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- **Record Financial Performance**: Q3 2025 adjusted EPS of $0.42 (50% YoY growth) and EBITDA of $221 million (46% YoY increase) reflect strong execution in contract ops and AMS.
- **Leverage and Share Returns**: 3.1x leverage ratio and $159M returned to shareholders (71% YoY increase) highlight financial discipline and shareholder focus.
- **Long-Term Growth Drivers**: 17 Bcf/day LNG export growth by 2030 and 10-25 Bcf/day AI-driven power demand create sustained compression demand.
- **Operational Strength**: 96% utilization, 6+ year average unit tenure, and 70.4% contract ops gross margin underscore market leadership.
- **CapEx and Pricing**: $345-355M 2025 CapEx guidance reflects confidence in multiyear contracts, while 60-65% annual repricing opportunities support margin resilience.

**【CEO Summary Section】**
- Archrock reported third-quarter 2025 adjusted EPS of $0.42, up 50% year-over-year, and adjusted EBITDA of $221 million, a 46% increase from Q3 2024. Contract operations and Aftermarket Services (AMS) segments drove strong revenue and gross margins due to robust activity and pricing.
- The company maintained a sector-leading leverage ratio of 3.1x and returned $159 million to shareholders through dividends and share buybacks in the first nine months of 2025, up 71% year-over-year.
- Management highlighted long-term growth drivers, including U.S. LNG exports (expected to grow by 17 Bcf/day by 2030) and AI-driven power demand, which could add 10-25 Bcf/day of natural gas demand by 2030.
- The fleet utilization rate remained at 96%, with units staying on location for an average of over 6 years, reflecting strong customer retention and multiyear contracts.

**【CFO Financial Commentary】**
- Third-quarter net income was $71 million, with adjusted EBITDA of $221 million. Contract operations revenue rose 2% sequentially to $326 million, driven by pricing and horsepower growth. AMS revenue was $56 million, up 20% year-over-year.
- Adjusted gross margin for contract operations was 70.4%, up slightly from Q2 2025, with a $9.9 million cash tax credit boosting the overall gross margin to 73%. 
- The company narrowed its 2025 growth CapEx guidance to $345-355 million, reflecting confidence in customer demand and multiyear contracts. Free cash flow after dividends is expected to remain positive.
- Archrock repurchased 1.1 million shares in Q3 at an average price of $23.18 and increased its share buyback authorization by $100 million, leaving $130 million available.

**【Q&A Highlights】**
- **Capital Allocation**: CEO Brad Childers emphasized investing in growth (priority), followed by dividend increases and share buybacks. The company plans to maintain a 3.0-3.5x leverage target while generating free cash flow.
- **Margins and Pricing**: CFO Doug Aron noted that 60-65% of contracts are repriced annually, with pricing driven by high utilization (96%) and limited available capacity. Gross margins remain resilient despite cost inflation (low single digits).
- **Demand Trends**: LNG exports and AI-driven power demand are key growth drivers. The company expects 2026 compression market activity to match 2025 levels, with $250 million+ CapEx required to meet demand.
- **Supply Chain Constraints**: Lead times for Caterpillar engines are 60 weeks, up from 42 weeks six months ago, but Archrock is able to source some units faster through the secondary market.
- **Asset Sales**: The company generated $114 million in non-strategic asset sales year-to-date and expects to continue monetizing older, smaller units to refresh its fleet.

Archrock, Inc. (AROC) Q3 2025 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

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Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

AROC

AROC fundamentals

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