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- **Record EBITDA Growth**: $76.8 million adjusted EBITDA, 382 bps margin expansion, fueled by 60% rental revenue mix.
- **Strategic Acquisitions**: 155-system acquisition fully integrated, driving margin expansion and new customer relationships.
- **Free Cash Flow Strength**: $43 million free cash flow supports $0.08 dividend and $15M buyback, with balance sheet liquidity at $518M.
- **Technology Edge**: Proprietary software optimizing surface equipment efficiency, early-stage VRU adoption trends positive.
- **2026 Outlook**: Steady capital deployment, VRU and HPGL growth aligned with natural gas infrastructure expansion.

**【CEO Summary Section】**
- Third-quarter adjusted EBITDA of $76.8 million, up 382 basis points year-over-year, driven by a shift to high-margin rental fleets.
- Acquired 155 high-pressure gas lift (HPGL) and vapor recovery unit (VRU) systems, fully integrated into operations with no performance issues.
- Rental revenue now accounts for 60% of total revenue, up from 50% in Q1 2025, reflecting strategic capital allocation.
- Customers prioritizing operating expenditures over capital expenditures, aligning with Flowco's production optimization focus.

**【CFO Financial Commentary】**
- Total revenue $176.9 million, down 8% sequentially due to lower product sales in Production Solutions and Natural Gas Technologies segments.
- Adjusted EBITDA margin expanded to 43.4%, driven by rental fleet growth and cost optimization.
- Organic capital deployment of $39.7 million in Q3, with Q4 CapEx expected to decline modestly.
- Free cash flow of $43 million (excluding acquisition costs), supporting dividend ($0.08/share) and $15 million share buyback.
- Balance sheet strength: $205.2 million in debt, $518.3 million in borrowing capacity.

**【Q&A Key Highlights】**
- **Natural Gas Systems Optimization**: 714 basis point margin expansion in Q3 via facility consolidation and lean manufacturing, with 100% employee placement during Pampa, TX closure.
- **VRU Adoption**: 2026 pipeline expansion in Permian expected to boost in-basin gas prices, driving VRU demand for methane monetization.
- **Technology Integration**: Proprietary software for surface equipment optimization showing early-stage efficiency gains, with potential for field-wide production optimization.
- **Capital Allocation**: Share buybacks and dividends opportunistic; 2026 capital deployment pace aligned with 2025 levels, prioritizing high-return rental fleet expansion.
- **HPGL Resilience**: Despite oil price volatility, HPGL demand stable in Permian, with no decline in production or customer demand.
- **M&A Strategy**: Integration of Archrock assets seamless, opening new commercial opportunities with previously hard-to-penetrate blue-chip customers.

Flowco Holdings Inc. (FLOC) Q3 2025 Earnings Call Transcript

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FLOC

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