compared to 2024 was impacted by (i) higher IT support costs of $1.0 million in support of our growth initiatives and noncapitalizable costs associated with certain IT system conversion projects, (ii) higher salaries and benefits of $0.8 million reflecting support staff growth and (iii) higher occupancy and office costs of $0.2 million.

These increases were partially offset by (i) lower commissions of $0.5 million and (ii) lower credit loss expenses of $0.2 million .

Our equity classified stock-based compensation increased during in 2025 over 2024 due primarily to a higher mix of performance-based share unit awards, or PSUs, for our executive officers in the 2025 period.

PSUs generally have a higher grant-date fair value than traditional restricted stock and restricted stock unit awards.

Depreciation and Amortization

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Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Depreciation and amortization allocable to cost of revenues:

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Corporate depreciation 358 413 (55) (13.3) %

Intangible asset amortization 121 125 (4) (3.2) %

Intangible asset amortization — 121 (121) NM

Total $ 36,656 $ 31,347 $ 5,309 16.9 %

Depreciation and amortization as a percent of total revenues 21.3 % 20.0 % 1.3 %

Depreciation and amortization expense increased on an absolute basis and declined as a percent of revenues during the year ended December 31, 2024, compared to 2023.

The increase is primarily the result of new units added to our rental fleet in 2024 and 2023.

We placed into service 22 high horsepower units (approximately 28,740 horsepower) to our fleet in 2024 and 92 units (approximately 98,349 horsepower) in 2023.

All 22 in 2024 and 73 of those units in 2023, were 400 horsepower or larger, representing a substantial portion of the total horsepower added during each year, respectively.

These higher horsepower unit additions, which began in earnest during 2023, are reflective of our strategic plans to concentrate our business development on these higher margin applications.

Depreciation and amortization expense increased on an absolute basis during the year ended December 31, 2025, compared to 2024, due primarily to depreciation expense associated with the large horsepower units placed in service during the second half of 2024 continuing through the end of 2025.

These large horsepower unit additions, which began in earnest during 2023, are reflective of our strategic plans to concentrate our business development on these higher margin applications.

We assess our long-lived assets for impairment on an annual basis or when indicators of impairment are present.

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Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Impairments $ 2,600 $ 841 $ 1,759 209.2 %

In connection with our efforts to plan for an eventual sale of the Former Headquarters Property, we undertook certain actions in the fourth quarter of 2025 to begin building-out a new leased office facility in Midland, Texas.

While the Former Headquarters Property remained in use as of December 31, 2025, these actions triggered a review for impairment of the Former Headquarters Property consistent with our plans to relocate to the new leased facility in 2026.

In our evaluation for the impairment, the cash flows that we considered were those that we expect to receive from a sale of the Former Headquarters Property, less costs to sell, or fair value.

As the carrying value of the Former Headquarters Property exceeded the fair value less costs to sell, we recognized an impairment of $2.6 million in the fourth quarter of 2025.

Subsequently, we entered into an exclusive listing agreement in February 2026 for the sale of the Former Headquarters Property.

Please see N o te 7 ( “ Propert y and Equipment ” ) and Note 19 ( “ Subsequent Events ” ) to our Consolidated Financial Statements for additional information.

During 2024, we fully impaired an intangible asset attributable to a trade name for $0.7 million.

Consistent with our shift in focus away from the sales of compressor and related technology, we determined that we will no longer market the technology associated with the trade name.

Please see Note 8 ( “ I n tangible Assets ” ) to our Consolidated Financial Statements for additional information.

In addition, we fully impaired certain information technology assets in the amount of $0.2 million for which we have terminated plans to develop and utilize the associated applications.

During 2023, we fully impaired certain information technology assets in the amount of $0.8 million under similar circumstances.

In addition, we fully impaired certain IT assets in the amount of $0.2 million for which we terminated plans to develop and utilize the associated applications.

Inventory Allowance

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Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Inventory allowance $ 1,114 $ 1,863 $ (749) (40.2) %

Due primarily to the slow-moving nature, obsolescence of a portion of our long-term inventory and inventory related to the retirement of certain rental equipment, we recorded an increase of $1.9 million to the inventory allowance reserve for the year ended December 31, 2024.

During 2023, we recorded an increase of $4.0 million to the inventory allowance reserve under similar circumstances as well as our decision to cease further assembly activities at our facility in Midland, Texas.

During 2025, we recorded an increase of $1.1 million to the allowance for obsolescence primarily attributable to limitations on our ability to market certain assembled parts as well as the transfer of inventory that remains useful from our former Midland, Texas facility, in connection with its closing in March 2025, to our other operating facilities.

Due primarily to the slow-moving nature, obsolescence of our long-term inventory and inventory related to the retirement of certain rental equipment, we recorded an increase of $1.9 million to the inventory allowance reserve for the year ended December 31, 2024.

We ended 2025 with an inventory allowance balance of $3.6 million.

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Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Retirement of rental equipment $ 728 $ 28 $ 700 NM

Retirements of compressor units during 2024 were minimal as compared to 2023 during which time we determined 95 units should be retired from our rental fleet for which we recorded loss on retirement of rental equipment during the year.

Gain on the Sale of Property and Equipment

We retired over 12,000 horsepower of small and medium horsepower compressor units during 2025 with only those units retired having any remaining carrying value .

Such retirements were minimal during 2024.

Gain on Disposition of Assets

As circumstances warrant, we will market certain property and equipment, primarily trucks, when we have determined that there is no longer a productive use for such assets or favorable opportunities arise to monetize otherwise idle assets.

Gains and losses are recognized accordingly upon the completion of such transactions.

The following table presents the gains recognized upon the sale of property and equipment for the periods presented:

The following table presents the gains recognized upon the disposition of assets for the periods presented:

Year Ended December 31,

2024 2023 Change % Change

Gain on the sale of property and equipment, net $ 430 $ 481 $ (51) (10.6) %

2025 2024 Change %

Gain on the disposition of assets, net $ 270 $ 430 $ (160) (37.2) %

Gains recognized during the years ended December 31, 2025 and 2024 are primarily attributable to the sales of trucks after the completion of their useful lives.

In addition, amounts are included during both years for sales scrap materials.

Interest Expense

Interest expense primarily reflects the costs of borrowing, including commitment fees and the amortization of debt issue costs, under our Credit Facility, net of amounts capitalized attributable to certain capital projects.

Also included is interest expense on our financing leases.

The following table summarizes the components of our interest expense for the periods presented:

Also included is interest expense on our financing leases during 2024 as all were settled before 2025.

The following table presents the components of our interest expense for the periods presented:

Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Interest on borrowings, finance leases and related fees $ 14,869 $ 15,904 $ (1,035) (6.5) %

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Capitalized interest (2,472) (4,723) 2,251 (47.7) %

Total $ 11,927 $ 4,082 $ 7,845 NM

Total $ 13,565 $ 11,927 $ 1,638 13.7 %

Weighted-average interest rates on borrowings 7.31 % 8.82 % (1.51) %

Weighted-average outstanding borrowings $ 192,921 $ 169,008 $ 23,913

Interest expense increased during the year ended December 31, 2024 as compared to 2023 due primarily to over $48 million of higher average borrowings outstanding under our Credit Facility during 2024.

In addition, we incurred higher debt issue cost amortization due primarily to costs associated with amendments to the Credit Facility and lower capitalized interest as a result of a smaller capital expenditures program in 2024 as compared to 2023.

These increases were marginally offset by the effect of lower average interest rates which declined in the second half of 2024 consistent with Federal Reserve interest rate reductions.

Other Income (Expense)

This caption primarily reflects non-operating items of income and loss including non-cash gains and losses attributable to our corporate-owned life insurance (“COLI”) policies related to our deferred compensation plan.

Please see Note 1 2 ( “ Deferred Compensation Plan ” ) to our Consolidated Financial Statements for additional information regarding the plan.

Interest expense increased during the year ended December 31, 2025, as compared to 2024 due primarily to the effect of $2.3 million lower capitalized interest as a result of the volume and timing of the completion of certain compressor assembly projects during 2025.

In addition, amortization of debt issue costs increased during 2025 as compared to 2024 due primarily to the amortization of costs associated with certain amendments to the Credit Facility that took place in June of 2024 as well as the Fourth Amendment to the Amended and Restated Credit Agreement (the “Fourth Amendment”) that was completed in April 2025.

While the average borrowings outstanding under our Credit Facility have increased during 2025 as compared 2024, we experienced lower average interest rates consistent with the Federal Reserve interest rate reductions implemented in the second halves of 2024 and 2025 as well as the lower interest rates at comparable leverage levels attributable to the Fourth Amendment.

Interest Income

This component of our income reflects interest earned on investments and certain financial assets including, when applicable, interest on significant income tax refunds receivable.

The following table indicates our interest income for the periods presented:

Year Ended December 31,

2025 2024 Change %

Interest income $ 2,444 $ — $ 2,444 NM

Interest income for the year ended December 31, 2025 is entirely attributable to interest earned on certain income tax refunds for 2015, 2016, 2017 and 2019.

The income tax refunds, including interest, for these tax years were substantially determined and settled in the first quarter of 2026.

Please see Note 11 ( “ Income Taxes ” ) to our Consolidated Financial Statements for additional information.

Other Income (Expense), net

This component of our income primarily reflects non-operating items of income and loss including non-cash gains and losses attributable to our corporate-owned life insurance (“COLI”) policies related to our deferred compensation plan as well as other credits, charges and scrap asset sales.

Please see Note 12 ( “ Deferred Compensation Plan ” ) to our Consolidated Financial Statements for additional information regarding the deferred compensation plan.

The following table indicates our other income (expense) for the periods presented:

Year Ended December 31,

2024 2023 Change % Change

2025 2024 Change %

Other income (expense), net $ 354 $ 268 $ 86 32.1 %

Other income was relatively consistent during the year ended December 31, 2024 as compared to 2023 with net gains from investments supporting our COLI policies comprising the majority of the amounts for each period.

Other amounts include certain vendor rebates and other miscellaneous non-operating income.

Income Tax Expense

Income tax expense represents our income tax provision as determined in accordance with GAAP.

Other income (expense), net improved for 2025 as compared to 2024 due primarily to certain non-operating credits and scrap asset sales as well as unrealized gains attributable to our COLI policies associated with our deferred compensation plan.

Provision for Income Taxes

Provision for income taxes represents our income taxes as determined in accordance with GAAP.

It considers taxes attributable to our obligations for federal taxes under the IRC as well as to various states in which we operate, primarily Texas.

Please see Note 1 1 ( “ I ncome Taxes ” ) to our Consolidated Financial Statements for additional information.

Please see Note 11 ( “ Income Taxes ” ) to our Consolidated Financial Statements for additional information.

The following table summarizes our income tax provision for the periods presented:

Year Ended December 31,

2024 2023 Change % Change

Income tax expense $ 4,439 $ 1,873 $ 2,566 NM

2025 2024 Change %

Income tax expense $ 6,603 $ 4,439 $ 2,164 48.7 %

Effective tax rate 24.9 % 20.5 % 4.40 %

Income tax expense increased for the year ended December 31, 2024, compared to 2023 due primarily to substantially higher pre-tax income during 2024 despite a lower effective tax rate.

Income tax expense increased for the year ended December 31, 2025, compared to 2024 due primarily to substantially higher pre-tax income during 2025 and the impact of a higher effective tax rate attributable to state and local income taxes.

Our effective tax rate for both years differs from the U.S.

federal statutory rate of 21%.

The effective tax rate declined during 2024 from that during 2023 largely due to certain executive severance compensation expenses incurred during 2023 that were non-deductible for income tax purposes.

Only a minimal portion of our total income tax expense is current while $4.2 million and $1.8 million is considered deferred for 2024 and 2023, respectively.

Financial Condition

Liquidity and Capital Resources

Our primary sources of liquidity include cash on hand, cash provided by operating activities and borrowings under our Credit Facility.

The Credit Facility provides us with up to $300 million in borrowing commitments with an additional $50 million at our request.

The borrowing base under the Credit Facility was $300.0 million with $168.0 million of borrowings outstanding as of March 14, 2025, leaving $132.0 million of availability under the Credit Facility.

Our primary sources of liquidity include cash provided by operating activities and borrowings under our Credit Facility.

On April 18, 2025, we entered into the Fourth Amendment which provides us with up to $400.0 million in borrowing commitments with an additional $100.0 million at our request through an accordion feature.

The accordion feature is subject to certain conditions, including the absence of a default, the consent of new or existing lenders willing to provide additional commitments, and our pro forma compliance with the Credit Facility ’ s financial covenants.

As of December 31, 2025, the borrowing base under the Credit Facility was $400.0 million with $230.0 million of borrowings outstanding leaving $170.0 million of availability under the Credit Facility.

Our cash flows from operating and investing activities are subject to a degree of volatility due primarily to (i) the consistency of our customers in remitting amounts owed to us for our services in full and on a timely basis and (ii) the timing of payments to our vendors and suppliers for capital projects which are often made well in advance of placing new compressor equipment into service.

In order to mitigate such volatility we employ disciplined efforts to monitor customer credit and maintain communications to support collection efforts when necessary.

Furthermore, and in certain circumstances, we require deposits in advance of transactions that require substantial investment on our part.

To the extent necessary, we rely on the availability of our Credit Facility to fund capital expenditures beyond that provided by our cash flows from operating activities.

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The level of our capital expenditures will vary in future periods depending on energy market conditions and other related economic factors.

Based upon existing economic and market conditions, we believe that cash on hand, cash flows from operating activities and borrowings under the Credit Facility will be sufficient to satisfy our capital and liquidity requirements for at least the twelve months subsequent to the date that this Annual Report on Form 10-K was filed.

We also believe we have flexibility with respect to our financing alternatives and adjustments to our capital expenditure plans if circumstances warrant.

Based upon existing economic and market conditions, we believe that cash on hand, cash flows from operating activities and borrowings under the Credit Facility will be sufficient to satisfy our capital, dividend and liquidity requirements for at least the twelve months subsequent to the date that this Annual Report on Form 10-K was filed.

We also believe we have flexibility with respect to our financing alternatives and can make adjustments to our capital expenditure plans if circumstances warrant.

We do not have any material continuing commitments related to our current operations that cannot be met with our cash on hand, cash from operating activities and borrowings under our Credit Facility.

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Cash From Operating Activitie s.

As of December 31, 2024, we had $2.1 million of cash on hand.

Our cash provided by operating activities was $62.9 million.

For additional information and an analysis of or historical cash flows from operating activities, see the “Cash Flows” discussion that follows.

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During 2025, we borrowed $60.0 million, net of repayments, under the Credit Facility.

Through March 14, 2025, we repaid $2.0 million, net of borrowings under the Credit Facility.

The following table summarizes our borrowing activity under the Credit facility for the periods presented:

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Cash Flows from Operating Activities.

Our cash flows from operating activities increased by $48.4 million during 2024 from 2023.

From a broad perspective, cash flows improved due to substantial growth in our high horsepower unit rentals which also provide for higher realized margins.

In addition, we made substantial progress in improving our processes for billings and collections from certain customers and lowering our “days sales outstanding” statistics for accounts receivable.

These efforts arose from the negative impact on working capital during 2023 as our rental activities began to grow significantly.

We anticipate a continued focus on these efforts into 2025 as we concentrate on further improvements to our working capital performance statistics.

Our cash flows from operating activities decreased by $3.5 million during 2025 from 2024.

From a broad perspective, cash flows declined in 2025 due primarily to the substantial progress made in the 2024 period for improving our processes for billings and collections from certain customers that had the effect of lowering our days sales outstanding (“DSO”) statistics for accounts receivable accounts.

While these efforts have continued with favorable DSO performance throughout 2025, the timing effect was more beneficial during 2024 while 2025 reflects a more normalized cash operating cycle.

In addition, we increased our maintenance parts inventory during 2025 in support of our growing fleet and incurred substantially higher costs in 2025 attributable to certain IT system conversion projects.

These working capital uses were partially offset by growth in accounts payable and the favorable effects of higher realized margins attributable to growth in our high horsepower unit rentals.

Cash Flows from Investing Activities.

For the years ended December 31, 2025 and 2024, we invested approximately $121.5 million and $71.9 million, respectively, in rental equipment, property and other equipment.

Included in these totals for 2024 and 2023 were $66.9 million and $152.5 million in new equipment to our rental fleet and $5.0 million and $1.4 million in other property and equipment, respectively.

Included in these totals for 2025 and 2024 were $109.8 million and $60.5 million for growth capital expenditures to expand our rental fleet and $11.7 million and $11.4 million for capital maintenance projects, respectively.

Our investment in rental equipment includes any changes to work-in-progress related to our rental fleet projects at the beginning of the year compared to the end of the year.

Our rental work-in-progress increased by $0.8 million and $13.8 million during 2024 and 2023, respectively.

We paid $0.2 million and $0.4 million for COLI policy purchases during 2024 and 2023.

We also received proceeds from the sale of property and equipment of $0.5 million and $0.5 million during the same periods, respectively.

We also received proceeds from the sale of property and equipment of $0.1 million and $0.5 million in 2025 and 2024, respectively, as well as insurance proceeds from damage to certain rental equipment of $0.1 million during 2025.

Cash Flows from Financing Activities.

During 2025, we had net borrowings of $60.0 million under the Credit Facility while 2024 included net borrowings of $6.0 million.

The decrease in net borrowings is due primarily to the substantial investment in large horsepower units during the prior year consistent with our strategy of directing our business to these larger, higher margin applications.

While we incurred and paid debt issuance costs during both years, the amounts paid during 2023 were $1.7 million higher as the Credit Facility was substantially upsized with the amendment and restatement in February 2023.

We received proceeds from the exercise of stock options of $0.3 million during 2024 while none were received during 2023 and taxes paid related to the net share settlements of equity awards were $0.2 million and $1.0 million for 2024 and 2023, respectively.

The increase in net borrowings is due primarily to the substantial investment in large horsepower units during the prior year consistent with our expanding fleet and strategy of directing our business to these larger, higher margin applications.

While we incurred and paid debt issuance costs during both years, the amounts paid during 2024 were $0.3 million higher in connection with the Fourth Amendment during 2025 as compared to the costs for amendments to the Credit Facility in 2024.

During 2025 we also paid $2.6 million for our common stock dividend which was initiated for the third quarter of 2025 and continued in the fourth quarter.

We also received proceeds from the exercise of stock options of $0.2 million and $0.3 million during 2025 and 2024, respectively.

Capitalization

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Credit Facility .

We have a five-year senior secured revolving credit agreement, as amended, or the Credit Facility, with Texas Capital Bank, National Association (the “Lender”) as administrative agent, TCBI Securities, Inc., as joint lead arranger and sole book runner and Bank of America, N.A., as joint lead arranger, with a total commitment of $300.0 million.

We also have a right to request from the Lender, an increase to the potential aggregate commitment of up to $50.0 million;

We have a senior secured revolving credit agreement, as amended, or the Credit Facility, with Texas Capital Bank, National Association as administrative agent (the “Administrative Agent”), and TCBI Securities, Inc., Bank of America, N.A., and the Huntington National Bank as joint lead arrangers and joint book runners, and the lenders party thereto (the “Lenders”), with a total commitment of $400.0 million.

We also have a right to request from the Lenders, an increase to the potential aggregate commitment of up to $100.0 million;

provided, however, the aggregate commitment amount is not permitted to exceed $500.0 million.

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(i) a borrowing base calculation, (ii) variable rates of interest on borrowings that are determined, in part, upon our actual leverage ratio, as defined in the Credit Facility, (iii) commitment fees, (iv) certain financial and other covenants and (v) events of default and acceleration, among other terms and conditions that are customary for such credit instruments.

Please see Note 10 ( “ L o ng-Term Debt ” ) to our Consolidated Financial Statements for a thorough discussion of these matters regarding our Credit Facility.

Please see Note 10 ( “ Long-Term Debt ” ) to our Consolidated Financial Statements for a thorough discussion of these matters regarding our Credit Facility.

As of December 31, 2025, we had $230.0 million outstanding under our Credit Facility with a weighted average interest rate of 6.59%.

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After the assessments of such circumstances, an impairment loss is recognized if the future undiscounted net cash flows associated with the asset (or asset group) and the estimated fair value of the asset are less than the asset’s (or asset group’s) carrying value.

During the year ended December 31, 2024, we fully impaired our indefinite-lived intangible asset attributable to a trade name (see the discussion in “Results of Operations” above and N o te 8.

( “ Intangible A ssets ” ) to our Consolidated Financial Statements).

During the year ended December 31, 2025, we recognized an impairment of $2.6 million in connection with our efforts to plan for an eventual sale of the Former Headquarters Property.

Please see Note 7 ( “ Property and Equipment ” ) and Note 19 ( “Subsequent Events” ) to our Consolidated Financial Statements for additional information..

In connection with the process of preparing our financial statements, we are required to estimate our federal income taxes as well as income taxes in each of the states in which we operate.

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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